Document:

<PAGE>   1
                                                                     EXHIBIT 4.3

                          SALE AND SERVICING AGREEMENT

                            Dated as of June 1, 2000

                                      among

                 ASSOCIATES AUTOMOBILE RECEIVABLES TRUST 2000-1
                                     Issuer

                        ARCADIA RECEIVABLES FINANCE CORP.
                                     Seller

                                       and

                             ARCADIA FINANCIAL LTD.
                   In its individual capacity and as Servicer

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                            <C>
ARTICLE I           DEFINITIONS...................................................................................1
         SECTION 1.1.          Definitions........................................................................1
         SECTION 1.2.          Usage of Terms....................................................................17
         SECTION 1.3.          Calculations......................................................................18
         SECTION 1.4.          Section References................................................................18
         SECTION 1.5.          No Recourse.......................................................................18

ARTICLE II          CONVEYANCE OF RECEIVABLES....................................................................18
         SECTION 2.1.          Conveyance of Receivables.........................................................18
         SECTION 2.2.          Custody of Receivable Files.......................................................19
         SECTION 2.3.          Conditions to Acceptance by Owner Trustee.........................................20
         SECTION 2.4.          Representations and Warranties of Seller..........................................20
         SECTION 2.5.          Repurchase of Receivables Upon Breach of Warranty.................................22
         SECTION 2.6.          Nonpetition Covenant..............................................................23
         SECTION 2.7.          Collecting Lien Certificates Not Delivered on the Closing Date....................23
         SECTION 2.8.          Trust's Assignment of Administrative Receivables and
                               Warranty Receivables..............................................................23

ARTICLE III         ADMINISTRATION AND SERVICING OF RECEIVABLES..................................................24
         SECTION 3.1.          Duties of the Servicer............................................................24
         SECTION 3.2.          Collection of Receivable Payments; Modifications of
                               Receivables; Lockbox Agreements...................................................25
         SECTION 3.3.          Realization Upon Receivables......................................................27
         SECTION 3.4.          Insurance.........................................................................28
         SECTION 3.5.          Maintenance of Security Interests in Vehicles.....................................29
         SECTION 3.6.          Covenants, Representations, and Warranties of Servicer............................29
         SECTION 3.7.          Purchase of Receivables Upon Breach of Covenant...................................32
         SECTION 3.8.          Total Servicing Fee; Payment of Certain Expenses by Servicer......................32
         SECTION 3.9.          Servicer's Certificate............................................................33
         SECTION 3.10.         Annual Statement as to Compliance; Notice of Servicer
                               Termination Event.................................................................33
         SECTION 3.11.         Annual Independent Accountants' Report............................................34
         SECTION 3.12.         Access to Certain Documentation and Information
                               Regarding Receivables.............................................................34
         SECTION 3.13.         Monthly Tape......................................................................35
         SECTION 3.14.         Duties of the Servicer under the Indenture........................................35
         SECTION 3.15.         Certain Duties of the Servicer under the Trust Agreement..........................36
         SECTION 3.16.         Fidelity Bond.....................................................................36
</TABLE>

                                       -i-

<PAGE>   3

<TABLE>
<S>                                                                                                            <C>
ARTICLE IV          DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS.....................................................37
         SECTION 4.1.          Trust Accounts....................................................................37
         SECTION 4.2.          Collections.......................................................................40
         SECTION 4.3.          Application of Collections........................................................41
         SECTION 4.4.          Monthly Advances..................................................................42
         SECTION 4.5.          Additional Deposits...............................................................43
         SECTION 4.6.          Distributions.....................................................................43
         SECTION 4.7.          Net Deposits......................................................................44
         SECTION 4.8.          Statements to Noteholders.........................................................44
         SECTION 4.9.          Indenture Trustee as Agent........................................................45
         SECTION 4.10.         Eligible Accounts.................................................................45

ARTICLE V           THE RESERVE ACCOUNT..........................................................................46
         SECTION 5.1.          Withdrawals from the Reserve Account..............................................46

ARTICLE VI          THE SELLER...................................................................................46
         SECTION 6.1.          Liability of Seller...............................................................46
         SECTION 6.2.          Merger or Consolidation of, or Assumption of the
                               Obligations of, Seller............................................................46
         SECTION 6.3.          Limitation on Liability of Seller and Others......................................47
         SECTION 6.4.          Seller May Own Notes..............................................................47
         SECTION 6.5.          Corporate Existence...............................................................47

ARTICLE VII         THE SERVICER.................................................................................48
         SECTION 7.1.          Liability of Servicer; Indemnities................................................48
         SECTION 7.2.          Merger or Consolidation of, or Assumption of the
                               Obligations of, the Servicer......................................................50
         SECTION 7.3.          Limitation on Liability of Servicer and Others....................................50
         SECTION 7.4.          Delegation of Duties..............................................................51
         SECTION 7.5.          Servicer Not to Resign............................................................51

ARTICLE VIII        SERVICER TERMINATION EVENTS..................................................................51
         SECTION 8.1.          Servicer Termination Event........................................................51
         SECTION 8.2.          Consequences of a Servicer Termination Event......................................52
         SECTION 8.3.          Appointment of Successor..........................................................53
         SECTION 8.4.          Notification to Noteholders.......................................................54
         SECTION 8.5.          Waiver of Past Defaults...........................................................54

ARTICLE IX          TERMINATION..................................................................................54
         SECTION 9.1.          Optional Purchase of All Receivables; Liquidation of Trust Estate.................54

ARTICLE X           MISCELLANEOUS PROVISIONS.....................................................................55
         SECTION 10.1.         Amendment.........................................................................55
         SECTION 10.2.         Protection of Title to Trust Property.............................................56
</TABLE>

                                      -ii-

<PAGE>   4

<TABLE>
<S>                                                                                                            <C>
         SECTION 10.3.         Governing Law.....................................................................58
         SECTION 10.4.         Severability of Provisions........................................................58
         SECTION 10.5.         Assignment........................................................................58
         SECTION 10.6.         Limitations on Rights of Others...................................................58
         SECTION 10.7.         Counterparts......................................................................58
         SECTION 10.8.         Intention of Parties..............................................................58
         SECTION 10.9.         Notices...........................................................................59
         SECTION 10.10.        Limitation of Liability...........................................................59
         SECTION 10.11.        Nonpetition Covenant..............................................................59
</TABLE>

