Document:

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                                                                    EXHIBIT 10.6

                                                          EXECUTION COPY

                                     FOURTH
                              AMENDED AND RESTATED
                     MASTER COLLATERAL ASSIGNMENT AGREEMENT

            THIS FOURTH AMENDED AND RESTATED MASTER COLLATERAL ASSIGNMENT
AGREEMENT dated as of September 1, 2002 (the "Agreement"), which amends and
restates the Master Collateral Assignment Agreement dated as of September 30,
1993, as amended and restated as of June 1, 1995, as amended and restated as of
November 1, 1998 (the "Second Amended and Restated Agreement"), as amended and
restated as of March 1, 2000 (the "Third Amended and Restated Agreement") is by
and among WESTERN FINANCIAL BANK, a federally-chartered savings association
formerly known as Western Financial Savings Bank, F.S.B. (including its
successors and assigns, the "Bank"), WFS FINANCIAL AUTO LOANS, INC., a
California corporation formerly known as Western Financial Auto Loans, Inc.
("WFAL"), WFS FUNDING, INC., a California corporation ("WFS Funding"), WFS
RECEIVABLES CORPORATION, a California corporation ("WFSRC") and WFS RECEIVABLES
CORPORATION 2, a California corporation ("WFSRC2"), WFS FINANCIAL AUTO LOANS 2,
INC., a California corporation formerly known as Western Financial Auto Loans 2,
Inc. ("WFAL2"), FINANCIAL SECURITY ASSURANCE INC., a New York stock insurance
company (including its successors and assigns, "Financial Security"), DEUTSCHE
BANK TRUST COMPANY AMERICAS (formerly known as Bankers Trust Company), a New
York banking corporation, in its capacity as indenture trustee (the "Indenture
Trustee") under each of the Indentures (as defined in Section 1.01 hereof) and
in its capacity as collateral agent (the "Collateral Agent") under each of the
Insurance Agreements (as defined in Section 1.01 hereof) and DEUTSCHE BANK
NATIONAL TRUST COMPANY (formerly known as Bankers Trust Company of California,
N.A.) as Master Collateral Agent (as defined in Section 1.01 hereof).
Capitalized terms used without definition have the meanings set forth in Article
I hereof.

                                 R E C I T A L S

            The Bank and WFAL2 are, and may in the future be, obligors under
certain reinvestment contracts (or RICs). To the extent provided in any RIC, the
Bank and/or WFAL2, as applicable, has received and/or will receive funds
credited to (i) the Collection Account, the Note Distribution Account and/or the
Certificate Distribution Account, (ii) the Spread Account and/or (iii) the
Holding Account for investment in such RIC.

            The Bank, WFAL2 and Financial Security have entered into a Master
RIC Reimbursement Agreement to provide for, among other things, the
reimbursement of any payments that may be made under Policies issued by
Financial Security with respect to the RICs.

            The parties hereto are entering into this Agreement in order to
secure the full and punctual payment of all amounts when due by the Bank or
WFAL2 under, and the performance

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by the Bank and WFAL2 of all of their other obligations pursuant to, the RICs
and the Master RIC Reimbursement Agreement by means of the pledge of Collateral
hereunder by the Bank and WFAL2 to the Master Collateral Agent on behalf of, and
for the benefit of, the Indenture Trustee, the Collateral Agent and Financial
Security.

                               A G R E E M E N T S

            In consideration of the premises, the mutual agreements contained
herein and Financial Security's continuing agreement to issue Policies at lower
premium rates than Financial Security would be willing to offer if the
collateral arrangements herein were not maintained, and for other consideration,
the parties hereto agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

            Section 1.01 Definitions. Unless defined in this Agreement,
capitalized terms used in this Agreement shall have the meaning given such terms
in the Sale and Servicing Agreement dated as of November 23, 1998 between WFS
and WFAL2, as amended by Amendment No. 1 thereto dated as of January 1, 2001, as
such agreement may be amended from time to time in accordance with its terms
(the "WFS Sale and Servicing Agreement"). The following terms shall have the
following respective meanings:

            "Account" has the meaning specified in Article 9 of the UCC.

            "Aggregate Collateral Value" means, as of any date of determination,
(i) the aggregate outstanding principal amount of all items of Collateral
pledged to the Master Collateral Agent pursuant to Section 2.01 hereof,
discounted as set forth on Schedule A hereto less (ii) the collection discount
equal to the amount determined in the manner described in footnote (c) of the
related Monthly Statement. Clause (ii) shall be deemed amended to the extent a
change in the form of or disclosures required in the Monthly Statement is
approved as described in the definition of "Monthly Statement" that would affect
clause (ii).

            "Aggregate Commingled Account Balance" means, as of any date of
determination, the aggregate amounts as determined in Section I of the relevant
Monthly Statement.

            "Authorized Officer" means, (i) with respect to the Bank and WFAL2,
the President, the Chief Financial Officer, Treasurer or any Vice President,
(ii) with respect to Financial Security, the Chairman of the Board, the
President, any Executive Vice President, any Managing Director or any Director,
(iii) with respect to the Master Collateral Agent, any Vice President, Assistant
Vice President or Trust Officer, and (iv) with respect to the Indenture Trustee
or the Collateral Agent, any Vice President or Trust Officer.

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            "Business Day" means any day that is not (a) a Saturday or Sunday or
(b) a day on which banking institutions in The City of New York or in the State
of California are authorized or obligated by law or executive order to be
closed.

            "Certificate Distribution Account" has the meaning, with respect to
any Issuer, set forth in the related Trust Agreement.

            "Chattel Paper" has the meaning specified in Article 9 of the UCC.

            "Clearing Corporation" means a "clearing corporation" (as defined in
Section 8-102(a)(5) of the UCC) with which the Master Collateral Agent maintains
an account and which is used by the Master Collateral Agent to hold Securities
and Securities Entitlements.

            "Collateral" has the meaning specified in Section 2.01(c)(iii)
hereof.

            "Collateral Account" has the meaning specified in Section 3.01
hereof.

            "Collateral Agent" has the meaning, with respect to any Issuer,
specified in the related Insurance Agreement.

            "Collateral Schedule" has the meaning specified in Section 7.01
hereof.

            "Collection Account" has the meaning, with respect to any Issuer,
set forth in the related Indenture.

            "Contract" means any retail installment sales contract and security
agreement, or installment loan agreement and security agreement that has been
executed by an obligor and pursuant to which such obligor purchased or financed
a motor vehicle and that is pledged or is intended to be pledged hereunder.

            "Controlling Party" means Financial Security so long as no Financial
Security Insolvency shall have occurred and no Insurer Default shall have
occurred and be continuing, and, at any other time, the Indenture Trustee.

            "Controlling Party Notice" has the meaning set forth in Section 3.05
hereof.

            "Default" means (i) any failure by the Bank or WFAL2 to Deliver
Collateral as and when required hereunder, (ii) any other material breach by the
Bank or WFAL2 of its obligations hereunder and failure to cure such breach
within two (2) Business Days after receipt of notice thereof from the
Controlling Party or (iii) any default by the Bank, WFAL2, WFS or any Depositor
under any Transaction Agreement to which it is a party.

            "Delivery" means, with respect to Collateral, the accomplishment of
the following:

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            (a)   "instruments" and "certificated securities" (as such terms are
defined in the UCC; any of such "instruments" or "certificated securities" being
"Possessory Collateral") shall be in bearer form or registered in the name of
the Master Collateral Agent or its nominee or duly indorsed to the Master
Collateral Agent or in blank, and in no case will any Collateral be registered
in the name of the Bank or WFAL2, payable to the order of the Bank or WFAL2 or
specially indorsed to the Bank or WFAL2 (except to the extent the foregoing have
been further specially indorsed by the Bank or WFAL2 to the Master Collateral
Agent or its nominee or in blank);

            (b)   Security Entitlements included in the Collateral and held by
or for a Clearing Corporation shall be (A) held by the Clearing Corporation (or
its custodian and/or nominee) as specified in clause (i) above, (B) evidenced by
a written or electronic advice of the book-entry registration of such Securities
Entitlement in an account of the Master Collateral Agent (or its nominee) as
such Clearing Corporation maintained in accordance with the rules of such
Clearing Corporation (a "Clearing Corporation Account"), and (C) the
corresponding Security Entitlement shall be evidenced by written records of the
Master Collateral Agent as being credited to the Collateral Account; and

            (c)   as to all Uncertificated Securities included in the
Collateral, the Master Collateral Agent shall have received evidence that (A) it
or its nominee is the registered owner on the books of the issuer thereof or (B)
a Clearing Corporation or its nominee is so registered and the corresponding
Security Entitlement is evidenced by written records of the Master Collateral
Agent as being credited to the Collateral Account.

            "Deposit Account" has the meaning specified in Article 9 of the UCC.

            "Depositor" means any of (i) WFAL, (ii) WFS Funding, (iii) WFSRC,
(iv) WFSRC2, or (v) any entity that becomes a "Depositor" under this Agreement
pursuant to the provisions of Section 8.03 hereof, and "Depositors" means
(unless otherwise specified) all of them.

            "Electronic Chattel Paper" has the meaning specified in Article 9 of
the UCC.

            "Eligible Account" means (i) a segregated trust account in the
corporate trust department that is maintained with a depository institution or
trust company the commercial paper or other short-term debt obligations of which
have credit ratings from S&P at least equal to "A-1" and from Moody's equal to
"P-1", which account is fully insured up to applicable limits by the Federal
Deposit Insurance Corporation or (ii) a general ledger account or deposit
account that is maintained at (a) a depository institution or trust company
satisfying the criteria specified in clause (i) above or (b) a depository
institution acceptable to Financial Security as evidenced by a letter to such
effect from Financial Security to the Master Collateral Agent.

            "Entitlement Order" means a notification communicated in accordance
with this Agreement by the Controlling Party to the Master Collateral Agent
directing transfer or redemption with respect to a Financial Asset credited to a
Securities Account hereunder.

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            "Federal Agency Security" means any mortgage-backed security issued
by the Federal National Mortgage Association or the Federal Home Loan Mortgage
Corporation or guaranteed by the Government National Mortgage Association.

            "Federal Government Security" means any security issued by the
United States or any department or agency of the United States which is entitled
to the full faith and credit of the United States.

            "Financial Asset" means Collateral that is a security or an
obligation of a Person or a share, participation, or other interest in a Person
or in property or an enterprise of a Person that is, or is of a type, dealt in
or traded on financial markets, or that is recognized in any area in which it is
issued or dealt in as a medium for investment and shall include, for the
purposes of this Agreement, a Federal Agency Security and a Federal Government
Security, regardless of whether the transfer or perfection of a Federal Agency
Security or Federal Government Security is accomplished under federal law or the
UCC. As the context requires, references to "Financial Asset" herein shall mean
the Financial Asset itself or the means by which the interest of a Person
holding an interest therein is evidenced, including a Security Certificate or
Uncertificated Security or a Security Entitlement.

            "General Intangibles" has the meaning specified in Article 9 of the
UCC.

            "Holding Account" has the meaning, with respect to any Issuer, set
forth in the related Indenture.

            "Indenture" means, with respect to any Issuer, the indenture entered
into between the Indenture Trustee and such Issuer, as such agreement may be
amended from time to time in accordance with the terms thereof, and "Indentures"
means (unless otherwise specified) all of such indentures.

            "Instrument" has the meaning specified in Article 9 of the UCC.

            "Insurance Agreement" means, with respect to any Issuer, the
Insurance, Indemnity and Pledge Agreement entered into among such Issuer, a
Depositor, Financial Security and the Collateral Agent (and which may also
include other parties) and pursuant to which a Policy (or Policies) is (or are)
issued, as such agreement may be amended from time to time in accordance with
the terms thereof, and "Insurance Agreements" means (unless otherwise specified)
all of such Insurance, Indemnity and Pledge Agreements.

            "Insurer Default" has the meaning set forth in the Indenture with
the most recent date (including any "as of" date) with respect to which any
related Policy remains in effect.

            "Insurer Insolvency" has the meaning set forth in the Indenture with
the most recent date (including any "as of" date) with respect to which any
related Policy remains in effect.

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            "Issuer" means any of the Delaware statutory trusts, or other
entities, (i) formed by (or to be formed by) or affiliated with (or to be
affiliated with, when formed) any Depositor and (ii) that has issued (or, in the
future, issues) securities guaranteed pursuant to a Policy, and "Issuers" means
(unless otherwise specified) all of such trusts or other entities.

            "Investment Property" has the meaning specified in Article 9 of the
UCC.

            "Lien" means, as applied to the property or assets (or the income,
proceeds, products, rents or profits therefrom) of any Person, in each case
whether the same is consensual or nonconsensual or arises by contract, operation
of law, legal process or otherwise: (a) any mortgage, pledge, attachment,
charge, lease, conditional sale or other title retention agreement or other
security interest or encumbrance of any kind; or (b) any arrangement, express or
implied, under which such property or assets (and/or such income, proceeds,
products, rents or profits) are transferred, sequestered or otherwise identified
for the purpose of subjecting or making available the same for payment of debt
or performance of any other obligation in priority to the payment of the
general, unsecured creditors of such Person.

            "Master Collateral Agent" means, initially, Deutsche Bank National
Trust Company ., including its successors and assigns, in its capacity as
collateral agent on behalf of the Indenture Trustee, the Collateral Agent and
Financial Security, or any successor that shall have become the Master
Collateral Agent pursuant to Section 4.05 hereof, and thereafter "Master
Collateral Agent" shall mean such successor.

            "Master RIC Reimbursement Agreement" means, the Second Amended and
Restated Master RIC Reimbursement Agreement dated as of September 1, 2002 among
the Bank, WFAL2 and Financial Security, as such agreement may be amended from
time to time in accordance with the terms thereof.

            "Master Secured Obligations" means, on any date, (i) the respective
obligations of the Bank and, WFAL2 set forth in Sections 2.01(c)(i) and
2.01(c)(ii) hereof, and (ii) all costs, expenses, attorney's fees and
disbursements and other amounts expended or incurred by the Master Collateral
Agent, the Indenture Trustee, the Collateral Agent or Financial Security in
connection with the protection or preservation of any Collateral and the
enforcement of the rights and remedies of the Master Collateral Agent, the
Indenture Trustee, the Collateral Agent or Financial Security under this
Agreement.

            "Master Servicer" means WFS in its capacity as the Master Servicer
under the WFS Sale and Servicing Agreement.

            "Monthly Statement" means the document captioned "Monthly Collateral
Statement" as delivered by the Bank and WFAL2 in the form of Schedule B hereto
pursuant to Section 3.02(b) hereof. The form of and disclosures in Schedule B
may be amended from time to time, with the prior written consent of Financial
Security, which consent shall not be unreasonably withheld or delayed, and as so
amended shall be the "Monthly Statement".

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            "Mortgage Loan" means any loan secured by real property that is
pledged or is intended to be pledged hereunder.

            "Note Distribution Account" has the meaning, with respect to any
Issuer, set forth in the related Indenture.

            "Opinion of Counsel" means a written opinion of counsel acceptable,
as to form, substance and issuing counsel (which may be counsel to the Bank
and/or WFAL2 and/or any of their Affiliates), to the Controlling Party and the
Master Collateral Agent.

            "Person" means any individual, sole proprietorship, joint stock
company, unincorporated association, joint venture, corporation, partnership,
business, statutory or owner trust, government, governmental department or
agency or any other entity whatsoever.

            "Pledge Date" means, each date on which the Bank and/or WFAL2 pledge
items of Collateral to the Master Collateral Agent hereunder.

            "Policy" means, with respect to any Issuer, any financial guaranty
insurance policy (including any endorsements thereto) issued by Financial
Security for the benefit of any securities or other obligations of such Issuer,
and "Policies" means (unless otherwise specified) all of such financial guaranty
insurance policies that remain in effect.

            "Policy Beneficiary" means, with respect to any Policy, any holder
or other beneficiary of such Policy, and "Policy Beneficiaries" means (unless
otherwise specified) all of such holders or other beneficiaries.

            "Possessory Collateral" has the meaning set forth in paragraph (a)
of the definition of "Delivery."

            "RIC" has the meaning, with respect to any Issuer, set forth in the
Sale and Servicing Agreement, and "RICs" means (unless otherwise specified) all
of such agreements.

            "Sale and Servicing Agreement" has the meaning, with respect to any
Issuer, set forth in the related Indenture, and "Sale and Servicing Agreements"
means (unless otherwise specified) all of such agreements.

            "Securities Account" has the meaning specified in Section 8-501 of
the UCC.

            "Securities Intermediary" has the meaning set forth in Section
8-102(a)(14) of the UCC.

            "Security" means an obligation of an issuer or a share,
participation, or other interest in an issuer or in property or an enterprise of
an issuer that is represented by a security certificate in bearer or registered
form, or an Uncertificated Security, the transfer of which may be registered
upon books maintained for that purpose by or on behalf of the issuer, or that is
one

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of a class or series, or which by its terms is divisible into a class or series,
of shares, participations, interests, or obligations and that is, or is of a
type, dealt in or traded on securities exchanges or securities markets.

            "Security Entitlement" means the rights and property interest of an
Entitlement Holder with respect to Financial Assets.

            "Security Interests" means the Liens on the Collateral granted to
the Master Collateral Agent under this Agreement to secure the Master Secured
Obligations.

            "Servicer" means Western Financial Bank (including its successors),
as servicer under the Servicing Agreement.

            "Servicing Agreement" means the Amended and Restated Servicing
Agreement dated as of September 1, 2002 between the Servicer and the Master
Collateral Agent, with the Controlling Party as a third party beneficiary
thereof, as such agreement may be amended from time to time in accordance with
the terms thereof.

            "Tangible Chattel Paper" has the meaning specified in Article 9 of
the UCC.

            "Termination Date" means the date that is the earliest of (A) the
latest of (i) the date on which all RICs shall have terminated and all amounts
owing by the Bank, WFAL2 and each Depositor to the relevant Issuer, the
Indenture Trustee, the Policy Beneficiaries, the Collateral Agent or Financial
Security shall have been paid in full, (ii) the date on which Financial Security
shall have received full payment and performance by the Bank, WFAL2 and each
Depositor pursuant to the Transaction Agreements and (iii) the latest date on
which any payment received by Financial Security pursuant to the Transaction
Agreements could be avoided in whole or in part as a preference payment under
the United States Bankruptcy Code or any similar federal or state law relating
to insolvency, receivership, conservatorship, bankruptcy, rehabilitation,
liquidation or reorganization, or (B) the date on which no amounts of any funds
credited to any Collection Account, Note Distribution Account, Certificate
Distribution Account, Spread Account, Holding Account or any other account held
by or for the benefit of the Indenture Trustee, Policy Beneficiaries, the
Collateral Agent or Financial Security are invested in RICs or are held in
general ledger accounts at the Bank or are otherwise commingled with funds of
the Bank, or (C) any date mutually agreed by the Bank, WFAL2 and the Controlling
Party.

            "Transaction Agreements" means, with respect to any Issuer, the
Indenture, the Sale and Servicing Agreement, the Trust Agreement, and any
related Policy, Insurance, Indemnity and Pledge Agreement, sub-servicing
agreement, indemnification agreement or RIC to which any of the Bank, WFS, WFAL,
WFAL2, WFSRC, WFS Funding, WFSRC2 or any other Depositor is a party, or, with
respect to all Issuers, all of such agreements.

            "Trust Agreement" means, with respect to any Issuer that is a trust,
the trust agreement pursuant to which the Issuer is constituted, as amended from
time to time

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in accordance with its terms, and "Trust Agreements" means (unless otherwise
specified) all of such trust agreements.

            "Uncertificated Security" means a Security that is not represented
by a certificate.

            "Uniform Commercial Code" or "UCC" means the Uniform Commercial Code
as in effect in the State of California or other applicable jurisdiction;
provided, however, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection or priority of the Master
Collateral Agent's security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the state of
California, the term "UCC" shall mean the Uniform Commercial Code as in effect
in such other jurisdiction for purposes of the provisions hereof relating to
such attachment, perfection or priority and for purposes of definitions related
to such provisions; provided, further, that if the UCC is amended after the date
hereof, such amendment will not be given effect for the purposes of this
Agreement if and to the extent the result of such amendment would be to limit or
eliminate any item of the Collateral.

            "WFS" means WFS Financial Inc, a California corporation.

            Section 1.02 Rules of Interpretation. The terms "hereof," "herein"
or "hereunder," unless otherwise modified by more specific reference, shall
refer to this Agreement in its entirety. Unless otherwise indicated in context,
the terms "Article," "Section," "Exhibit" or "Annex" shall refer to an Article
or Section of, or Exhibit or Annex to, this Agreement. The definition of a term
shall include the singular, the plural, the past, the present, the future, the
active and the passive forms of such term.

                                   ARTICLE II
                                 THE COLLATERAL

            Section 2.01 Security Interests.

            (a)   Continuation of Security Interest. The Bank and WFAL2 hereby
restate and reaffirm the pledge set forth in Section 2.01 of the Second Amended
and Restated Agreement as though set forth herein verbatim.

            (b)   Continuation of Security Interest. The Bank and WFAL2 hereby
restate and reaffirm the pledge set forth in Section 2.01 of the Third Amended
and Restated Agreement as though set forth herein verbatim.

            (c)   Pledges.

            (i)   In order to secure the full and punctual payment of all
amounts when due by the Bank or WFAL2 under, and the performance by the Bank and
WFAL2 of all of their other obligations pursuant to, the RICs and the Master RIC
Reimbursement Agreement from time to time in accordance with the terms thereof,
the Bank hereby pledges, assigns, transfers and

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conveys all of its right, title and interest in and to all of the Collateral to
the Master Collateral Agent on behalf of, and for the benefit of, the Indenture
Trustee, the Collateral Agent and Financial Security.

            (ii)  In order to secure the full and punctual payment of all
amounts when due by WFAL2 or the Bank under, and the performance by WFAL2 and
the Bank of all of their other obligations pursuant to, the RICs and the Master
RIC Reimbursement Agreement from time to time in accordance with the terms
thereof, WFAL2 hereby pledges, assigns, transfers and conveys all of its right,
title and interest in and to all of the Collateral to the Master Collateral
Agent on behalf of, and for the benefit of, the Indenture Trustee, the
Collateral Agent and Financial Security.

            (iii) The "Collateral" shall at any time consist of:

            (A)   all Accounts, Chattel Paper, Deposit Accounts, Financial
Assets, General Intangibles, Instruments, and Investment Property, as all such
assets shall be more particularly described on each Collateral Schedule from
time to time delivered pursuant hereto and any other assets, property and
proceeds thereof, approved in writing by the Controlling Party (which may be by
a supplemental Collateral Schedule or an amendment (or an amendment and
restatement) of an existing Collateral Schedule by mutual agreement of the Bank,
WFAL2 and the Controlling Party);

            (B)   the WFS Sale and Servicing Agreement;

            (C)   the related documentation for, all proceeds, income and
profits on, and all interest, principal and other payments and distributions
with respect to the Collateral described in Section 2.01(c)(iii)(A) hereof;

            (D)   all rights and remedies for the enforcement of payment of any
principal, interest and proceeds with respect to the Collateral described in
Section 2.01(c)(iii)(A) hereof;

            (E)   any collateral securing any other Collateral including,
without limitation, all rights and remedies of a beneficiary of such security to
foreclose upon, repossess and sell the related Collateral, or all rights and
remedies assertable against any Person other than the related obligor under a
guaranty, warranty or otherwise in connection with any Collateral;

            (F)   insurance proceeds, if any, and any other proceeds received in
connection with the disposition, repossession, foreclosure, destruction or
condemnation of, or impairment of title to, any Collateral;

            (G)   any cash, securities or other property received on account of
the Collateral from any liquidation thereof or any adjustment of debt of the
obligors and any portion of the Collateral that may be distributed in kind in
connection with any such liquidation or adjustment of debt of the obligors;

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            (H)   the Collateral Account and each other account, if any,
established by or with the Master Collateral Agent hereunder; and

            (I)   all distributions, revenues, products, substitutions,
benefits, profits and proceeds, in whatever form, of any of the foregoing.

            (iv)  Each of the Bank and WFAL2 agrees that it shall not (a) use
any adverse selection method in selecting any Collateral to be pledged
(including any pledge of substitute Collateral) hereunder or (b) include any
Collateral that would be charged off in accordance with its normal accounting
practices. If any Collateral Delivered to the Master Collateral Agent hereunder
shall be or become subject to charge off by the Bank or WFAL2, the Bank or
WFAL2, as the case may be, shall promptly substitute new Collateral therefor to
the extent necessary to satisfy the requirements of Section 3.02 hereof.

            (v)   In order to effectuate the provisions and purposes of this
Agreement, including to effectuate the collateral assignment to the Master
Collateral Agent, as agent for the Indenture Trustee and the Collateral Agent,
pursuant to this Section 2.01, each of the Bank and WFAL2 hereby Delivers, and
agrees in the future to Deliver, to the Master Collateral Agent, all items of
Collateral pledged by it hereunder in which a security interest must be
perfected only by possession, and the Master Collateral Agent hereby agrees to
accept such Collateral on the terms set forth in this Agreement. The Bank and
WFAL2, and each of them, hereby agree to take all additional steps that may be
necessary or reasonably requested by the Master Collateral Agent or the
Controlling Party from time to time for the perfection, preservation,
protection, maintenance or continuation of such transfers, assignments and
security interests including, but not limited to, the execution, recording,
registering and filing of any appropriate collateral assignments, security
interests and Uniform Commercial Code financing statements and the making of
notations on records or documents of title.

            (vi)  The Security Interests are granted as security only and shall
not (a) transfer or in any way affect or modify, or relieve either of the Bank
or WFAL2 from any obligation to perform or to satisfy, any term, covenant,
condition or agreement to be performed or satisfied by either of them under or
in connection with this Agreement, the Servicing Agreement or any Transaction
Agreement to which either of them is a party or (b) impose any obligation on any
of the Master Collateral Agent, the Indenture Trustee, the Collateral Agent or
Financial Security to perform or to observe any such term, covenant, condition
or agreement or impose any liability on any of the Master Collateral Agent, the
Indenture Trustee, the Collateral Agent or Financial Security for any act or
omission on its part relative thereto or for any breach of any representation or
warranty on its part contained therein or made in connection therewith.

            Section 2.02 Priority. The Bank and WFAL2, and each of them, intend
the Security Interests granted hereunder to be prior to all other Liens in
respect of the Collateral, and the Bank and WFAL2, and each of them, shall take
all actions necessary to obtain and maintain, in favor of the Master Collateral
Agent, a first lien on and a first priority, perfected security interest in the
Collateral. The Master Collateral Agent shall have all of the rights, remedies
and recourse with respect to the Collateral afforded a secured party under the
Uniform Commercial

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Code and all other applicable law, in addition to, and not in limitation of, the
other rights, remedies and recourse granted to the Master Collateral Agent by
this Agreement, the Servicing Agreement, any Transaction Agreement or any other
law relating to the creation and perfection of liens on, and security interests
in, the Collateral.

            Section 2.03 Maintenance of Collateral.

            (a)   Safekeeping. The Master Collateral Agent agrees to maintain
the Collateral received by it and the Collateral Schedules and all other records
and documents relating thereto either at the office of the Master Collateral
Agent, the office of the agent of the Master Collateral Agent or such other
address as may be approved by the Controlling Party. Beginning December 31,
2003, the Master Collateral Agent shall keep safe and secure all Collateral
Schedules as and when delivered from time to time to it after December 31, 2003.
The Master Collateral Agent shall keep or cause to be kept all Collateral and
related documentation in its possession separate and apart from all other
property that it is holding in its possession and from its own general assets
and shall maintain accurate records pertaining to the Collateral and the
Collateral Account in such a manner as shall enable the Master Collateral Agent
and the Controlling Party to verify the accuracy of such record-keeping. The
Master Collateral Agent's books and records shall at all times show that the
Collateral is held by the Master Collateral Agent as agent for the Indenture
Trustee and the Collateral Agent and is not the property of the Master
Collateral Agent. The Master Collateral Agent will promptly report to the
Indenture Trustee, the Collateral Agent, Financial Security, the Bank and WFAL2
any failure on its part to hold the Collateral or to safeguard related
documentation as provided in this Section 2.03(a) and will promptly take
appropriate action to remedy any such failure.