<TABLE>
<CAPTION>
                                    SCHEDULES
<S>                       <C>
Schedule A       --       Representations and Warranties of Seller and AFL

<CAPTION>

                                    EXHIBITS
<S>                       <C>

Exhibit A        --       Schedule of Receivables

Exhibit B        --       Form of Custodian Agreement (AFL)

Exhibit C        --       Form of Servicer's Certificate
</TABLE>

                                     -iii-

<PAGE>   5

                  THIS SALE AND SERVICING AGREEMENT, dated as of June 1, 2000,
is made among Associates Automobile Receivables Trust 2000-1 (the "Issuer"),
Arcadia Receivables Finance Corp., a Delaware corporation, as Seller (the
"Seller"), and Arcadia Financial Ltd., a Minnesota corporation, in its
individual capacity and as Servicer (in its individual capacity, "AFL"; in its
capacity as Servicer, the "Servicer").

                  In consideration of the mutual agreements herein contained,
and of other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

                  SECTION 1.1. Definitions. All terms defined in the Indenture
or the Trust Agreement (each as defined below) shall have the same meaning in
this Agreement. Whenever capitalized and used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:

                  Accountants' Report: The report of a firm of nationally
recognized independent accountants described in Section 3.11.

                  Accounting Date: With respect to a Distribution Date, the last
day of the Monthly Period immediately preceding such Distribution Date.

                  Actual Funds: With respect to a Distribution Date, the sum of
(i) Available Funds for such Distribution Date, plus (ii) the portion of the
amounts on deposit in the Reserve Account, if any, deposited pursuant to Section
5.1 into the Collection Account with respect to such Distribution Date.

                  Administrative Receivable: With respect to any Monthly Period,
a Receivable which the Servicer is required to purchase pursuant to Section 3.7.

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

                  AFL: Arcadia Financial Ltd., a Minnesota corporation, in its
individual capacity.

                  Agreement or "this Agreement": This Sale and Servicing
Agreement, all amendments and supplements thereto and all exhibits and schedules
to any of the foregoing.

<PAGE>   6

                  Amount Financed: With respect to a Receivable, the aggregate
amount advanced under such Receivable toward the purchase price of the Financed
Vehicle and related costs, including amounts advanced in respect of accessories,
insurance premiums, service and warranty contracts, other items customarily
financed as part of retail automobile installment sale contracts or promissory
notes, and related costs.

                  Annual Percentage Rate or APR: With respect to a Receivable,
the rate per annum of finance charges stated in such Receivable as the "annual
percentage rate" (within the meaning of the Federal Truth-in-Lending Act). If
after the Closing Date, the rate per annum with respect to a Receivable as of
the Closing Date is reduced as a result of (i) an insolvency proceeding
involving the Obligor or (ii) pursuant to the Soldiers' and Sailors' Civil
Relief Act of 1940, Annual Percentage Rate or APR shall refer to such reduced
rate.

                  Available Funds: With respect to any Determination Date, the
sum of (i) the Collected Funds for such Determination Date, (ii) all Purchase
Amounts deposited in the Collection Account as of the related Determination
Date, (iii) all Monthly Advances made by the Servicer as of the related
Determination Date, and (iv) all net income from investments of funds in the
Trust Accounts (other than the Reserve Account) during the related Monthly
Period.

                  Basic Servicing Fee: With respect to any Monthly Period, the
fee payable to the Servicer for services rendered during such Monthly Period,
which shall be equal to one-twelfth of the Basic Servicing Fee Rate multiplied
by the Pool Balance as of the Determination Date falling in such Monthly Period.

                  Basic Servicing Fee Rate: 1.25% per annum.

                  Business Day: Any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banking institutions in Dallas, Texas,
New York, New York, Wilmington, Delaware or any other location of any successor
Servicer, successor Owner Trustee, or successor Indenture Trustee are authorized
or obligated by law, executive order or governmental decree to be closed.

                  Certificate: The Certificates issued pursuant to the Trust
Agreement.

                  Certificate Distribution Account: The meaning assigned to such
term in the Trust Agreement.

                  Certificate Majority: Holders of Certificates representing
more than 50% of the interest of the Certificates as a whole.

                  Certificateholder: A Person in whose name a Certificate is
registered pursuant to the Trust Agreement.

                                      -2-
<PAGE>   7

                  Class A Interest Distributable Amount: The sum of the Class
A-1 Interest Distributable Amount, the Class A-2 Interest Distributable Amount
and the Class A-3 Interest Distributable Amount.

                  Class A-1 Final Scheduled Distribution Date: The June 2001
Distribution Date.

                  Class A-1 Interest Carryover Shortfall: With respect to any
Distribution Date, the excess of the Class A-1 Interest Distributable Amount for
the preceding Distribution Date over the amount in respect of interest on the
Class A-1 Notes that was actually deposited in the Note Interest Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class A-1 Noteholders on the preceding Distribution
Date, to the extent permitted by law, at the Class A-1 Interest Rate from such
preceding Distribution Date to but excluding the current Distribution Date.

                  Class A-1 Interest Distributable Amount: With respect to any
Distribution Date, the sum of the Class A-1 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-1 Interest Carryover Shortfall
for such Distribution Date.

                  Class A-1 Interest Rate: 6.854% per annum.

                  Class A-1 Monthly Interest Distributable Amount: With respect
to any Distribution Date, the product of (x) the Class A-1 Interest Rate, (y) a
fraction, the numerator of which is the number of days elapsed (on the basis of
a 360-day year) from and including the most recent date to which interest has
been paid to but excluding such Distribution Date (or, in the case of the first
Distribution Date, 25) and the denominator of which is 360 and (z) the
outstanding principal balance of the Class A-1 Notes on the immediately
preceding Distribution Date (or, in the case of the first Distribution Date, on
the Closing Date), after giving effect to all payments of principal to Class A-1
Noteholders on or prior to such immediately preceding Distribution Date (or, in
the case of the first Distribution Date, on the Closing Date).