            (b)   Access. The Master Collateral Agent shall permit the Indenture
Trustee, the Collateral Agent or Financial Security, or their respective duly
authorized representatives, attorneys, auditors or designees, to inspect the
Collateral Schedules and all Collateral in the possession of or otherwise under
the control of the Master Collateral Agent pursuant hereto at such reasonable
times during normal business hours as the Indenture Trustee, the Collateral
Agent or Financial Security may reasonably request with prior written notice.
Prior to a Default such inspection shall be at the expense of the Indenture
Trustee, the Collateral Agent or Financial Security, as the case may be, but
after a Default such inspection shall be at the expense of the Bank and WFAL2,
jointly and severally.

            (c)   Servicing. The Servicing Agreement notwithstanding, the Bank
and WFAL2 agree that they shall cause all Contracts pledged hereunder to be
serviced by WFS or the Bank pursuant to the WFS Sale and Servicing Agreement or
similar agreement reasonably satisfactory to Financial Security.

            (d)   Limitations on Investments and Collateral. Specified Account
Funds, Spread Account Funds and Holding Account Deposited Funds, as such terms
are defined in the RICs, may be invested in RICs subject to the aggregate
limitations and other provisions set forth in Schedule A hereto, which may be
amended from time to time by a writing signed only by Financial Security, the
Bank and WFAL2.

                                       12
<PAGE>

            (e)   Liquidity. In order to ensure that WFAL2 has sufficient funds
to satisfy its repayment obligations pursuant to Section 4 of each RIC, the Bank
hereby agrees to lend WFAL2 sufficient immediately available funds in order to
enable WFAL2 timely to perform its obligations under each of such Sections and
any other payment obligations due by WFAL2 under any RIC, or otherwise to make
available, or cause to be made available, to WFAL2 immediately available funds
for such purpose.

            Section 2.04 General Authority. Each of the Bank and WFAL2 hereby
irrevocably appoints each of the Master Collateral Agent and the Controlling
Party as its true and lawful attorney, with full power of substitution, in the
name of the Bank and WFAL2, for the sole use and benefit of the Master
Collateral Agent, the Indenture Trustee, the Collateral Agent and Financial
Security, but at the expense of the Bank and WFAL2, to exercise, at any time
while a Default has occurred and is continuing, to the extent permitted by law,
all or any of the following powers with respect to all or any of the Collateral:

            (a)   to demand, to sue for, to collect, to receive and to give
acquittance for any and all monies due or to become due upon or by virtue
thereof,

            (b)   to settle, to compromise, to compound, to prosecute or to
defend any action or proceeding with respect thereto,

            (c)   to sell, to transfer, to assign or otherwise to deal in or
with the same or the proceeds or avails thereof, as fully and effectually as if
the Master Collateral Agent were the absolute owner thereof, and

            (d)   to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference thereto;

provided, that the Controlling Party or the Master Collateral Agent (as the case
may be) shall give the Bank and WFAL2 such prior notice of the time and place of
sale of any of the Collateral as may be required pursuant to Section 6.01
hereof.

            Section 2.05 Termination of Security Interests. On the Termination
Date, the rights, remedies, powers, duties, authority and obligations conferred
upon the Master Collateral Agent, the Indenture Trustee, the Collateral Agent
and Financial Security pursuant to this Agreement in respect of the Collateral
shall terminate and be of no further force and effect and all rights, remedies,
powers, duties, authority and obligations of the Master Collateral Agent, the
Indenture Trustee, the Collateral Agent and Financial Security with respect to
such Collateral shall be automatically released. In addition, the Master
Collateral Agent, the Indenture Trustee, the Collateral Agent and Financial
Security agree that, upon request by the Bank and WFAL2, they, or any of them,
shall execute and deliver, at the expense of the Bank or WFAL2 and at no expense
to the Master Collateral Agent, the Indenture Trustee, the Collateral Agent or
Financial Security whatsoever, such instruments as the Bank or WFAL2 may
reasonably request to effectuate such release, and any such instruments so
executed and delivered shall be fully binding on the Master Collateral Agent,
the Indenture Trustee, the Collateral Agent and Financial Security.

                                       13
<PAGE>

                                   ARTICLE III
                             THE COLLATERAL ACCOUNT

            Section 3.01 Establishment. The Master Collateral Agent has
previously established a segregated, non-interest bearing trust account, which
shall be an Eligible Account under the control (as defined in Article 8-106 of
the UCC) of the Master Collateral Agent, designated "Collateral Account -
Deutsche Bank National Trust Company , as Master Collateral Agent for Deutsche
Bank Trust Company Americas, as Trustee and as Collateral Agent (for the benefit
of Financial Security Assurance Inc.)" (the "Collateral Account"). The
Collateral Account shall at all times be established at a banking office,
located in the State of California, of Deutsche Bank National Trust Company or
another depository institution acceptable to the Controlling Party. Funds in the
Collateral Account shall not be commingled with any other funds. The Master
Collateral Agent shall have sole signature authority over the Collateral
Account, and no withdrawals of funds in the Collateral Account shall be made
except as specified in this Agreement.

            Section 3.02 Delivery and Release of Collateral.

            (a)   Concurrently with each Delivery or other pledge of Collateral
hereunder, the Bank and WFAL2 shall furnish to the Master Collateral Agent, the
Indenture Trustee, the Collateral Agent and Financial Security an Opinion of
Counsel to the effect that the Master Collateral Agent has a valid, perfected,
first priority security interest in such items of Collateral listed in the
related Collateral Schedule, and so Delivered or otherwise pledged hereunder,
subject only to such exceptions as are customary for such legal opinions;
provided, however, that such Opinion of Counsel shall not be required if such
Delivery or other pledge of Collateral would have been within the scope of an
Opinion of Counsel rendered under Section 5.02 or an Opinion of Counsel
previously rendered under this Section 3.02(a) in connection with a previous
Delivery or other pledge of Collateral hereunder and there has been no
applicable change in law.

            (b)   On the tenth (10th) Business Day of each calendar month, the
Bank and WFAL2 shall deliver to the Master Collateral Agent, the Indenture
Trustee, the Collateral Agent and Financial Security the Monthly Statement,
signed by an Authorized Officer of each of the Bank and WFAL2, certifying the
Aggregate Collateral Value of Collateral Delivered by it to the Master
Collateral Agent and held by the Master Collateral Agent as of the last day of
the preceding calendar month and the Aggregate Commingled Account Balance
required to be maintained as of such day. If the Aggregate Collateral Value so
certified is less than the Aggregate Commingled Account Balance as so certified,
either or both of the Bank and WFAL2 shall, together with such Monthly
Statement, Deliver additional Collateral, together with a Collateral Schedule,
in an amount necessary to make the Aggregate Collateral Value (after giving
effect to such additional Delivery) at least equal to the Aggregate Commingled
Account Balance, and such Monthly Statement shall contain a certification as to
Aggregate Collateral Value after giving effect to such additional Delivery.

                                       14
<PAGE>

            (c)   The Master Collateral Agent shall release items of Collateral
(i) to the Servicer in connection with the Servicer's performance of its duties
pursuant to Section 7.03 hereof, (ii) to the Bank and WFAL2, in the capacity of
each as a pledgor hereunder, in connection with the substitution of new
Collateral against Delivery or other pledge by the Bank and/or WFAL2 to the
Master Collateral Agent of substitute Collateral in an amount necessary to make
the Aggregate Collateral Value (after giving effect to such substitution) at
least equal to the Aggregate Collateral Value prior to such substitution and
(iii) to the Bank and WFAL2, in the capacity of each as a pledgor hereunder, in
connection with a release of excess Collateral against delivery of a Monthly
Statement, together with or incorporating a request for release of specific
Collateral, indicating that the Aggregate Collateral Value (after giving effect
to such release) is at least equal to the Aggregate Commingled Account Balance.
Each of the Bank and WFAL2 agrees that it shall not use any adverse selection
method in selecting any Collateral to be released in accordance with the
foregoing clauses (ii) and (iii) of this Section 3.02(c).

            (d)   On any date on which the Master Collateral Agent shall have
received a Controlling Party Notice to the effect that a Default has occurred
and is continuing, and for as long as such Controlling Party Notice shall be
effective, no Collateral shall be released to the Bank, WFAL2 or any other
Person, except as specified in Sections 3.03(d) and/or 6.01 hereof.

            (e)   Pending its maturity or disposition hereunder, all Collateral
consisting of Possessory Collateral shall be held solely by the Master
Collateral Agent; all Collateral consisting of Security Entitlements shall be
continuously maintained by the Master Collateral Agent through continued
book-entry registration of such Collateral as described in clause (ii) of the
definition of "Delivery"; and all Collateral consisting of Uncertificated
Securities shall be maintained through continued registration of the ownership
of such Security as described in Clause (iii) of the definition of "Delivery".

            (f)   All Collateral consisting of chattel paper or general
intangibles (including the WFS Sale and Servicing Agreement) or any other item
of the Collateral to which perfection is not effected by Delivery (i) may be
held by the Master Servicer until receipt by the Master Servicer of a
Controlling Party Notice directing delivery of such Collateral elsewhere and
(ii) shall be duly perfected by the filing of financing statements in the
appropriate filing office, as set forth in the Opinion of Counsel required to be
delivered pursuant to subsection (a) above.

            Section 3.03 Collateral Account Funds.

            (a)   Payments on the Collateral received by the Servicer or by WFS
as servicer under the WFS Sale and Servicing Agreement shall be paid over to the
Bank or WFAL2 as pledgor of such Collateral free of the lien created by this
Agreement until the Servicer or WFS shall have received a Controlling Party
Notice specifying that a Default has occurred and is continuing. After receipt
of such a Controlling Party Notice, the Servicer and WFS shall transfer to the
Master Collateral Agent any moneys received by it on or in respect of the
Collateral for deposit in the Collateral Account.

                                       15
<PAGE>

            (b)   Following delivery of a Controlling Party Notice, all payments
made to the Master Collateral Agent on, or otherwise received by the Master
Collateral Agent in respect of, any Collateral shall be deposited on the date of
receipt by the Master Collateral Agent in the Collateral Account. Any income
received by the Master Collateral Agent with respect to the balance from time to
time credited to the Collateral Account, including any interest or capital gains
on investments, shall be deposited in the Collateral Account. All right, title
and interest in and to the funds on deposit from time to time in the Collateral
Account, together with any investments made pursuant to paragraph (c) below,
shall vest in the Master Collateral Agent, shall constitute part of the
Collateral hereunder and shall not constitute payment of any Master Secured
Obligations until applied as specified herein.

            (c)   Amounts, if any, on deposit in the Collateral Account shall be
invested and re-invested from time to time in such investments as shall be
specified by instructions (which may include, subject to the other provisions
hereof, general standing instructions) given to the Master Collateral Agent by
the Controlling Party; provided that if the Master Collateral Agent receives a
Controlling Party Notice, the Master Collateral Agent shall, if instructed by
the Controlling Party, liquidate any such investments and apply or cause to be
applied the proceeds thereof to the payment of the Master Secured Obligations in
the manner specified in Section 3.03(d) hereof. If no such instruction with
respect to investment of any portion of the Collateral Account is received by
the Master Collateral Agent, no investment shall be made of such portion and the
Master Collateral Agent shall not be liable for any resulting absence of income.

            (d)   The Master Collateral Agent or its affiliates are permitted to
receive additional compensation that could be deemed to be in the Master
Collateral Agent's economic self-interest for (i) serving as investment adviser,
administrator, shareholder, servicing agent, custodian or sub-custodian with
respect to certain investments, (ii) using affiliates to effect transactions in
certain investments and (iii) effecting transactions in certain investments.

            (e)   On each Business Day specified by the Controlling Party after
delivery of a Controlling Party Notice, the Master Collateral Agent shall
withdraw from the Collateral Account an amount (up to the balance therein) that
is sufficient to pay to Financial Security or the Indenture Trustee all amounts
constituting Master Secured Obligations owing to Financial Security or the
Indenture Trustee, as the case may be (such payments to be applied to reduce the
Master Secured Obligations in such manner as the Controlling Party shall
specify). All amounts or investments, if any, remaining in the Collateral
Account on any date after giving effect to the distribution required to be made
on such date pursuant to this paragraph shall remain on deposit in the
Collateral Account until required or permitted to be withdrawn therefrom
pursuant to the provisions of this Section.

            Section 3.04 General Provisions Regarding the Accounts.

            (a)   Promptly upon the relocation of the Collateral Account
hereunder, the Master Collateral Agent shall advise the Bank, WFAL2, the
IndentureTrustee, the Collateral Agent and Financial Security in writing of the
name and address of the depository institution to which such Collateral Account
was relocated (if not Deutsche Bank National Trust Company or

                                       16
<PAGE>

any successor Master Collateral Agent in its commercial banking capacity), the
name of the officer of the depository institution who is responsible for
overseeing the Collateral Account, the Collateral Account number and the
individuals whose names appear on the signature cards for the Collateral
Account. The Bank and WFAL2 shall cause such depository institution to execute a
written agreement, in form and substance satisfactory to the Controlling Party,
waiving, in each case to the extent permitted under applicable law, (i) any
banker's or other statutory or similar Lien, and (ii) any right of setoff or
other similar right under applicable law with respect to the Collateral Account
and agreeing to notify the Bank, WFAL2, the Master Collateral Agent, the
Indenture Trustee, the Collateral Agent and Financial Security of any charge or
claim against or with respect to the Collateral Account. The Master Collateral
Agent shall give the Bank, WFAL2, the Indenture Trustee, the Collateral Agent
and Financial Security at least ten (10) Business Days' prior written notice of
any change in the location of the Collateral Account or in any related account
information. Anything herein to the contrary notwithstanding, unless otherwise
consented to by the Controlling Party in writing, the Master Collateral Agent
shall have no right to change the location of the Collateral Account.

            (b)   If at any time the Collateral Account ceases to be an Eligible
Account, the Master Collateral Agent shall establish, in accordance with
paragraph (a) of this Section, a successor Collateral Account thereto which
shall be an Eligible Account at Deutsche Bank National Trust Company or at
another depository institution acceptable to the Controlling Party.

            (c)   Any investment of funds in the Collateral Account shall be
made in accordance with the provisions of Section 3.03(c) hereof in the name of
the Master Collateral Agent (in its capacity as such). Subject to the other
provisions hereof, the Master Collateral Agent shall have sole control over each
such investment and the income thereon, and any certificate or other instrument
evidencing any such investment, if any, shall be delivered directly to the
Master Collateral Agent, together with each document of transfer, if any,
necessary to transfer title to such investment to the Master Collateral Agent in
a manner which complies with Article II and this Section.

            (d)   Subject to Section 4.03 hereof, the Master Collateral Agent
shall not be liable by reason of any insufficiency in the Collateral Account
resulting from any loss on any investment included therein except for losses
attributable to the Master Collateral Agent's failure to make payments on
investments as to which the Master Collateral Agent, in its commercial capacity,
is obligated.

            Section 3.05 Controlling Party Notices. The Controlling Party may at
any time give notice (a "Controlling Party Notice") to the Master Collateral
Agent stating that (i) a Default has occurred and is continuing or (ii) the
Controlling Party has, pursuant to any Transaction Agreement, terminated the
status of a RIC as an eligible investment under a Trust Agreement or other
Transaction Agreement.

            Section 3.06 Representations by the Bank and WFAL2. The Bank and
WFAL2 hereby jointly and severally represent and warrant to the other parties
hereto, as of the date hereof and as of the Pledge Date of any Collateral
hereunder, as follows:

                                       17
<PAGE>

            (a)   Immediately prior to Delivery or other pledge hereunder of any
item of Collateral, the Bank or WFAL2 shall have owned such Collateral free and
clear of all Liens, adverse claims or rights of others of any nature whatsoever.

            (b)   Upon Delivery or other pledge of Collateral hereunder, the
Master Collateral Agent will have a valid perfected first priority security
interest in such Collateral.

            (c)   The Bank and WFAL2 jointly and severally represent, warrant
and covenant to the Master Collateral Agent, the Indenture Trustee, the
Collateral Agent and Financial Security that, with respect to each Mortgage Loan
pledged to the Master Collateral Agent hereunder, such Mortgage Loan represents
a first or second Lien on a single-family or multi-family residential property
and conforms to the criteria set forth on Schedule A hereto.

            (d)   The Bank and WFAL2 jointly and severally represent, warrant
and covenant to the Master Collateral Agent, the Indenture Trustee, the
Collateral Agent and Financial Security that, with respect to each Contract
pledged to the Master Collateral Agent hereunder, the Contract is in conformance
with every representation and warranty made with respect to such Contract in the
Sale and Servicing Agreement and each such representation and warranty is deemed
repeated in this Agreement by the Bank and WFAL2 jointly and severally for the
benefit of the Master Collateral Agent, the Indenture Trustee, the Collateral
Agent and Financial Security; provided, however, that if at any time Financial
Security gives prior written approval to the pledge of Electronic Chattel Paper
as Collateral hereunder, the Bank and WFAL2 shall not be required to make or to
observe representations and warranties that are applicable only to Tangible
Chattel Paper with respect to any Electronic Chattel Paper pledged hereunder,
but the Bank and WFAL2 jointly and severally agree to make and to observe such
other representations and warranties applicable to Electronic Chattel Paper as
Financial Security may then impose.

            Section 3.07 Representations by WFS. WFS hereby represents and
warrants to the other parties hereto, as of the date hereof and as of the Pledge
Date of any Collateral hereunder consisting of a Contract that was acquired by
WFAL2 from WFS pursuant to the WFS Sale and Servicing Agreement, as to each such
Contract as follows:

            (a)   As of the Pledge Date, scheduled payments under such Contract
are applied in accordance with the Rule of 78's method or the simple interest
method and are due monthly in level payments through its Maturity Date
sufficient to fully amortize the principal balance of such Contract by its
Maturity Date, assuming timely payment by Obligors on Simple Interest Contracts,
except that the payment in the first or last month in the life of the Contract
may be minimally different from the level payment.

            (b)   There is only one original of such Contract and such original,
together with all other Contract Documents, is being held by WFS. The Seller has
received a written acknowledgement from WFS that it is holding the Contract
Documents that constitute or evidence the Contracts on behalf and for the
benefit of the WFAL2 and the Master Collateral

                                       18
<PAGE>

Agent in accordance with their interests as they may arise under the WFS Sale
and Servicing Agreement and this Agreement. None of the Contract Documents that
constitute or evidence each Contract has any marks or notations indicating that
it has been pledged, assigned or otherwise conveyed to any Person other than
WFAL2 and the Master Collateral Agent in accordance with their interests as they
may arise under the WFS Sale and Servicing Agreement and this Agreement.

            (c)   Each Contract (A) constitutes "tangible chattel paper" as
defined in the applicable UCC and (B) shall be maintained in its original
"tangible" form, unless Financial Security has consented in writing to such
chattel paper being maintained in another form or medium.

            (d)   As of the Pledge Date with respect to the Contracts, the
Seller is not aware of any Obligor that is or has been, since the origination of
the related Contract, the subject of a bankruptcy proceeding.

            (e)   The number of, or timing of, scheduled payments has not been
changed on any Contract on or before the Pledge Date, except as reflected on the
computer tape delivered in connection with the sale of the Contracts.

            (f)   As of the Pledge Date, no Financed Vehicle has been
repossessed.

            (g)   Any prepayment in full of a Contract by an Obligor to WFS will
consist of the entire outstanding principal balance of such Contract together
with all accrued and unpaid interest thereon.

                                   ARTICLE IV
                           THE MASTER COLLATERAL AGENT

            Section 4.01 Appointment and Powers. (a) Subject to the terms and
conditions hereof, the Indenture Trustee, the Collateral Agent, and Financial
Security hereby appoint Deutsche Bank National Trust Company as the Master
Collateral Agent with respect to the Collateral, and Deutsche Bank National
Trust Company hereby accepts such appointment and agrees to act as Master
Collateral Agent hereunder. The Indenture Trustee, the Collateral Agent, and
Financial Security hereby authorize the Master Collateral Agent to take such
action on their 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 Master Collateral Agent by the terms hereof,
together with such actions, rights, remedies, powers and privileges as are
reasonably incidental thereto. The Master Collateral Agent has executed the
Servicing Agreement and shall act upon and in compliance with the written
instructions of the Controlling Party delivered pursuant to this Agreement
promptly following receipt of such written instructions.

                                       19
<PAGE>

            (b)   The Master Collateral Agent is, and shall at all times during
the term of this Agreement be, a Securities Intermediary for Financial Security.

            (c)   The Master Collateral Agent is eligible to maintain, and does
maintain, and will continue to be eligible to maintain and will maintain, one or
more accounts in its name (or the name of a nominee) with each Clearing
Corporation through which Securities or Security Entitlements constituting
Collateral are held.

            Section 4.02 Performance of Duties. The Master Collateral Agent may
perform any of its duties hereunder by or through agents and employees, shall be
entitled to retain counsel and act in reliance upon the written advice of such
counsel concerning all matters pertaining to the agencies hereby created or its
duties hereunder and shall not be liable for actions taken, or omitted to be
taken, in good faith reliance upon the opinion of counsel selected by it. The
duties of the Master Collateral Agent shall be mechanical and administrative in
nature. The Master Collateral Agent shall not have by reason of this Agreement a
fiduciary relationship. Nothing in this Agreement, express or implied, is
intended to be or shall be construed as to impose upon the Master Collateral
Agent any obligations in respect of this Agreement except as expressly set forth
herein.

            Section 4.03 Limitation on Liability; Indemnification. Neither the
Master 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 Master Collateral Agent shall be
liable for its own gross negligence or willful misconduct; nor shall the Master
Collateral Agent be responsible for the validity, effectiveness, value,
sufficiency or enforceability against the Bank or WFAL2 of this Agreement or any
of the Collateral (or any part thereof).

            The Bank and WFAL2 hereby jointly and severally agree to indemnify
and hold the Master Collateral Agent harmless from and against all damage,
liability and expense (including reasonable attorneys' fees) arising out of or
in connection with this Agreement, except to the extent such damage, liability
or expense arises out of the Master Collateral Agent's negligence, willful
misconduct or breach of the obligations imposed hereby on the Master Collateral
Agent.

            Section 4.04 Reliance upon Documents. Subject to the provisions of
Section 4.08 hereof, in the absence of gross negligence or willful misconduct on
its part, the Master Collateral Agent shall be entitled to 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 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 4.05 Successor Master Collateral Agent. The Master
Collateral Agent acting hereunder at any time may resign by giving not less than
ninety (90) days' prior written notice in writing to the Bank, WFAL2, the
Indenture Trustee, the Collateral Agent and Financial

                                       20
<PAGE>

Security. If the Master Collateral Agent is also an Indenture Trustee and/or a
Collateral Agent and, as such, determines that it has a conflicting interest on
account of its acting as Master Collateral Agent, the Master Collateral Agent
shall eliminate such conflicting interest by resigning as Master Collateral
Agent hereunder rather than resigning as such Indenture Trustee or Collateral
Agent. The Controlling Party shall appoint a successor to the Master Collateral
Agent upon any such resignation by an instrument of substitution complying with
the requirements of applicable law, or, in the absence of any such requirements,
without formality other than appointment and designation in writing, a copy of
which instrument or writing shall be sent to the Bank and WFAL2; provided,
however, that the validity of any such appointment shall not be impaired or
affected by any failure to give any such notice to the Bank and WFAL2 or by any
defect therein. Notwithstanding the foregoing, prior to the receipt by the Bank
and WFAL2 of a Controlling Party Notice, such appointment shall be subject to
the consent of the Bank and WFAL2, which consent shall not be unreasonably
withheld. Upon the making and acceptance of such appointment, the execution and
delivery by such successor Master Collateral Agent of a ratifying instrument
pursuant to which such successor Master Collateral Agent agrees to assume the
duties and obligations imposed on the Master Collateral Agent by the terms of
this Agreement, and the delivery to such successor Master Collateral Agent of
the Collateral and related documents then held by the retiring Master Collateral
Agent, such successor Master Collateral Agent shall thereupon succeed to and
become vested with all the estate, rights, powers, remedies, privileges,
immunities, indemnities, duties and obligations hereby granted to or conferred
or imposed upon the Master Collateral Agent named herein, and one such
appointment and designation shall not exhaust the right to appoint and designate
further successor Master Collateral Agents hereunder. No Master Collateral Agent
shall be discharged from its duties or obligations hereunder until the
Collateral and related documents then held by such Master Collateral Agent shall
have been transferred and delivered to the successor Master Collateral Agent and
such retiring Master Collateral Agent shall have executed and delivered to the
successor Master Collateral Agent appropriate instruments establishing the
successor Master Collateral Agent as the record holder of all liens and security
interests in favor of the Indenture Trustee and the Collateral Agent in the
Collateral and transferring to such successor Master Collateral Agent all power
given pursuant to this Agreement to act as attorney-in-fact of the Bank and
WFAL2, and each of them, for purposes of this Agreement. Each such successor
Master Collateral Agent shall provide the Bank, WFAL2 and Financial Security
with its address, and its telephone and telecopier numbers, to be used for
purposes of Section 7.04 hereof, in a notice complying with the terms of said
Section.

            Section 4.06 Representations and Warranties of Deutsche Bank
National Trust Company Deutsche Bank National Trust Company represents and
warrants to the Bank, WFAL2, the Indenture Trustee, the Collateral Agent and
Financial Security as follows:

            (a)   Deutsche Bank National Trust Company is a national banking
association, duly organized, validly existing and in good standing.

            (b)   Deutsche Bank National Trust Company has full power, authority
and legal right to execute, deliver and perform this Agreement and the Servicing
Agreement and has

                                       21
<PAGE>

taken all necessary action to authorize the execution, delivery and performance
by it of this Agreement and the Servicing Agreement.

            (c)   This Agreement and the Servicing Agreement constitute valid
and binding obligations of Deutsche Bank National Trust Company in its capacity
as Master Collateral Agent enforceable against it in accordance with their
respective terms.

            (d)   The execution and delivery by Deutsche Bank National Trust
Company of this Agreement and the Servicing Agreement and the performance by it
of its obligations hereunder and thereunder, will not violate any law, rule or
regulation or any agreement, order or decree binding on it or its properties.

            Section 4.07 Waiver of Setoffs. The Master Collateral Agent hereby
expressly waives any and all rights of setoff that the Master Collateral Agent
may otherwise at any time have under applicable law with respect to the
Collateral Account and agrees that amounts in the Collateral Account shall at
all times be held and applied solely in accordance with the provisions of this
Agreement.

            Section 4.08 Control by the Controlling Party. The Master Collateral
Agent shall comply with notices and instructions given by the Bank or WFAL2 only
if expressly contemplated hereby or if accompanied by the written consent of the
Controlling Party, except that if any Default shall have occurred and be
continuing, the Master Collateral Agent shall act upon and comply with notices
and instructions given by the Controlling Party alone in the place and stead of
the Bank or WFAL2. In the absence of any written communication by the
Controlling Party to the Master Collateral Agent to the effect that a Default
has occurred and is continuing, the Master Collateral Agent may assume that no
Default has occurred and is continuing. The Master Collateral Agent shall have
no duty to verify whether or not a Default has occurred or is continuing or the
facts stated in any Controlling Party Notice. Any written communication by the
Controlling Party to the Master Collateral Agent specifying the amount of any
obligations owing to the Indenture Trustee, the Collateral Agent or Financial
Security shall be conclusive evidence of such amount, notwithstanding any notice
to the contrary received by the Master Collateral Agent from the Bank, WFAL2 or
any other Person.