                  Class A-2 Final Scheduled Distribution Date: The March 2003
Distribution Date.

                  Class A-2 Interest Carryover Shortfall: With respect to any
Distribution Date, the excess of the Class A-2 Interest Distributable Amount for
the preceding Distribution Date, over the amount in respect of interest on the
Class A-2 Notes that was actually deposited in the Note Interest Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class A-2 Noteholders on the preceding Distribution
Date, to the extent permitted by law, at the Class A-2 Interest Rate from such
preceding Distribution Date to but excluding the current Distribution Date.

                  Class A-2 Interest Distributable Amount: With respect to any
Distribution Date, the sum of the Class A-2 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-2 Interest Carryover Shortfall
for such Distribution Date.

                                      -3-
<PAGE>   8

                  Class A-2 Interest Rate: 7.15% per annum.

                  Class A-2 Monthly Interest Distributable Amount: With respect
to any Distribution Date, 30 days of interest (or, in the case of the first
Distribution Date, 23 days of interest) at the Class A-2 Interest Rate on the
outstanding principal balance of the Class A-2 Notes on the immediately
preceding Distribution Date (or, in the case of the first Distribution Date, on
the Closing Date), after giving effect to all payments of principal to Class A-2
Noteholders on or prior to such immediately preceding Distribution Date (or, in
the case of the first Distribution Date, on the Closing Date).

                  Class A-3 Final Scheduled Distribution Date: The January 2004
Distribution Date.

                  Class A-3 Interest Carryover Shortfall: With respect to any
Distribution Date, the excess of the Class A-3 Interest Distributable Amount for
the preceding Distribution Date over the amount in respect of interest on the
Class A-3 Notes that was actually deposited in the Note Interest Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class A-3 Noteholders on the preceding Distribution
Date, to the extent permitted by law, at the Class A-3 Interest Rate from such
preceding Distribution Date to but excluding the current Distribution Date.

                  Class A-3 Interest Distributable Amount: With respect to any
Distribution Date, the sum of the Class A-3 Monthly Interest Distributable
Amount for such Distribution Date and the Class A-3 Interest Carryover Shortfall
for such Distribution Date.

                  Class A-3 Interest Rate: 7.30% per annum.

                  Class A-3 Monthly Interest Distributable Amount: With respect
to any Distribution Date, 30 days of interest (or, in the case of the first
Distribution Date, 23 days of interest) at the Class A-3 Interest Rate on the
outstanding principal balance of the Class A-3 Notes on the immediately
preceding Distribution Date (or, in the case of the first Distribution Date, on
the Closing Date), after giving effect to all payments of principal to Class A-3
Noteholders on or prior to such immediately preceding Distribution Date (or, in
the case of the first Distribution Date, on the Closing Date).

                  Class B Final Scheduled Distribution Date: The August 2007
Distribution Date.

                  Class B Interest Carryover Shortfall: With respect to any
Distribution Date, the excess of the Class B Interest Distributable Amount for
the preceding Distribution Date over the amount in respect of interest on the
Class B Notes that was actually deposited in the Note Interest Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class B Noteholders on the preceding Distribution
Date, to the extent permitted by law, at the Class B Interest Rate from such
preceding Distribution Date to but excluding the current Distribution Date.

                                      -4-
<PAGE>   9

                  Class B Interest Distributable Amount: With respect to any
Distribution Date, the sum of the Class B Monthly Interest Distributable Amount
for such Distribution Date and the Class B Interest Carryover Shortfall for such
Distribution Date.

                  Class B Interest Rate: 7.83% per annum.

                  Class B Monthly Interest Distributable Amount: With respect to
any Distribution Date, 30 days of interest (or, in the case of the first
Distribution Date, 23 days of interest) at the Class B Interest Rate on the
outstanding principal balance of the Class B Notes on the immediately preceding
Distribution Date (or, in the case of the first Distribution Date, on the
Closing Date), after giving effect to all payments of principal to Class B
Noteholders on or prior to such immediately preceding Distribution Date (or, in
the case of the first Distribution Date, on the Closing Date).

                  Class M Final Scheduled Distribution Date: The May 2005
Distribution Date.

                  Class M Interest Carryover Shortfall: With respect to any
Distribution Date, the excess of the Class M Interest Distributable Amount for
the preceding Distribution Date over the amount in respect of interest on the
Class M Notes that was actually deposited in the Note Interest Distribution
Account on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to Class M Noteholders on the preceding Distribution
Date, to the extent permitted by law, at the Class M Interest Rate from such
preceding Distribution Date to but excluding the current Distribution Date.

                  Class M Interest Distributable Amount: With respect to any
Distribution Date, the sum of the Class M Monthly Interest Distributable Amount
for such Distribution Date and the Class M Interest Carryover Shortfall for such
Distribution Date.

                  Class M Interest Rate: 7.51% per annum.

                  Class M Monthly Interest Distributable Amount: With respect to
any Distribution Date, 30 days of interest (or, in the case of the first
Distribution Date, 23 days of interest) at the Class M Interest Rate on the
outstanding principal balance of the Class M Notes on the immediately preceding
Distribution Date (or, in the case of the first Distribution Date, on the
Closing Date), after giving effect to all payments of principal to Class M
Noteholders on or prior to such immediately preceding Distribution Date (or, in
the case of the first Distribution Date, on the Closing Date).

                  Closing Date:  June 22, 2000.

                  Collateral Insurance: The insurance policy maintained by the
Servicer, or indemnification obligation of the Servicer in lieu of such
insurance policy.

                  Collected Funds: With respect to any Determination Date, the
amount of funds in the Collection Account after giving effect to deposits on or
prior to the Determination Date representing collections on the Receivables
during the related Monthly Period, including all Liquidation Proceeds

                                      -5-
<PAGE>   10

collected during the related Monthly Period (but excluding any Monthly Advances
and any Purchase Amounts).