                                    ARTICLE V
                         COVENANTS OF THE BANK AND WFAL2

            Section 5.01 Preservation of Collateral. Subject to the rights,
powers and authorities granted to the Master Collateral Agent, the Indenture
Trustee, the Collateral Agent and Financial Security in this Agreement, the Bank
and WFAL2 shall take such action as is necessary and proper with respect to the
Collateral in order to preserve, maintain and service such Collateral and to
cause (subject to the rights of the Controlling Party) the Master Collateral
Agent to perform its obligations with respect to such Collateral as provided
herein. The Bank and WFAL2, and each of them, will do, execute, acknowledge and
deliver, or cause to be done, executed, acknowledged and delivered, such
instruments of transfer or take such other steps or actions as may be necessary,
or required by the Controlling Party, to perfect the Security

                                       22
<PAGE>

Interests granted hereunder in (a) prior to delivery of a Controlling Party
Notice to the Master Collateral Agent, the items of Collateral referenced in
Schedule A hereto and (b) after delivery of a Controlling Party Notice to the
Master Collateral Agent, all Collateral, to ensure that such Security Interests
rank prior to all other Liens and to preserve the priority of such Security
Interests and the validity and enforceability thereof. Upon any Delivery or
substitution of Collateral, the Bank and/or WFAL2, as pledgor, shall be
obligated to create for the benefit of the Master Collateral Agent a valid first
Lien on, and valid and perfected, first priority security interest in, (a) prior
to delivery of a Controlling Party Notice to the Master Collateral Agent, the
items of Collateral referenced in Schedule A hereto and (b) after delivery of a
Controlling Party Notice to the Master Collateral Agent, all Collateral so
Delivered and to Deliver such Collateral to the Master Collateral Agent, free
and clear of any other Lien, together with satisfactory assurances thereof, and
to pay any reasonable costs incurred by the Controlling Party or the Master
Collateral Agent (including its agents) or otherwise in connection with such
Delivery.

            Section 5.02 Opinions as to Collateral. On the date of delivery of
the Monthly Statement following each January and July, commencing with such date
following January 2004, the Bank and WFAL2 shall, at their own cost and expense,
furnish to the Master Collateral Agent, the IndentureTrustee, the Collateral
Agent and Financial Security an Opinion of Counsel either stating that, in the
opinion of such counsel, (a) such actions have been taken as are necessary under
California law to perfect, maintain and protect the first priority lien and
first priority security interest of the Master Collateral Agent with respect to
the items of Collateral set forth on the Collateral Schedules that have been
granted to the Master Collateral Agent as of the last Business Day of the
relevant January or July (other than any items of Collateral that have been
released from the Lien of this Agreement in accordance with the terms of this
Agreement) under California law (and other applicable law) against all creditors
of and purchasers from the Bank or WFAL2, as the case may be, and reciting the
details of such action, or (b) no action is necessary to maintain such perfected
lien and security interest. Such Opinion of Counsel shall describe each
execution and filing of any documents and instruments and such other actions as
will, in the opinion of such counsel, be required to perfect, maintain and
protect the lien and security interest of the Master Collateral Agent, on behalf
of the Indenture Trustee and the Collateral Agent with respect to such
Collateral under California law (and other applicable law) against all creditors
of and purchasers from the Bank or WFAL2, as the case may be, for a period,
specified in such Opinion, continuing until a date not earlier than eighteen
months from the date of such Opinion.

            Section 5.03 Notices. In the event the Bank or WFAL2 acquires
knowledge of the occurrence and continuance of any Default, the Bank or WFAL2,
as the case may be, shall promptly give notice thereof to the Master Collateral
Agent, the Indenture Trustee, the Collateral Agent and Financial Security.

            Section 5.04 Waiver of Stay or Extension Laws; Marshalling of
Assets. The Bank and WFAL2 covenant, to the fullest extent permitted by
applicable law, that they, and each of them, will not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any appraisement, valuation, stay, extension or redemption law wherever enacted,
now or at any time hereafter in force, in order to prevent or hinder the
enforcement of

                                       23
<PAGE>

this Agreement or any sale of the Collateral or any part thereof in accordance
with this Agreement or the possession thereof by any purchaser at any sale,
pursuant to and in accordance with Section 6.01 hereof; and the Bank and WFAL2,
to the fullest extent permitted by applicable law, for themselves and all who
may claim under them, or any of them, hereby waive the benefit of all such laws,
and covenant that they will not hinder, delay or impede the execution of any
power herein granted to the Master Collateral Agent, but will suffer and permit
the execution of every such power as though no such law had been enacted. The
Bank and WFAL2, for themselves and all who may claim under them, waive, to the
fullest extent permitted by applicable law, all right to have the Collateral
marshalled upon any foreclosure or other disposition thereof.

            Section 5.05 Noninterference, etc. The Bank and WFAL2 shall not take
any action, or fail to take any action, if such action or failure to take action
will interfere with the enforcement of any rights of the Master Collateral
Agent, the Indenture Trustee, the Collateral Agent or Financial Security under
this Agreement, the Servicing Agreement, the WFS Sale and Servicing Agreement or
the Transaction Agreements.

            Section 5.06 Changes. Neither the Bank nor WFAL2, unless it shall
have given the Master Collateral Agent, the Indenture Trustee, the Collateral
Agent and Financial Security at least sixty (60) days' prior written notice
thereof (i) change its name, (ii) relocate its principal executive office or its
principal place of business from that set forth in Section 8.05 hereof, (iii)
change the locations where it keeps or holds any Collateral or any records
relating thereto from that set forth in Section 8.05 hereof, or (iv) change its
jurisdiction of organization. Upon (i) at least sixty (60) days' prior written
notice to the Master Collateral Agent, the Indenture Trustee, the Collateral
Agent and Financial Security, (ii) the execution of amendments to all applicable
Transaction Agreements affecting the substitution of a new subsidiary (the "New
Subsidiary") of the Bank or WFS in place of WFAL2 with respect to each such
applicable Transaction Agreement and (iii) the execution by New Subsidiary of an
assumption agreement pursuant to which New Subsidiary agrees to be bound by all
of the terms and conditions of this Agreement and of the Master RIC
Reimbursement Agreement and assumes all of the obligations of this Agreement and
of the Master RIC Reimbursement Agreement to be performed by WFAL2 as though New
Subsidiary were originally a party to this Agreement and the Master RIC
Reimbursement Agreement, WFAL2 shall be released of its obligations under this
Agreement and under the Master RIC Reimbursement Agreement and any Collateral
pledged by it shall be released from the Lien of this Agreement, provided New
Subsidiary or the Bank shall have concurrently pledged additional Collateral
with a value sufficient in amount (as determined in accordance with Schedule A
to this Agreement) such that the Aggregate Collateral Value upon that release
will be not less than the then Aggregate Commingled Account Balance as reported
in the relevant Monthly Statement. Upon the substitution of New Subsidiary for
WFAL2, all references herein and in the Master RIC Reimbursement Agreement to
WFAL2 shall be read as referring to New Subsidiary; provided further, the
articles and bylaws of New Subsidiary shall provide that (i) New Subsidiary
shall only engage in the business of purchasing, holding, pledging and selling
Contracts, and activities necessary or incidental thereto, (ii) New Subsidiary
have at all times at least one independent director, (iii) the affirmative vote
of all directors be required to amend or repeal the article or bylaw provisions
limiting the business of New

                                       24
<PAGE>

Subsidiary and (iv) the shareholder(s) of New Subsidiary pledge all of the
outstanding shares of New Subsidiary to Financial Security pursuant to a stock
pledge agreement substantially similar to the Stock Pledge Agreement dated as of
November 1, 1998 by and among WFAL2, Financial Security and the Master
Collateral Agent. The Bank and WFS affirmatively covenant to cause the articles
and bylaws of New Subsidiary to be amended to add such additional provisions as
may enhance the bankruptcy remoteness of New Subsidiary as Financial Security
may reasonably request.

                                   ARTICLE VI
                              REMEDIES UPON DEFAULT

            Section 6.01 Rights and Remedies Upon Default. In addition to and
not in limitation of the rights otherwise provided to the Controlling Party
pursuant to this Agreement, to the fullest extent permitted by applicable law,
if a Default has occurred and is continuing, the Controlling Party in its
discretion may exercise, or may direct the Master Collateral Agent to exercise,
the following rights, privileges and remedies:

            (a)   Collection of the Collateral. The Master Collateral Agent
shall have the right to collect all proceeds of the Collateral, to pay all
expenses of such collection, including the reasonable expenses and compensation
of the Master Collateral Agent, its agents and attorneys, and to apply the
remainder of the moneys so received as provided herein.

            (b)   Sale of Collateral. The Master Collateral Agent may sell, or
cause to be sold, the Collateral or any part thereof or interest therein, at
public auction to the highest bidder for cash or at private sale or auction with
or without demand, advertisement or notice of the date, time or place of sale or
any adjournment thereof, upon such terms as the Controlling Party may approve,
and upon such sale the Master Collateral Agent shall make and deliver to the
purchaser or purchasers an appropriate instrument or instruments of transfer.
The Master Collateral Agent is hereby irrevocably appointed the true and lawful
attorney of the Bank and WFAL2, and each of them, in its name and stead, to make
all necessary transfers of property thus sold; and for that purpose it may
execute all necessary instruments of transfer, and may substitute one or more
Persons with like power, the Bank and WFAL2, and each of them, hereby ratifying
and confirming all that its said attorney, or such substitute or substitutes,
shall lawfully do by virtue hereof. Nevertheless, if so requested by the Master
Collateral Agent or any purchaser of the Collateral or any part thereof, the
Bank and WFAL2, and each of them, shall ratify and confirm any such sale or
transfer by executing and delivering to the Master Collateral Agent or such
purchaser all proper instruments of transfer and releases as may be designated
in any such request. The Master Collateral Agent may proceed at law or in equity
to foreclose the lien of this Agreement against all or any part of the
Collateral and to have the same sold under the judgment or decree of a court
having jurisdiction or as otherwise may be required or permitted by law. Upon
any such sale, whether made under the power of sale hereby given or by virtue of
judicial proceedings, the Controlling Party may bid for and purchase the
Collateral or any part thereof and, upon compliance with the terms of such sale,
may hold, retain, possess or dispose of such property in its own absolute right
without accountability. Upon any sale, whether made under the power of sale
hereby given or by virtue of judicial proceedings, a receipt of the Master

                                       25
<PAGE>

Collateral Agent, or of the officer making such sale under judicial proceedings,
shall be a sufficient discharge to the purchaser or purchasers at such sale for
its or their purchase money, and such purchaser or purchasers shall not be
obliged to see to the application thereof. Any such sale, whether under the
power of sale hereby given or by virtue of judicial proceedings, shall bind the
Master Collateral Agent, the Bank and WFAL2, shall operate to divest all right,
title and interest whatsoever, either at law or in equity, of each of them in
and to the property sold, and shall be a perpetual bar, both at law and in
equity, against each of them and their successors and assigns, and against any
and all Persons claiming through or under them.

            (c)   Other Actions. The Master Collateral Agent shall have the
right to cause any other action permitted at law or in equity to be initiated
and prosecuted to enforce this Agreement and any rights granted by virtue of the
pledge of the Collateral hereunder.

            Section 6.02 Restoration of Rights and Remedies. If the Controlling
Party or the Master Collateral Agent has instituted any proceeding to enforce
any right or remedy under this Agreement, and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Controlling Party or the Master Collateral Agent, then and in every such
case the Bank, WFAL2, the Controlling Party and the Master Collateral Agent
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 Controlling Party and the Master Collateral Agent shall
continue as though no such proceeding had been instituted.

            Section 6.03 No Remedy Exclusive. No right or remedy herein
conferred upon or reserved to the Master Collateral Agent or the Controlling
Party is intended to be exclusive of any other right or remedy, and every right
or 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, in equity or otherwise, and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time and as often and in such order as may be deemed expedient by the
Controlling Party, and the exercise of or the beginning of the exercise of any
right or power or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other right, power or remedy.

                                   ARTICLE VII
                                     CUSTODY

            Section 7.01 Collateral Schedule. On each Pledge Date, the Bank
and/or WFAL2, as applicable, shall deliver to the Master Collateral Agent, the
Indenture Trustee, the Collateral Agent and Financial Security a schedule of
Collateral (each, a "Collateral Schedule") that, as to each item of Collateral,
sets forth at least the following information (i) in the case of each Mortgage
Loan or Contract, the obligor's name, the loan or other identifying number, the
interest rate, the original principal balance, the outstanding principal
balance, the origination or issue date, the scheduled monthly principal and
interest payment and the maturity date, (ii) in the case of any Security, the
security name, the CUSIP number, the pool number (if applicable), the interest
rate, the original principal balance, the outstanding principal balance, the
origination or issue date, the scheduled monthly principal and interest payment
(if applicable) and the maturity

                                       26
<PAGE>

date and (iii) in the case of any other item of Collateral, to the extent
applicable, the obligor's name, the loan or other identifying number, the
security name, the CUSIP number, the pool number, the interest rate, the
original principal balance, the outstanding principal balance, the origination
or issue date, the scheduled monthly principal and interest payment and the
maturity date.

            Section 7.02 Collateral Files.

            (a)   With respect to each Mortgage Loan pledged on any Pledge Date,
the Bank or WFAL2, as applicable, shall deliver the following documents to the
Master Collateral Agent:

            (i)   Original mortgage note endorsed or assigned without recourse
to Deutsche Bank National Trust Company, as Master Collateral Agent;

            (ii)  Original recorded mortgage or deed of trust or certified copy
thereof; and

            (iii) Original assignment, in recordable form, of mortgage or deed
of trust (which may be a blanket assignment for all Mortgage Loans) to Deutsche
Bank National Trust Company, as Master Collateral Agent.

The Bank and WFAL2 jointly and severally represent, warrant and covenant to the
Master Collateral Agent, the Indenture Trustee, the Collateral Agent and
Financial Security that, with respect to such Mortgage Loan, the Bank or WFAL2
has (i) originals of all assumption and modification agreements related thereto,
(ii) evidence of homeowners insurance on the related mortgaged property, and
(iii) a title insurance policy.