                  Collection Account: The account designated as the Collection
Account in, and which is established and maintained pursuant to, Section 4.1(a).

                  Collection Records: All manually prepared or computer
generated records relating to collection efforts or payment histories with
respect to the Receivables.

                  Computer Tape: The computer tape generated on behalf of the
Seller which provides information relating to the Receivables and which was used
by the Seller and AFL in selecting the Receivables conveyed to the Trust
hereunder.

                  Controlling Noteholders: The Holders of (i) a majority in
outstanding principal amount of the Class A Notes, or (ii) if all of the Class A
Notes have been paid in full, a majority in outstanding principal amount of the
Class M Notes, or (iii) if all of the Class A Notes and Class M Notes have been
paid in full, a majority in outstanding principal amount of the Class B Notes.

                  Corporate Trust Office: With respect to the Owner Trustee, the
principal office of the Owner Trustee at which at any particular time its
corporate trust business shall be administered, which office at the Closing Date
is located at Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890; the telecopy number for the Corporate Trust Administration of
the Owner Trustee on the date of the execution of this Agreement is (302)
651-8882; with respect to the Indenture Trustee, the principal office of the
Indenture Trustee at which at any particular time its corporate trust business
shall be administered, which office is located at 1 Bank One Plaza, Suite
IL1-0126, Chicago, Illinois 60670-0126, Attention: Global Corporate Trust
Services; the telecopy number for the Corporate Trust Office of the Indenture
Trustee on the date of execution of this Agreement is (312) 407-1708.

                  Cram Down Loss: With respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on a Receivable or otherwise modifying or restructuring
the Scheduled Payments to be made on a Receivable, an amount equal to the excess
of the Principal Balance of such Receivable immediately prior to such order over
the Principal Balance of such Receivable as so reduced or the net present value
(using as the discount rate the higher of the contract rate or the rate of
interest, if any, specified by the court in such order) of the Scheduled
Payments as so modified or restructured. A "Cram Down Loss" shall be deemed to
have occurred on the date of issuance of such order.

                  Custodian: AFL and any other Person named from time to time as
custodian in any Custodian Agreement acting as agent for the Trust.

                  Custodian Agreement: Any Custodian Agreement from time to time
in effect between the Custodian named therein and the Trust, substantially in
the form of Exhibit B hereto, as the same

                                      -6-
<PAGE>   11

may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof.

                  Cutoff Date: The close of business on May 31, 2000.

                  Cutoff Date Principal Balance:  $833,347,584.32.

                  Dealer: A seller of new or used automobiles or light trucks
that originated one or more of the Receivables and sold the respective
Receivable, directly or indirectly, to AFL under an existing agreement between
such seller and AFL.

                  Dealer Agreement: An agreement between AFL and a Dealer
relating to the sale of retail installment sale contracts and installment notes
to AFL and all documents and instruments relating thereto.

                  Dealer Assignment: With respect to a Receivable, the executed
assignment executed by a Dealer conveying such Receivable to AFL.

                  Determination Date: With respect to any Monthly Period, the
second Business Day immediately preceding the related Distribution Date.

                  Distribution Date: The 15th day of each calendar month, or if
such 15th day is not a Business Day, the next succeeding Business Day,
commencing July 17, 2000, to and including the Final Scheduled Distribution
Date.

                  Draw Date: With respect to any Distribution Date, the Business
Day immediately preceding such Distribution Date.

                  Electronic Ledger: The electronic master record of the retail
installment sales contracts or installment loans of AFL.

                  Eligible Account: (i) A segregated trust account that is
maintained with the corporate trust department of a depository institution
organized under the laws of the United States of America, or any of the states
thereof, or the District of Columbia, so long as any of the securities of such
institution have a credit rating from each Rating Agency (if then rated by such
Rating Agency) in one of its generic rating categories which signifies
investment grade, or (ii) a segregated direct deposit account maintained with a
depository institution or trust company organized under the laws of the United
States of America, or any of the States thereof, or the District of Columbia,
having a certificate of deposit, short term deposit or commercial paper rating
of at least "A-1+" by Standard & Poor's and "P-1" by Moody's and whose deposits
are insured by the Federal Deposit Insurance Corporation.

                  Eligible Investments: Any one or more of the following types
of investments:

                                      -7-
<PAGE>   12

                  (a) (i) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal and
interest by, the United States or any agency or instrumentality of the United
States, the obligations of which are backed by the full faith and credit of the
United States; and (ii) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal and
interest by, the Federal National Mortgage Association or the Federal Home Loan
Mortgage Corporation, but only if, at the time of investment, such obligations
are assigned a rating in the highest credit rating category by each Rating
Agency;

                  (b) demand or time deposits in, certificates of deposit of, or
bankers' acceptances issued by any depository institution or trust company
organized under the laws of the United States or any State and subject to
supervision and examination by federal and/or State banking authorities
(including, if applicable, the Indenture Trustee, the Owner Trustee or any
agent of either of them acting in their respective commercial capacities);
provided that the short-term unsecured debt obligations of such depository
institution or trust company at the time of such investment, or contractual
commitment providing for such investment, are assigned a rating in the highest
credit rating category by each Rating Agency;

                  (c) repurchase obligations pursuant to a written agreement (i)
with respect to any obligation described in clause (a) above, where the
Indenture Trustee has taken actual or constructive delivery of such obligation
in accordance with Section 4.1, and (ii) entered into with the corporate trust
department of a depository institution or trust company organized under the laws
of the United States or any State thereof, the deposits of which are insured by
the Federal Deposit Insurance Corporation and the short-term unsecured debt
obligations of which are rated "A-1+" by Standard & Poor's and "P-1" by Moody's
(including, if applicable, the Indenture Trustee, the Owner Trustee or any agent
of either of them acting in their respective commercial capacities);

                  (d) securities bearing interest or sold at a discount issued
by any corporation incorporated under the laws of the United States or any State
whose long-term unsecured debt obligations are assigned a rating in the highest
credit rating category by each Rating Agency at the time of such investment or
contractual commitment providing for such investment; provided, however, that
securities issued by any particular corporation will not be Eligible Investments
to the extent that an investment therein will cause the then outstanding
principal amount of securities issued by such corporation and held in the Trust
Accounts to exceed 10% of the Eligible Investments held in the Trust Accounts
(with Eligible Investments held in the Trust Accounts valued at par);

                  (e) commercial paper that (i) is payable in United States
dollars and (ii) is rated in the highest credit rating category by each Rating
Agency;

                  (f) units of money market funds rated in the highest credit
rating category by each Rating Agency; provided that all Eligible Investments
shall be held in the name of the Indenture Trustee; or

                                      -8-
<PAGE>   13

                  (g) any other demand or time deposit, obligation, security or
investment as may be acceptable to the Rating Agencies.

Eligible Investments may be purchased by or through the Indenture Trustee or any
of its Affiliates. No Eligible Investment shall have an "r" highlighter affixed
to the rating of Standard & Poor's.

                  Eligible Servicer: AFL, the Indenture Trustee or another
Person which at the time of its appointment as Servicer (i) is servicing a
portfolio of motor vehicle retail installment sales contracts and/or motor
vehicle installment loans, (ii) is legally qualified and has the capacity to
service the Receivables, (iii) has demonstrated the ability professionally and
competently to service a portfolio of motor vehicle retail installment sales
contracts and/or motor vehicle installment loans similar to the Receivables with
reasonable skill and care, and (iv) is qualified and entitled to use, pursuant
to a license or other written agreement, and agrees to maintain the
confidentiality of, the software which the Servicer uses in connection with
performing its duties and responsibilities under this Agreement or otherwise has
available software which is adequate to perform its duties and responsibilities
under this Agreement.

                  Final Scheduled Distribution Date: With respect to each class
of Notes, the Class A-1 Final Scheduled Distribution Date, the Class A-2 Final
Scheduled Distribution Date, the Class A-3 Final Scheduled Distribution Date,
the Class M Final Scheduled Distribution Date and the Class B Final Scheduled
Distribution Date, respectively.

                  Financed Vehicle: A new or used automobile or light truck,
together with all accessories thereto, securing or purporting to secure an
Obligor's indebtedness under a Receivable.

                  First Priority Principal Distribution Amount: With respect to
any Distribution Date, an amount equal to the excess, if any, of:

                  (a) the aggregate outstanding principal amount of the Class A
         Notes as of the preceding Distribution Date, after giving effect to any
         principal payments made on such preceding Distribution Date, over

                  (b) the Pool Balance at the end of the Monthly Period
         preceding such Distribution Date;

provided, however, that the First Priority Principal Distribution Amount shall
not exceed the outstanding principal amount of all of the Notes on such
Distribution Date, prior to giving effect to any principal payments made on such
Distribution Date; and provided, further, that the First Priority Principal
Distribution Amount on and after the Final Scheduled Distribution Date of each
class of Class A Notes shall not be less than the amount that is necessary to
reduce the outstanding principal amount of each such class of Class A Notes to
zero.

                                      -9-
<PAGE>   14

                  Indenture: The Indenture, dated as of June 1, 2000, between
the Trust and the Indenture Trustee, as the same may be amended and supplemented
from time to time.

                  Indenture Trustee: The Person acting as Trustee under the
Indenture, its successors in interest and any successor Trustee under the
Indenture.

                  Independent Accountants: As defined in Section 3.11(a).

                  Insolvency Event: With respect to a specified Person, (a) the
commencement of an involuntary case against such Person under the federal
bankruptcy laws, as now or hereinafter in effect, or another present or future
federal or state bankruptcy, insolvency or similar law, and such case is not
dismissed within 60 days; or (b) the filing of a decree or entry of an order for
relief by a court having jurisdiction in the premises in respect of such Person
or any substantial part of its property in an involuntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for such Person or for any substantial
part of its property, or ordering the winding-up or liquidation of such Person's
affairs; or (c) the commencement by such Person of a voluntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or the consent by such Person to the entry of an order for
relief in an involuntary case under any such law, or the consent by such Person
to the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.

                  Insurance Policy: With respect to a Receivable, any insurance
policy benefitting the holder of the Receivable providing loss or physical
damage, credit life, credit disability, theft, mechanical breakdown or similar
coverage with respect to the Financed Vehicle or the Obligor.

                  Lien: Any security interest, lien, charge, pledge, preference,
equity or encumbrance of any kind, including tax liens, mechanics' liens and any
liens that attach by operation of law.

                  Lien Certificate: With respect to a Financed Vehicle, an
original certificate of title, certificate of lien or other notification issued
by the Registrar of Titles of the applicable state to a secured party which
indicates that the lien of the secured party on the Financed Vehicle is recorded
on the original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
Certificate" shall mean only a certificate or notification issued to a secured
party.

                  Liquidated Receivable: With respect to any Monthly Period, a
Receivable as to which (i) 91 days have elapsed since the Servicer repossessed
the related Financed Vehicle, (ii) the Servicer has determined in good faith
that all amounts it expects to recover have been received, or (iii) all or any
portion of a Scheduled Payment equal to $10 or more shall have become more than
180 days past due.

                                      -10-
<PAGE>   15

                  Liquidation Proceeds: With respect to a Liquidated Receivable,
all amounts realized with respect to such Receivable (other than amounts
withdrawn from the Reserve Account) net of (i) reasonable expenses incurred by
the Servicer in connection with the collection of such Receivable and the
repossession and disposition of the Financed Vehicle and (ii) amounts that are
required to be refunded to the Obligor on such Receivable; provided, however,
that the Liquidation Proceeds with respect to any Receivable shall in no event
be less than zero.

                  Lockbox Account: The segregated account maintained on behalf
of the Trust by the Lockbox Bank in accordance with Section 3.2(d).