            (b)   With respect to each Contract pledged on any Pledge Date, the
Bank or WFAL2 jointly and severally represent, warrant and covenant to the
Master Collateral Agent, the Indenture Trustee, the Collateral Agent and
Financial Security that, with respect to such Contract, that the Contract File
(as defined in the WFS Sale and Servicing Agreement) is held by the Master
Servicer as custodian under and in accordance with the terms of the Sale and
Servicing Agreement. The Bank and WFAL2 jointly and severally represent, warrant
and covenant to the Master Collateral Agent, the Indenture Trustee, the
Collateral Agent and Financial Security that, with respect to such Contract, the
Contract File contains all of the Contract Documents (as defined in the Sale and
Servicing Agreement); provided, however, that if at any time Financial Security
gives prior written approval to the pledge of Electronic Chattel Paper as
Collateral hereunder, the original of the Contract shall not be required to be
included in the Contract File. If Financial Security gives its prior written
approval to the pledge of Electronic Chattel Paper as Collateral hereunder, the
Bank and WFAL2 jointly and severally agree to comply with such requirements as
Financial Security may then impose for the control of the single authoritative
copy of such Electronic Chattel Paper.

            (c)   Upon receipt by the Bank and WFAL2 of a Controlling Party
Notice stating that a Default has occurred and is continuing, the Bank and WFAL2
shall deliver to the

                                       27
<PAGE>

Master Collateral Agent all documents and instruments specified in Sections
7.02(a) and (b) and such other documents and instruments with respect to each
Mortgage Loan, Contract, Federal Agency Security, Federal Government Security or
other item of Collateral pledged hereunder in which a security interest may be
perfected by possession.

            (d)   The documents and instruments delivered in respect of each
Mortgage Loan, Contract, Federal Agency Security, Federal Government Security or
other item of Collateral are herein referred to as the "Collateral File". The
Master Collateral Agent shall segregate and maintain continuous custody of all
documents constituting each Collateral File coming into the Master Collateral
Agent's possession, in secure and fire-resistant facilities within the State of
California in accordance with customary standards for such custody.

            Section 7.03 Release of Documents to Servicer. In the event that a
specific document relating to an item of Collateral is required to be obtained
by the Servicer or Master Servicer because such Collateral has been paid in full
and is to be released by the Servicer or Master Servicer to the related obligor
or to facilitate enforcement and collection procedures with respect to such
Collateral, the Servicer or Master Servicer shall be entitled to obtain such
document by submitting to the Master Collateral Agent (with copies to the
Indenture Trustee, the Collateral Agent and Financial Security) a written
request therefor, indicating and confirming that it will hold such document in
trust for the benefit of the Master Collateral Agent until such time as it is
released to the related obligor upon full payment or is otherwise returned to
the Master Collateral Agent. Upon its receipt of a Controlling Party Notice
stating that a Default has occurred and is continuing, the Master Collateral
Agent shall not release such document to the Servicer or Master Servicer until
it has received the written authorization from the Controlling Party.

            Section 7.04 Insurance. The Master Collateral Agent shall, at its
own expense, maintain at all times during the existence of this Agreement and
keep in full force and effect (a) fidelity insurance, (b) theft of documents
insurance and (c) forgery insurance. All such insurance shall be in amounts,
with standard coverage and subject to deductibles, as are customary for
insurance typically maintained by institutions that act as custodian in similar
transactions.

            Section 7.05 Master Collateral Agent's Interest in Collateral. By
execution of this Agreement, the Master Collateral Agent warrants and covenants
that it currently does not hold, and during the existence of this Agreement will
not hold, any adverse interest, by way of security or otherwise, in any
Collateral and hereby waives and releases any such interest which it may have or
acquire in the future. The Master Collateral Agent expressly waives (i) any lien
that might arise in connection with unpaid fees or any lien that might arise in
connection with any other claims against any party hereto and (ii) any
possessory lien, claim or right of set-off with respect to any Collateral.

                                       28
<PAGE>

                                  ARTICLE VIII
                                  MISCELLANEOUS

            Section 8.01 Further Assurances. Each of the Bank, WFAL2 and the
Master Collateral Agent shall take such action and deliver such instruments, in
addition to the actions and instruments specifically provided for herein, as may
be reasonably requested or required by the Controlling Party to effectuate the
purpose or provisions of this Agreement or to confirm or perfect any transaction
described or contemplated herein. The parties hereto will make any changes
required by the Office of Thrift Supervision if mutually agreed by the parties
hereto and if there is no such mutual agreement, the Bank, WFAL2 and the
Controlling Party agree to terminate this Agreement.

            Section 8.02 Waiver. Any waiver by any party of any provision of
this Agreement or any right, remedy or option hereunder shall only prevent and
stop such party from thereafter enforcing such provision, right, remedy or
option if such waiver is given in writing and only as to the specific instance
and for the specific purpose for which such waiver was given. The failure or
refusal of any party hereto to insist in any one or more instances, or in a
course of dealing, upon the strict performance of any of the terms or provisions
of this Agreement by any party hereto or the partial exercise of any right,
remedy or option hereunder shall not be construed as a waiver or relinquishment
of any such term or provision, but the same shall continue in full force and
effect.

            Section 8.03 Amendments; Additional Depositors. This Agreement may
be amended, changed, modified, altered or terminated only by written instrument
or written instruments signed by each of the parties hereto; provided that the
consent of the Master Collateral Agent shall not be withheld or delayed with
respect to any amendment that does not adversely affect the Master Collateral
Agent and, provided further that Schedule A hereto may be amended or replaced as
set forth in Section 2.03(d) hereof. The Third Amended and Restated Agreement,
as amended and restated hereby, shall remain in full force and effect.
Furthermore, any affiliate of the Bank, WFAL or WFAL2 may become a "Depositor"
under this Agreement with Controlling Party Consent and shall thereafter be
subject to the provisions hereof and entitled to the benefits hereunder upon the
execution of a counterpart hereof or other form of acknowledgment hereunder
(which may be in the form of joinder attached hereto as Schedule C), and
delivery to the parties hereto of a copy of such counterparty, acknowledgement
or joinder, including such new Depositor's address for notice hereunder.

            Section 8.04 Severability. In the event that any provision of this
Agreement or the application thereof to any party hereto or to any circumstance
or in any jurisdiction governing this Agreement shall, to any extent, be invalid
or unenforceable under any applicable statute, regulation or rule of law, then
such provision shall be deemed inoperative to the extent that it is invalid or
unenforceable and the remainder of this Agreement, and the application of any
such invalid or unenforceable provision to the parties, jurisdictions or
circumstances other than to whom or to which it is held invalid or
unenforceable, shall not be affected thereby nor shall the same affect the
validity or enforceability of any other provision of this Agreement. The parties
hereto further agree that the holding by any court of competent jurisdiction
that any remedy pursued by the Master Collateral Agent or by the Controlling
Party hereunder is unavailable or unenforceable shall not affect in any way the
ability of the Master Collateral Agent or the Controlling Party to pursue any
other remedy available to it.

                                       29
<PAGE>

            Section 8.05 Notices. All notices, demands, certificates, requests
and communications hereunder ("notices") shall be in writing and shall be
effective (a) upon receipt when sent through the U.S. mails, registered or
certified mail, return receipt requested, postage prepaid, with such receipt to
be effective the date of delivery indicated on the return receipt, or (b) one
Business Day after delivery to an overnight courier, or (c) on the date
personally delivered to an Authorized Officer of the party to which sent, or (d)
on the date transmitted by legible telecopier transmission with a confirmation
of receipt, in all cases addressed to the recipient as follows:

            (i)    If to the Bank or the Bank as Servicer:

                   Western Financial Bank
                   16485 Laguna Canyon Road
                   Irvine, California 92618
                   Attention: Guy Du Bose, Esq.
                   Telecopier No.: (949) 753-3085

            (ii)   If to WFAL:

                   WFS Financial Auto Loans, Inc.
                   23 Pasteur
                   Irvine, California 92618
                   Attention: Guy DuBose, Esq.
                   Telecopier No.: (949) 753-3085

            (iii)) If to WFS Funding:

                   WFS Funding, Inc.
                   444 East Warm Springs Road, # 116
                   Las Vegas, Nevada 89119
                   Attention: John L. Coluccio
                   Telecopier No.: 702-247-4602

            (iv)   If to WFSRC:

                   WFS Receivables Corporation
                   444 East Warm Springs Road, #116
                   Las Vegas, Nevada 89119
                   Attention: John L. Coluccio
                   Telecopier No.: 702-247-4602

                                       30
<PAGE>

            (v)    If to WFSRC2:

                   WFS Receivables Corporation 2
                   444 East Warm Springs Road, #116
                   Las Vegas, Nevada 89119
                   Attention: John L. Coluccio
                   Telecopier No.: 702-247-4602

            (vi)   If to WFAL2:

                   WFS Financial Auto Loans 2, Inc.
                   23 Pasteur
                   Irvine, California 92618
                   Attention: Guy DuBose, Esq.
                   Telecopier No.: (949) 753-3085

            (vii)  If to WFS as Servicer:

                   WFS Financial Inc.
                   23 Pasteur
                   Irvine, California  92618
                   Attention: Guy Du Bose, Esq.
                   Telecopier No.: (949) 727-2306

            (viii) If to Financial Security:

                   Financial Security Assurance Inc.
                   350 Park Avenue - 13th Floor
                   New York, New York 10022
                   Attention: Transaction Oversight Department
                        Telecopier No.(212) 339-3518

                   (in each case in which the notice or other communication to
                   Financial Security refers to an Event of Default or a claim
                   under the Policy or is a notice or other communication as to
                   which a failure on the part of Financial Security to respond
                   shall be deemed to constitute consent or acceptance, then
                   with a copy to the attention of the Managing Director -
                   Transaction Oversight)

                                       31
<PAGE>

            (ix)   If to the Indenture Trustee or the Collateral Agent:

                   Deutsche Bank Trust Company Americas
                   60 Wall Street
                   26th Floor - MSNYC60-2606
                   New York, New York 10005
                   Telecopier No. (212) 797-8696
                   Attention: Corporate Trust & Agency Services - Structured
                   Finance Services

            (x)    If to the Master Collateral Agent:

                   Deutsche Bank National Trust Company
                   1761 East St. Andrew Place
                   Santa Ana, California 92705-4934
                   Telecopier No.: (714) 247-6478
                   Attention: Western Financial Collateral Assignment

A copy of each notice given hereunder to any party hereto shall also be given to
(without duplication) the Controlling Party and the Master Collateral Agent.
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.

            Section 8.06 Term of this Agreement. This Agreement shall take
effect on the date hereof and shall continue in effect until the Termination
Date. On the Termination Date, this Agreement shall terminate, all obligations
of the parties hereunder shall cease and terminate and the Collateral, if any,
held hereunder and not to be used or applied in discharge of any obligations of
the Bank or WFAL2 in respect of the Master Secured Obligations or otherwise
under this Agreement, shall be released to and in favor of the Bank or WFAL2, as
pledgor as the case may be.

            Section 8.07 Assignments; Third-Party Rights; Reinsurance.

            (a)    This Agreement shall be a continuing obligation of the Bank
and WFAL2 and shall (i) be binding upon the Bank and WFAL2 and their respective
successors and assigns, and (ii) inure to the benefit of and be enforceable by
the Master Collateral Agent, the Indenture Trustee, the Collateral Agent and
Financial Security and by their respective successors and assigns. Neither the
Bank nor WFAL2 may assign this Agreement or delegate any of its duties
hereunder, without the prior written consent of the Controlling Party. Any
assignment made in violation of this Agreement shall be null and void.

            (b)    Financial Security shall have the right to give
participations in its rights under this Agreement and to enter into contracts of
reinsurance with respect to any Policy issued

                                       32
<PAGE>

in connection with any of the Trusts upon such terms and conditions as Financial
Security may in its discretion determine; provided, however, that no such
participation or reinsurance agreement or arrangement shall relieve Financial
Security of its obligations hereunder or under any such Policy.

            (c)   In addition, Financial Security shall be entitled to assign or
pledge to any bank or other lender providing liquidity or credit with respect to
any Trust or the obligations of Financial Security in connection therewith any
rights of Financial Security under this Agreement, the Servicing Agreement or
the Transaction Agreements or with respect to any real or personal property or
other interests pledged to Financial Security, or in which Financial Security
has a security interest, in connection with any Trust.

            (d)   Except as provided herein with respect to participants and
reinsurers, nothing in this Agreement shall confer any right, remedy or claim,
express or implied, upon any Person, any owner or other holder of any security
or other investment covered by any Policy, other than Financial Security,
against the Bank or WFAL2, and all the terms, covenants, conditions, promises
and agreements contained herein shall be for the sole and exclusive benefit of
the parties hereto and their successors and permitted assigns.

            Section 8.08 Consent of the Controlling Party. In the event that the
Controlling Party's consent is required under the terms hereof, it is understood
and agreed that, except as otherwise provided expressly herein, the
determination whether to grant or withhold such consent shall be made solely by
the Controlling Party in its sole discretion.

            Section 8.09 Trial by Jury Waived. EACH OF THE PARTIES HERETO
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE SERVICING AGREEMENT, ANY OF THE
EXISTING AGREEMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREUNDER OR
THEREUNDER. EACH OF THE PARTIES HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THIS WAIVER.

            Section 8.10 Counterparts. This Agreement may be executed in two or
more counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.

            Section 8.11 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.

                                       33
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date set forth on the first page hereof.

                                    WESTERN FINANCIAL BANK

                                    By: /s/ THOMAS A. WOLFE
                                        ----------------------------------------
                                    Name: Thomas A. Wolfe
                                    Title: President and Vice Chairman

                                    WFS FINANCIAL AUTO LOANS, INC.

                                    By: /s/ LEE A. WHATCOTT
                                        ----------------------------------------
                                    Name: Lee A. Whatcott
                                    Title: Vice President and Chief Financial
                                           Officer

                                    WFS FUNDING, INC.

                                    By: /s/ MARK OLSON
                                        ----------------------------------------
                                    Name: Mark Olson
                                    Title: Senior Vice President and Controller

                                    WFS FINANCIAL AUTO LOANS 2, INC.