                  Lockbox Agreement: The Agency Agreement, dated as of
November 13, 1992, by and among Harris Trust and Savings Bank, AFL, Shawmut
Bank, N.A., as Trustee, Saturn Financial Services, Inc. and the Program Parties
(as defined therein), taken together with the Retail Lockbox Agreement, dated as
of November 13, 1992, among such parties, and the Counterpart to Agency
Agreement and Retail Lockbox Agreement, dated as of June 22, 2000, among Harris
Trust and Savings Bank, AFL, the Trust and the Indenture Trustee, as such
agreements may be amended from time to time, unless the Indenture Trustee
hereunder shall cease to be a Program Party thereunder, or such agreement shall
be terminated in accordance with its terms, in which event "Lockbox Agreement"
shall mean such other agreement, in form and substance acceptable to the
Indenture Trustee, among the Servicer, the Trust, the Indenture Trustee and the
Lockbox Bank.

                  Lockbox Bank: A depository institution named by the Servicer
and acceptable to the Indenture Trustee.

                  Monthly Advance: The amount that the Servicer is required to
advance on any Receivable pursuant to Section 4.4(a).

                  Monthly Period: With respect to a Distribution Date, the
calendar month preceding the month in which such Distribution Date occurs (such
calendar month being referred to as the "related" Monthly Period with respect to
such Distribution Date). With respect to an Accounting Date, the calendar month
in which such Accounting Date occurs is referred to herein as the "related"
Monthly Period to such Accounting Date.

                  Monthly Records: All records and data maintained by the
Servicer with respect to the Receivables, including the following with respect
to each Receivable: the account number; the identity of the originating Dealer;
Obligor name; Obligor address; Obligor home phone number; Obligor business phone
number; original Principal Balance; original term; Annual Percentage Rate;
current Principal Balance; current remaining term; origination date; first
payment date; final scheduled payment date; next payment due date; date of most
recent payment; new/used classification; collateral description; days currently
delinquent; number of contract extensions (months) to date; amount of the
Scheduled Payment; current Insurance Policy expiration date; and past due late
charges, if any.

                  Moody's: Moody's Investors Service, Inc., or any successor
thereto.

                                      -11-
<PAGE>   16

                  Note Interest Distribution Account: The account designated as
such, established and maintained pursuant to Section 4.1(c).

                  Note Majority: As to each class of Notes, Holders of Notes
representing a majority of the outstanding principal balance of such class of
Notes.

                  Note Pool Factor: With respect to any Distribution Date and
each class of Notes, an eight-digit decimal figure equal to the outstanding
principal balance of such class of Notes as of such Distribution Date (after
giving effect to all distributions on such date) divided by the original
outstanding principal balance of such class of Notes as of the Closing Date.

                  Notes: The Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes, the Class M Notes and the Class B Notes.

                  Obligor: The purchaser or the co-purchasers of the Financed
Vehicle and any other Person or Persons who are primarily or secondarily
obligated to make payments under a Receivable.

                  Opinion of Counsel: A written opinion of counsel acceptable in
form and substance and from counsel acceptable to the Owner Trustee and, if such
opinion or a copy thereof is required to be delivered to the Indenture Trustee
to the Indenture Trustee.

                  Outstanding Monthly Advances: With respect to a Receivable and
a Determination Date, the sum of all Monthly Advances made on any Determination
Date prior to such Determination Date relating to that Receivable which have not
been reimbursed pursuant to Section 4.6(i) or Section 4.7.

                  Owner Trustee: Wilmington Trust Company, acting not
individually but solely as trustee, or its successor in interest, and any
successor Owner Trustee appointed as provided in the Trust Agreement.

                  Person: Any legal person, including any individual,
corporation, partnership, joint venture, estate, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof, or any other entity.

                  Pool Balance: With respect to any Distribution Date, the sum
of the Principal Balances (computed as of the related Accounting Date) for all
Receivables (other than (i) any Receivable that became a Liquidated Receivable
during the related Monthly Period and (ii) any Receivable that became a
Purchased Receivable as of the immediately preceding Accounting Date).

                  Principal Balance: With respect to any Receivable, as of any
date, the Amount Financed minus (i) that portion of all amounts received on or
prior to such date and allocable to principal in accordance with the terms of
the Receivable, and (ii) any Cram Down Loss in respect of such Receivable.

                                      -12-
<PAGE>   17

                  Principal Distribution Account: The account designated as
such, established and maintained pursuant to Section 4.1(b).

                  Principal Distribution Amount: The sum of the First Priority
Principal Distribution Amount, the Second Priority Principal Distribution Amount
and the Regular Principal Distribution Amount.

                  Purchase Agreement: The Receivables Purchase Agreement and
Assignment, dated as of June 1, 2000, between AFL and the Seller.

                  Purchase Amount: With respect to a Receivable, the Principal
Balance and all accrued and unpaid interest on the Receivable (without regard to
any Monthly Advances that may have been made with respect to the Receivable) as
of the Accounting Date on which the obligation to purchase such Receivable
arises.

                  Purchased Receivable: As of any Accounting Date, any
Receivable (including any Liquidated Receivable) that became a Warranty
Receivable or Administrative Receivable as of such Accounting Date (or which AFL
or the Servicer has elected to purchase as of an earlier Accounting Date, as
permitted by Section 2.5 or Section 3.7), and as to which the Purchase Amount
has been deposited in the Collection Account by the Seller, AFL or the Servicer,
as applicable, on or before the related Determination Date.

                  Rating Agency: Each of Moody's and Standard & Poor's, so long
as such Persons maintain a rating on the Notes; and if either Moody's or
Standard & Poor's no longer maintains a rating on the Notes, such other
nationally recognized statistical rating organization selected by the Seller.

                  Rating Agency Condition: With respect to any action, that each
Rating Agency shall have been given 10 days' prior notice thereof and that each
of the Rating Agencies shall have notified the Seller, the Servicer, the Owner
Trustee and the Indenture Trustee in writing that such action will not result in
a reduction or withdrawal of the then current rating of the Notes.