                                    By: /s/ J. KEITH PALMER
                                        ----------------------------------------
                                    Name: J. Keith Palmer
                                    Title: Vice President and Treasurer

                                    WFS RECEIVABLES CORPORATION

                                    By: /s/ SHELLEY CHASE
                                        ----------------------------------------
                                    Name: Shelley Chase
                                    Title: Vice President

                                    WFS RECEIVABLES CORPORATION 2

                                    By: /s/ JOHN COLUCCIO
                                        ----------------------------------------
                                    Name: John Coluccio
                                    Title: President

                                    FINANCIAL SECURITY ASSURANCE INC.

                                    By: /s/ ERROL UHR
                                        ----------------------------------------
                                    Name: Errol Uhr
                                    Title: Managing Director

                                       34
<PAGE>

                                    DEUTSCHE BANK TRUST COMPANY AMERICAS,
                                    as Indenture Trustee and Collateral Agent

                                    By: /s/ MAN WING LI
                                        ----------------------------------------
                                    Name: Man Wing Li
                                    Title: Associate

                                    DEUTSCHE BANK NATIONAL TRUST COMPANY, as
                                    Master Collateral Agent

                                    By: /s/ RONALDO REYES
                                        ----------------------------------------
                                    Name: Ronaldo Reyes
                                    Title: Assistant Vice President

                                       35
<PAGE>

                                   SCHEDULE A
                              COLLATERAL GUIDELINES
                         (effective as of May 15, 2002)

<TABLE>
<CAPTION>
                                                                     Maximum Borrowing
                                                                Capacity as a Percentage of
                                                                Outstanding Principal Amount
                                                                ----------------------------
<S>                                                             <C>
MORTGAGE COLLATERAL: 1-4 Unit Residential First Mortgages                   80%
                     Multifamily (5-36 units) First Mortgages*              75%
                     Residential (1-4 units) Second Mortgages               50%

*Limited to $100 million on a discounted basis:

AUTO LOANS:                                                                 85%
</TABLE>

<TABLE>
<CAPTION>
                                                                      Maximum Borrowing
                                                                 Capacity as a Percentage of
                                                                    Current Market Value
                                                                 ---------------------------
<S>                                                              <C>
SECURITIES COLLATERAL: FHLB Certificate of Deposit and
                       eligible deposit accounts                            100%
                       AIDS-Housing Guaranty Certificates                   100%
                       U.S. Treasury Bills, Bonds, and Notes                 95%
                       FHLB Bonds and Discount Notes                         95%
                       FNMA Mortgage-Backed Securities                       95%
                       FNMA Bonds and Discount Notes                         95%
                       GNMA Pass-through Securities                          95%
                       FHLMC Participation Certificates                      95%
                       FHLMC Bonds and Discount Notes                        95%
                       Federal Farm Credit Bank Bonds                        80%
                       Federal Land Bank Bonds                               80%
                       "AA" or "AAA" Publicly Registered
                          Pass-Throughs                                      85%
                       "AA" or "AAA" Publicly Registered
                          CMO's                                              80%
</TABLE>

In accordance with Section 2.03(d) of the MCA Agreement as to which this
Schedule A relates, for purposes of Section 3.02 of the MCA Agreement and the
definition of "Aggregate Collateral Value", the Bank, WFAL2 and Financial
Security agree that the value of any item of Securities Collateral of a type
listed above shall be determined by apply the specified percentages listed above
for that type of Securities Collateral to the "Market Value" of that Securities
Collateral as determined in accordance with the next following paragraph.

"Market Value" shall at any time be, for any item of Securities Collateral, the
bid price shown on the Bloomberg screen, or any other pricing source approved by
Financial Security.

                                       A-1
<PAGE>

ALLOCATION LIMITATIONS: Specified Account Funds, Spread Account Funds and
Holding Account Deposited Funds, pursuant to Section 2.03(d) of the MCA
Agreement, may be invested under Reinvestment Contracts with the Bank and WFAL2
only in accordance with the following; aggregate limitations (in addition to any
limitations set forth in Reinvestment Contracts or other wise under Reinvestment
Contracts):

<TABLE>
<CAPTION>
                         Bank           WFAL2
                         ----           -----
<S>                      <C>            <C>
Specified Account        No Limit       Up to 25% of the amount of funds on
Invested Funds                          deposit in each Specified Account for
                                        such Series

Spread Account           No Limit       No Limit
Invested Funds

Holding Account          No Limit       0
Deposited Funds
</TABLE>

Capitalized terms not otherwise defined in this Schedule A shall have the
meanings specified in the MCA Agreement to which this Schedule A is annexed.

                                       A-2
<PAGE>

                                   SCHEDULE B
                          MONTHLY COLLATERAL STATEMENT

This certificate is given by the undersigned pursuant to the requirements of
Section 3.02(b) of the Fourth Amended and Restated Master Collateral Assignment
Agreement dated as of September 1, 2002, among Western Financial Bank (the
"Bank"), WFS Financial Auto Loans, Inc. ("WFAL"), WFS Financial Auto Loans 2,
Inc. ("WFAL2"), WFS Receivables Corporation, WFS Receivables Corporation 2,
Western Funding, Inc., Financial Security Assurance Inc., Deutsche Bank Trust
Company Americas (formerly known as Bankers Trust Company), as Trustee and
Collateral Agent, and Deutsche Bank National Trust Company (formerly known as
Bankers Trust Company of California, N.A.), as Master Collateral Agent (the "MCA
Agreement"). All capitalized terms used herein have the definitions given for
them in the MCA Agreement. The undersigned hereby certifies that the following
information is a full, complete and accurate statement as to (1) the Aggregate
Commingled Account and (ii) the Aggregate Collateral Value as of ______________.

I.    Aggregate Commingled Account Balance

            Aggregate Collection Account Balances (a)               $
            Aggregate Spread Account Balances                       $

      Aggregate Commingled Account Balance                $___________

II.   Aggregate Collateral Value

            Value of Collateral pledged (b)
                  Residential (1-4 units) Second Mortgages          $
                  Multifamily First Mortgages                       $
                  FNMA Participation Certificate                    $
                  Auto Loans                                        $
                  GNMA MBS                                          $
                  US Treasury Bills                                 $___________
            Less anticipated collections of principal and interest
            from contracts during the next calendar month (c)       $(_________)

      Total Net Value of Collateral Pledged                         $___________

III.  The Aggregate Collateral Value as shown in Item II, above, exceeds the
Aggregate Commingled Account Balance as shown in Item I above.

Dated ______________                          WESTERN FINANCIAL BANK

                                              By:________________________

                                              WFS FINANCIAL AUTO LOANS 2, INC.

                                              By:________________________

--------------------------------------------------------------------------------
(a)   Aggregate Collection Account Balance has been reduced by Advances made by
      the Bank or the Master Servicer [and by $__________________, the actual
      amount of principal and interest payments made by the Bank and WFAL2 to
      the Trustee on ____________ 1, __________ from the various Collection
      Accounts].

(b)   Discounted values in accordance with the Collateral Guidelines, Schedule A
      to the MCA Agreement.

(c)   Calculated as an amount equal to 3% of the Aggregate Scheduled Balances
      (as defined in the applicable Sale and Servicing Agreements) as of the
      last Business Day of the immediately preceding month.

                                       B-1<PAGE>

                                                                   EXHIBIT 4.2.1

                           INVESTORS' RIGHTS AGREEMENT

         THIS INVESTORS' RIGHTS AGREEMENT is made as of the 18th day of November
1999, by and among diamonddepot.com, Inc., a Delaware corporation (the
"Company"), and the investors listed on SCHEDULE A hereto, each of which is
herein referred to as an "Investor" and all of whom are collectively referred to
as the "Investors."

                                    RECITALS

         WHEREAS, certain Investors are parties to the Stock Purchase Agreement
of even date herewith among the Company, the Founders and the Investors (the
"Series A Agreement"), which provides, that as a condition to the closing of the
sale of the Series A Preferred Stock (the "Series A Preferred Stock") and the
Common Stock (the "Common Stock"), this Agreement must be executed and delivered
by such Investors, the prior holders of the Company's Common Stock (the
"Founders") and the Company. (The Founders and the Investors are referred to
collectively as the "Existing Stockholders").

         NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto further agree as follows:

1. REGISTRATION RIGHTS. The Company covenants and agrees as follows:

         1.1 DEFINITIONS. For purposes of this Section 1:

                  (a) The term "Act" means the Securities Act of 1933, as
amended.

                  (b) The term "Form S-1" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC having substantially similar disclosure requirements.

                  (c) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC that permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.

                  (d) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.9 hereof.

                  (e) The term "Initial Offering" means the Company's first firm
commitment underwritten public offering of its Common Stock under the Act.

                  (f) The term "1934 Act" means the Securities Exchange Act of
1934, as amended.

<PAGE>

                  (g) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.

                  (h) The term "Registrable Securities" means (i) the Common
Stock issuable or issued upon conversion of the Series A Preferred Stock issued
to the Investors and the Common Stock issued to the Investors and (ii) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security that is issued as) a dividend
or other distribution with respect to, or in exchange for, or in replacement of,
the shares referenced in clause (i) above, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned.

                  (i) The term "Qualified IPO" means the Company's closing of a
sale of its Common Stock in a firm commitment underwritten public offering
pursuant to a registration statement on Form S-1 (or any successor form) under
the Securities Act of 1933, as amended, the public offering price of which was
not less than $30,000,000 in the aggregate, or any other public offering in
which all outstanding shares of the Company's Preferred Stock convert into
shares of the Company's Common Stock.

                  (j) The number of shares of "Registrable Securities"
outstanding shall be determined by the number of shares of Common Stock
outstanding that are, and the number of shares of Common Stock issuable pursuant
to then exercisable or convertible securities that are, Registrable Securities.

                  (k) The term "SEC" shall mean the Securities and Exchange
Commission.

         1.2 COMPANY PIGGYBACK REGISTRATION.

                  (a) If the Company proposes to register (including for this
purpose a registration effected by the Company for stockholders other than the
Holders) any of its stock or other securities under the Act in connection with
the public offering of such securities (other than a registration relating
solely to the sale of securities to participants in a Company stock plan, a
registration relating to a corporate reorganization or other transaction under
Rule 145 of the Act, a registration on any form that does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities, or a
registration in which the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities that are also being registered), the
Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within twenty (20)
days after mailing of such notice by the Company in accordance with Section 3.6,
the Company shall, subject to the provisions of Section 1.2(c), use all
reasonable efforts to cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be registered.

                                       2
<PAGE>

                  (b) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 1.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The expenses of
such withdrawn registration shall be borne by the Company in accordance with
Section 1.6 hereof.

                  (c) UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under this Section 1.2 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters) and enter into an
underwriting agreement in customary form with an underwriter or underwriters
selected by the Company, and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of the
offering by the Company. If the total amount of securities, including
Registrable Securities, requested by stockholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
that the underwriters determine in their sole discretion will not jeopardize the
success of the offering (the securities so included to be apportioned pro rata
among the selling Holders according to the total amount of securities entitled
to be included therein owned by each selling Holder or in such other proportions
as shall mutually be agreed to by such selling Holders), but in no event shall
(i) the amount of securities of the selling Holders included in the offering be
reduced below thirty percent (30%) of the total amount of securities included in
such offering, unless such offering is the initial public offering of the
Company's securities, in which case the selling Holders may be excluded if the
underwriters make the determination described above and no other stockholder's
securities are included. For purposes of the preceding parenthetical concerning
apportionment, for any selling stockholder that is a Holder of Registrable
Securities and that is a partnership or corporation, the partners, retired
partners and stockholders of such Holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "selling Holder," and any
pro rata reduction with respect to such "selling Holder" shall be based upon the
aggregate amount of Registrable Securities owned by all such related entities
and individuals.

         1.3 DEMAND REGISTRATION. In case the Company shall receive from the
Holders of at least twenty percent (20%) of the Registrable Securities a written
request or requests that the Company effect a registration and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company shall:

                  (a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and

                  (b) use all reasonable efforts to effect, as soon as
practicable, such registration and all such qualifications and compliances as
may be so requested and as would permit or facilitate the sale and distribution
of all or such portion of such Holders' Registrable Securities as are specified
in such request, together with all or such portion of the Registrable Securities
of

                                       3
<PAGE>

any other Holders joining in such request as are specified in a written request
given within fifteen (15) days after receipt of such written notice from the
Company, provided, however, that the Company shall not be obligated to effect
any such registration, qualification or compliance, pursuant to this Section
1.3;

                           (i) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public (net of any underwriters' discounts or
commissions) of less than $1,000,000;

                           (ii) if the Company shall furnish to the Holders a
certificate signed by the Chief Executive Officer or Chairman of the Board of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
stockholders for such Registration to be effected at such time, in which event
the Company shall have the right to defer the filing of the registration
statement for a period of not more than one hundred twenty (120) days after
receipt of the request of the Holder or Holders under this Section 13; provided,
however, that the Company shall not utilize this right more than once in any
twelve (12)-month period;

                           (iii) if the Company has already effected for the
Holders two (2) registrations on Form S-1 and four (4) registrations on Form S-3
pursuant to this Section 1.3; or

                           (iv) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.

                  (c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders.

         1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this Section 1
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:

                  (a) prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become effective, and, upon the request of
the Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for a period of up to one hundred
twenty (120) days or, if earlier, until the distribution contemplated in the
Registration Statement has been completed;

                  (b) prepare and fie with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement;

                                       4
<PAGE>

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

                  (d) use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions;

                  (e) in the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering;

                  (f) notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act or the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;

                  (g) cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed; and

                  (h) provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.

         1.5 INFORMATION FROM HOLDER. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section I with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.

         1.6 EXPENSES OF REGISTRATION. All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Sections 1.2 and 1.3, including (without limitation)
all registration, filing and qualification fees, printers' and accounting fees,
fees and disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
Company. Notwithstanding the foregoing, the Company shall not be required to pay
for any expenses of any registration proceeding begun pursuant to Section 1.3 if
the registration request is subsequently withdrawn at the request of the Holders
of a majority of the Registrable Securities to be registered (in which case all
participating Holders shall bear such expenses pro

                                       5
<PAGE>

rata based upon the number of Registrable Securities that were to be registered
in the withdrawn registration), provided, however, that if at the time of such
withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from that known to the Holders
at the time of their request and have withdrawn the request with reasonable
promptness following disclosure by the Company of such material adverse change,
then the Holders shall not be required to pay any of such expenses and shall
retain their rights pursuant to Section 1.3.

         1.7 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:

                  (a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners or officers, directors and
stockholders of each Holder, legal counsel and accountants for each Holder, any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Act or the 1934
Act, against any losses, claims, damages or liabilities (joint or several) to
which they may become subject under the Act, the 1934 Act or any state
securities laws, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Act, the 1934 Act, any
state securities laws or any rule or regulation promulgated under the Act, the
1934 Act or any state securities laws; and the Company will reimburse each such
Holder, underwriter or controlling person for any legal or other expenses
reasonably incurred by them, as incurred, in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection 1.7(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation that occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person; provided further, however, that the foregoing indemnity
agreement with respect to any preliminary prospectus shall not inure to the
benefit of any Holder or underwriter, or any person controlling such Holder or
underwriter, from whom the person asserting any such losses, claims, damages or
liabilities purchased shares in the offering, if a copy of the prospectus (as
then amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) was not sent or given by or on behalf of such Holder or
underwriter to such person, if required by law so to have been delivered, at or
prior to the written confirmation of the sale of the shares to such person, and
if the prospectus (as so amended or supplemented) would have cured the defect
giving rise to such loss, claim, damage or liability.

                                       6
<PAGE>

                  (b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, legal counsel and
accountants for the Company, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Act, the 1934 Act or any state securities laws, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will reimburse any person intended
to be indemnified pursuant to this subsection 1.7(b), for any legal or other
expenses reasonably incurred by such person, as incurred, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
1.7(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder (which consent shall not be unreasonably withheld), provided that
in no event shall any indemnity under this subsection 1.7(b) exceed the gross
proceeds from the offering received by such Holder.

                  (c) Promptly after receipt by an indemnified party under this
Section 1.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.7, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.7, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.7.

                  (d) If the indemnification provided for in this Section 1.7 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that

                                       7
<PAGE>

resulted in such loss, liability, claim, damage or expense, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and of the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.

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

                  (f) The obligations of the Company and Holders under this
Section 1.7 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.

         1.8 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration statement, the Company agrees to:

                  (a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the Initial Offering;

                  (b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and

                  (c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC that permits the
selling of any such securities without registration or pursuant to such form.

         1.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 1 may be assigned
(but only with all related obligations) by a Holder to a transferee or assignee
of such securities that (i) is a subsidiary, affiliate, parent, partner, limited
partner, retired partner or stockholder of a Holder, (ii) is a Holder's family
member or trust for the benefit of an individual Holder, or (iii) after such
assignment or transfer, holds at least 300,000 shares of Registrable Securities
(subject to

                                       8
<PAGE>

appropriate adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided: (a) the Company is, within a reasonable time after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement, including without limitation the provisions of Section 1.11 below;
and (c) such assignment shall be effective-only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act.

         1.10 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of the Registrable Securities, enter into any
agreement with any holder or prospective holder of any securities of the Company
that would allow such holder or prospective holder (a) to include such
securities in any registration filed under Section 1.2 hereof, unless under the
terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
such securities will not reduce the amount of the Registrable Securities of the
Holders that are included or (b) to demand registration of their securities.

         1.11 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that it
will not, without the prior written consent of the managing underwriter, during
the period commencing on the date of the final prospectus relating to the
Company's initial public offering and ending on the date specified by the
Company and the managing underwriter (such period not to exceed one hundred
eighty (180) days) (i) lend, offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock (whether such shares or any
such securities are then owned by the Holder or are thereafter acquired), or
(ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing provisions of this Section 1.11 shall apply only to the
Company's initial public offering of equity securities, shall not apply to the
sale of any-shares to an underwriter pursuant to an underwriting agreement, and
shall only be applicable to the Holders if all officers and directors and
greater than two percent (2%) stockholders of the Company enter into similar
agreements. The underwriters in connection with the Company's initial public
offering are intended third party beneficiaries of this Section 1.11 and shall
have the right, power and authority to enforce the provisions hereof as though
they were a party hereto.

         In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.

         1.12 TERMINATION OF REGISTRATION RIGHTS. No Holder shall be entitled to
exercise any right provided for in this Section 1 after five (5) years following
the consummation of the Initial Offering or, as to any Holder, such earlier time
at which all Registrable Securities held by such

                                       9
<PAGE>

Holder (and any affiliate of the Holder with whom such Holder must aggregate its
sales under Rule 144) can be sold in any three (3)-month period without
registration in compliance with Rule 144 of the Act.

2. COVENANTS OF THE COMPANY.

         2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver to each
Investor that holds at least 300,000 shares (as adjusted for subsequent stock
splits, stock dividends, combinations, recapitalizations and the like) of Series
A Preferred (or Common Stock issuable upon conversion thereof) of the Company:

                  (a) as soon as practicable, but in any event within ninety
(90) days after the end of each fiscal year of the Company, an income statement
for such fiscal year, a balance sheet of the Company and statement of
stockholder's equity as of the end of such year, and a statement of cash flows
for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles in the
United States ("GAAP"), and audited and certified by "Big Five" independent
public accountants of nationally recognized standing selected by the Company;

                  (b) as soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three (3) quarters of each fiscal
year of the Company, an unaudited income statement, statement of cash flows for
such fiscal quarter and an unaudited balance sheet as of the end of such fiscal
quarter;

                  (c) within thirty (30) days of the end of each month, an
unaudited income statement and statement of cash flows and balance sheet for and
as of the end of such month, in reasonable detail;

                  (d) as soon as practicable, but in any event at least thirty
(30) days prior to the end of each fiscal year, a budget and business plan for
the next fiscal year, prepared on a monthly basis, including balance sheets,
income statements and statements of cash flows for such months and, as soon as
prepared, any other budgets or revised budgets prepared by the Company;

                  (e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company certifying that such financials
were prepared in accordance with GAAP consistently applied with prior practice
for earlier periods (with the exception of footnotes that may be required by
GAAP) and fairly present the financial condition of the Company and its results
of operation for the period specified, subject to year-end audit adjustment; and

                  (f) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the
Investor or any assignee of the Investor may from time to time request.

         2.2 INSPECTION. The Company shall permit each Investor that holders at
least 300,000 shares (as adjusted for subsequent stock splits, stock dividends,
combinations, recapitalizations

                                       10
<PAGE>

and the like) of Common Stock (either outstanding or issuable upon conversion
Series A Preferred Stock) of the Company, at such Investor's expense, to visit
and inspect the Company's properties, to examine its books of account and
records and to discuss the Company's affairs, finances and accounts with its
officers, all at such reasonable times as may be requested by the Investor.

         2.3 TERMINATION OF INFORMATION AND INSPECTION COVENANTS. The covenants
set forth in Sections 2.1 and 2.2 shall terminate as to Investors and be of no
further force or effect when the sale of securities pursuant to a registration
statement filed by the Company under the Act when (i) the Initial Offering is
consummated or (ii) the Company first becomes subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the 1934 Act, whichever event shall
first occur.

         2.4 RIGHT OF FIRST OFFER. Subject to the terms and conditions specified
in this Section 2.4, the Company hereby grants to each Existing Stockholder a
right of first offer with respect to future sales by the Company of its Shares
(as hereinafter defined). For purposes of this Section 2.4, an Existing
Stockholder includes any general partners and affiliates of an Existing
Stockholder. An Existing Stockholder shall be entitled to apportion t4 e right
of first offer hereby granted it among itself and its partners and affiliates in
such proportions as it deems appropriate.

         Each time the Company proposes to offer any shares of, or securities
convertible into or exchangeable or exercisable for any shares of, any class of
its capital stock ("Shares"), the Company shall first make an offering of such
Shares to each Existing Stockholder in accordance with the following provisions.

                  (a) The Company shall deliver a notice in accordance with
Section 4.6 ("Notice") to the Existing Stockholders stating (i) its bona fide
intention to offer such Shares, (ii) the number of such Shares to be offered,
and (iii) the price and terms upon which it proposes to offer such Shares.

                  (b) By written notification received by the Company, within
twenty (20) calendar days after receipt of the Notice, the Existing Stockholder
may elect to purchase or obtain, at the price and on the terms specified in the
Notice, up to that portion of such Shares that equals the proportion that the
number of shares of Common Stock issued and held, or issuable upon conversion of
the Series A Preferred Stock, then held by such Existing Stockholder, bears to
the total number of shares of. Common Stock of the Company then outstanding
(assuming full conversion and exercise of all convertible and exercisable
securities).

                  (c) If all Shares that the Existing Stockholders are entitled
to obtain pursuant to subsection 2.4(b) are not elected to be obtained as
provided in subsection 2.4(b) hereof, the Company may, during the ninety (90)
day period following the expiration of the period provided in subsection 2.4(b)
hereof, offer the remaining unsubscribed portion of such Shares to any person or
persons at a price not less than, and upon terms no more favorable to the
offeree than those specified in the Notice. If the Company does not enter into
an agreement for the sale of the Shares within such period, or if such agreement
is not consummated within ninety (90) days of the execution thereof, the right
provided hereunder shall be deemed to be revived and such

                                       11
<PAGE>

Shares shall not be offered unless first reoffered to the Existing Stockholders
in accordance herewith.

                  (d) Subject to the following sentence, the right of first
offer in this Section 2.4 shall not be applicable to (i) the issuance or sale of
shares of Common Stock (or options therefor) to employees, officers, directors
and consultants for the primary purpose of soliciting or retaining their
services; (ii) the issuance of securities pursuant to a Qualified IPO, (iii) the
issuance of securities pursuant to the conversion or exercise of convertible or
exercisable securities, (iv) the issuance of securities in connection with a
bona fide business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock or otherwise or (v) the
issuance of stock, warrants or other securities or rights to persons or entities
with which the Company has business relationships provided such issuances are
for other than primarily equity financing purposes. If the issuance referred to
in the foregoing clauses (iv) or (v) is to an affiliate of the Company, then the
issuance shall be subject to the right of first offer in this Section 2.4 unless
the issuance is approved by a majority of the Board of Directors excluding, for
such determination, any director that is an affiliate of the person or entity to
receive the Issuance. An "affiliate" of, or a person "affiliated" with, a
specified person shall mean a person that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, the person specified.

                  (e) The covenants set forth in this Section 2.4 shall
terminate and be of no further force or effect upon the consummation of a
Qualified IPO.

3. COVENANT OF FOUNDERS. Each Founder covenants and agrees that for as long as
he is employed by the Company and for one year thereafter he, she or it shall
not own, operate, manage, control or invest in any entity that engages in or
proposes to engage in the Business (as defined below). Notwithstanding the
foregoing, nothing contained in this Section 3 shall prohibit a Founder from
owning not more than an aggregate of two percent (2%) of any class of stock of
any competing company which is listed on a national securities exchange or
traded in the over-the-counter market but only if the Founder is not involved in
the business of said company. "Business" shall mean a business that derives its
revenues primarily from the sale of diamonds, jewelry, watches and related goods
to consumers through a web site. The Founders hereby acknowledge that in the
event of a breach or threatened breach by any of them of the provisions of this
section 3, the Company would suffer irreparable harm for which there would be no
adequate remedy at law. Accordingly, the Founders agree that in such event, in
addition to any other remedies which the Company may have in law or in equity
for money damages or other relief, the Company shall be entitled to temporary
and/or injunctive relief, without the necessity of proving damages, to enforce
the provisions hereof.

4. MISCELLANEOUS.

         4.1 [INTENTIONALLY DELETED].

         4.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective heirs, personal representatives, successors and
assigns of the parties (including transferees of

                                       12
<PAGE>

any shares of Registrable Securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

         4.3 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York as applied to agreements among New York
residents entered into and to be performed entirely within New York.

         4.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

         4.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

         4.6 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
delivery by confirmed facsimile transmission, upon deposit with a nationally
recognized overnight courier service, or upon deposit with the United States
Post Office, by registered or certified mail, postage prepaid and addressed to
the party to be notified at the address indicated for such party on the
signature page of the Series A Agreement, or at such other address as such party
may designate by ten (10) days' advance written notice to the other parties.

         4.7 EXPENSES. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys' fees, costs and necessary disbursements in addition to
any other relief to which such party may be entitled.

         4.8 ENTIRE AGREEMENT: AMENDMENTS AND WAIVERS. This Agreement (including
the Exhibits hereto, if any) constitutes the full and entire understanding and
agreement among the parties with regard to the subjects hereof and thereof. Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company,
the holders of at least fifty-one percent (51%) of the Registrable Securities
[and the holders of at least fifty one percent (51%) of the Common Stock held by
the Founders.] Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any Registrable Securities each
future holder of all such Registrable Securities, all the Founders and their
permit and the Company.

         4.9 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.

                                       13
<PAGE>

         4.10 AGGREGATION OF STOCK. All shares of Registrable Securities held or
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.

             [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK].

                                       14
<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

                                       COMPANY:

                                       DIAMONDDEPOT.COM, INC.

                                       By: /s/ NEERAJ GUPTA
                                           -------------------------------------
                                           Name: Neeraj Gupta
                                           Title: President

                                       INVESTOR:

                                       LENORTH HOLDINGS S.A.

                                       By: /s/ PETER VEENENDAAL
                                           -------------------------------------
                                           Name: Peter Veenendaal
                                           Title: Attorney in Fact

                                       INVESTOR:

                                       NORTHERN FINANCIAL GROUP LTD.

                                       By: /s/ PETER BLAUW
                                           -------------------------------------
                                           Name: Peter Blauw
                                           Title: Attorney in Fact

                                       INVESTOR:

                                       LIPTON PARTNERSHIP NO.2

                                       By: /s/ Alan Lipton
                                           -------------------------------------
                                           Name: Alan Lipton
                                           Title: President

                                       15
<PAGE>

                                       INVESTOR:

                                       DATA INVESTMENT LLC

                                       By: /s/ Philippe Laub
                                           -------------------------------------
                                       Name:  Philippe Laub
                                       Title: President

                                       FOUNDER:

                                       /s/ Neeraj Gupta
                                       -----------------------------------------

                                       FOUNDER:

                                       /s/ Sachin Gupta
                                       -----------------------------------------

                                       16

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