                  Receivable: A retail installment sale contract or promissory
note (and related security agreement) for a new or used automobile or light
truck (and all accessories thereto) that is included in the Schedule of
Receivables, and all rights and obligations under such a contract or note, but
not including (i) any Liquidated Receivable (other than for the purpose of
determining the obligations pursuant to Section 2.5 and 3.7 to purchase
Receivables), or (ii) any Purchased Receivable on or after the Accounting Date
immediately preceding the Determination Date on which payment of the Purchase
Amount is made in connection therewith pursuant to Section 4.5.

                  Receivable File: The documents, electronic entries,
instruments and writings listed in Section 2.2 pertaining to a particular
Receivable.

                                      -13-
<PAGE>   18

                  Registrar of Titles: With respect to any state, the
governmental agency or body responsible for the registration of, and the
issuance of certificates of title relating to, motor vehicles and liens thereon.

                  Regular Principal Distribution Amount: With respect to any
Distribution Date, an amount not less than zero equal to:

                  (a) the greater of:

                      (i)      the aggregate outstanding principal amount of the
                               Class A-1 Notes as of the preceding Distribution
                               Date, after giving effect to any principal
                               payments made on such preceding Distribution
                               Date, or as of the Closing Date, as the case may
                               be, and

                      (ii)     the excess, if any, of (A) the sum of the
                               aggregate outstanding principal amount of the
                               Notes as of the preceding Distribution Date,
                               after giving effect to any principal payment made
                               on such preceding Distribution Date, or as of the
                               Closing Date, as the case may be, over (B) (x)
                               the Pool Balance at the end of the Monthly
                               Period preceding such Distribution Date minus
                               (y) the Specified Overcollateralization Amount,
                               minus,

                  (b) the sum of the First Priority Principal Distribution
         Amount, if any, and the Second Priority Principal Distribution Amount,
         if any, each with respect to such Distribution Date;

provided, however, that the Regular Principal Distribution Amount shall not
exceed the outstanding principal amount of all the Notes on such Distribution
Date, after giving effect to any principal payments made on such Distribution
Date in respect of the First Priority Principal Distribution Amount, if any, and
the Second Priority Principal Distribution Amount; and provided, further, that
the Regular Principal Distribution Amount on and after the Class B Final
Scheduled Distribution Date shall not be less than the amount that is necessary
to reduce the outstanding principal amount of the Class B Notes to zero.

                  Related Documents: The Trust Agreement, the Indenture, the
Notes, the Certificates, the Purchase Agreement, the Administration Agreement,
the Custodian Agreement, the Lockbox Agreement, the Depository Agreement, the
letter agreement between Associates Corporation of North America and the
underwriters of the Notes and the Underwriting Agreement among the Seller, AFL
and the underwriters of the Notes. The Related Documents executed by any party
are referred to herein as "such party's Related Documents," "its Related
Documents" or by a similar expression.

                  Repurchase Events: The occurrence of a breach of any of AFL's,
the Seller's or the Servicer's representations and warranties in this Agreement
or in the Purchase Agreement which

                                      -14-
<PAGE>   19

requires the repurchase of a Receivable by AFL or the Seller pursuant to Section
2.5 or by the Servicer pursuant to Section 3.7.

                  Required Deposit Rating: A rating on short-term unsecured debt
obligations of "P-1" by Moody's and at least "A-1+" by Standard & Poor's (or
such other rating as may be acceptable to the Rating Agencies so as to not
affect the rating on the Notes).

                  Reserve Account: The account designated as the Reserve Account
in, and which is established and maintained pursuant to, Section 4.1(e).

                  Reserve Account Excess Amount: With respect to any
Distribution Date, means an amount equal to the excess, if any, of:

                  (a) the amount of cash or other immediately available funds in
         the Reserve Account on the Distribution Date, prior to giving effect to
         any withdrawals from the Reserve Account relating to that Distribution
         Date, over

                  (b) the Specified Reserve Balance with respect to that
         Distribution Date.

                  Responsible Officer: When used with respect to the Owner
Trustee, any officer of the Owner Trustee assigned by the Owner Trustee to
administer its corporate trust affairs relating to the Trust. When used with
respect to the Indenture Trustee, any officer assigned to the Corporate Trust
Office (or any successor thereto), including any Vice President, Assistant Vice
President, Trust Officer, any Assistant Secretary, any trust officer or any
other officer of the Indenture Trustee customarily performing functions similar
to those performed by any of the above designated officers and having direct
responsibility for the administration of the Trust and any other officer to whom
a matter arising hereunder may be referred. When used with respect to any other
Person that is not an individual, the President, any Vice-President or Assistant
Vice-President or the Controller of such Person, or any other officer or
employee having similar functions.

                  Schedule of Receivables: The schedule of all retail
installment sales contracts and promissory notes sold and transferred to the
Trust pursuant to this Agreement which is attached hereto as Exhibit A.

                  Schedule of Representations: The Schedule of Representations
and Warranties attached hereto as Schedule A.

                  Scheduled Payment: With respect to any Monthly Period for any
Receivable, the amount set forth in such Receivable as required to be paid by
the Obligor in such Monthly Period. If after the Closing Date, the Obligor's
obligation under a Receivable with respect to a Monthly Period has been modified
so as to differ from the amount specified in such Receivable as a result of (i)
the order of a court in an insolvency proceeding involving the Obligor, (ii)
pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940 or (iii)
modifications or extensions of the Receivable permitted by

                                      -15-
<PAGE>   20

Section 3.2(b), the Scheduled Payment with respect to such Monthly Period shall
refer to the Obligor's payment obligation with respect to such Monthly Period as
so modified.

                  Second Priority Principal Distribution Amount: With respect to
any Distribution Date, an amount not less than zero equal to:

                  (a) the excess, if any, of (i) the aggregate outstanding
         principal amount of the Class A Notes and Class M Notes as of the
         preceding Distribution Date, after giving effect to any principal
         payments made on such preceding Distribution Date, over (ii) the Pool
         Balance at the end of the Monthly Period preceding such Distribution
         Date, minus

                  (b) the First Priority Principal Distribution Amount, if any,
         with respect to such Distribution Date;

provided, however, that the Second Priority Principal Distribution Amount shall
not exceed the outstanding principal amount of all the Notes on such
Distribution Date, after giving effect to any principal payments made on such
Distribution Date in respect of the First Priority Principal Distribution
Amount, if any; and provided, further, that the Second Priority Principal
Distribution Amount on and after the Class M Final Scheduled Distribution Date
shall not be less than the amount that is necessary to reduce the outstanding
principal amount of the Class M Notes to zero.

                  Seller: Arcadia Receivables Finance Corp., a Delaware
corporation, or its successor in interest pursuant to Section 6.2.

                  Servicer: Arcadia Financial Ltd., in its capacity as Servicer,
its successor in interest pursuant to Section 8.2 or, after any termination of
the Servicer upon a Servicer Termination Event, the Indenture Trustee or any
other successor Servicer.

                  Servicer Termination Event: An event described in Section 8.1.

                  Servicer's Certificate: With respect to each Determination
Date, a certificate, completed by and executed on behalf of the Servicer, in
accordance with Section 3.9, substantially in the form attached hereto as
Exhibit E.

                  Specified Credit Enhancement Amount: An amount equal to
$93,751,605.00; provided, however, that the Specified Credit Enhancement Amount
with respect to any Distribution Date shall not exceed the sum of the aggregate
outstanding principal amount of all the Notes as of the preceding Distribution
Date, after giving effect to any principal payments made on the Notes on such
preceding Distribution Date.

                  Specified Overcollateralization Amount: With respect to any
Distribution Date, the excess, if any, of (a) the Specified Credit Enhancement
Amount over (b) the Specified Reserve Balance, each with respect to such
Distribution Date.

                                      -16-
<PAGE>   21

                  Specified Reserve Balance: An amount equal to $4,166,738.

                  Standard & Poor's: Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., or any successor thereto.

                  Supplemental Servicing Fee: With respect to any Monthly
Period, all administrative fees, expenses and charges paid by or on behalf of
Obligors, including late fees, collected on the Receivables during such Monthly
Period.

                  Total Required Payment: With respect to any Distribution Date,
the sum of the amounts distributable pursuant to clauses (i) through (viii) of
Section 4.6 without regard to the limitation of the Actual Funds for such
Distribution Date plus, on the Class B Final Scheduled Distribution Date, the
Regular Principal Distribution Amount; provided, however, that following the
occurrence and during the continuation of an Event of Default which has resulted
in an acceleration of the Notes, on any Distribution Date until the Distribution
Date on which the outstanding principal amount of all the Notes has been paid in
full, the Total Required Payment shall mean the sum of the amounts distributable
pursuant to clauses (i) through (viii) of Section 4.6 without regard to the
limitation of the Actual Funds for such Distribution Date, plus the amount
necessary to reduce the outstanding principal amount of all the Notes to zero.

                  Total Servicing Fee: The sum of the Basic Servicing Fee and
the Supplemental Servicing Fee.

                  Trust:  Associates Automobile Receivables Trust 2000-1.

                  Trust Accounts:  The meaning specified in Section 4.1(f).

                  Trust Agreement: The Trust Agreement dated as of June 1, 2000,
between the Seller and the Owner Trustee, as the same may be amended and
supplemented from time to time.

                  UCC: The Uniform Commercial Code as in effect from time to
time in the relevant jurisdiction.

                  Warranty Receivable: With respect to any Monthly Period, a
Receivable which AFL has become obligated to repurchase pursuant to Section 2.5.

                  SECTION 1.2. Usage of Terms. With respect to all terms used in
this Agreement, the singular includes the plural and the plural the singular;
words importing any gender include the other gender; references to "writing"
include printing, typing, lithography, and other means of reproducing words in a
visible form; references to agreements and other contractual instruments include
all subsequent amendments thereto or changes therein entered into in accordance
with their respective terms and not prohibited by this Agreement; references to
Persons include their permitted successors

                                      -17-
<PAGE>   22

and assigns; and the terms "include" or "including" mean "include without
limitation" or "including without limitation."

                  SECTION 1.3. Calculations. All calculations of the amount of
interest accrued on the Notes (other than the Class A-1 Notes) and all
calculations of the amount of the Basic Servicing Fee shall be made on the basis
of a 360-day year consisting of twelve 30-day months. All references to the
Principal Balance of a Receivable as of an Accounting Date shall refer to the
close of business on such day. All calculations and the amount of interest
accrued on the Class A-1 Notes shall be made on the basis of actual days elapsed
and a 360-day year.

                  SECTION 1.4. Section References. All references to Articles,
Sections, paragraphs, subsections, exhibits and schedules shall be to such
portions of this Agreement unless otherwise specified.

                  SECTION 1.5. No Recourse. No recourse may be taken, directly
or indirectly, under this Agreement or any certificate or other writing
delivered in connection herewith or therewith, against any stockholder, officer,
or director, as such, of the Seller, AFL, the Servicer, the Indenture Trustee or
the Owner Trustee or of any predecessor or successor of the Seller, AFL, the
Servicer, the Indenture Trustee or the Owner Trustee.

                                   ARTICLE II

                            CONVEYANCE OF RECEIVABLES

                  SECTION 2.1. Conveyance of Receivables. Subject to the terms
and conditions of this Agreement, the Seller, pursuant to the mutually agreed
upon terms contained herein, hereby sells, transfers, assigns, and otherwise
conveys to the Trust, without recourse (but without limitation of its
obligations in this Agreement), all of the right, title and interest of the
Seller in and to the Receivables, all monies at any time paid or payable thereon
or in respect thereof after the Cutoff Date (including amounts due on or before
the Cutoff Date but received by AFL or the Seller after the Cutoff Date), an
assignment of security interests of AFL in the related Financed Vehicles, the
Insurance Policies and any proceeds from any Insurance Policies relating to the
Receivables, the Obligors or the related Financed Vehicles, including rebates of
premiums, all Collateral Insurance relating to the Receivables, an assignment of
the rights of AFL or the Seller against Dealers with respect to the Receivables
under the Dealer Agreements and the Dealer Assignments, all items contained in
the related Receivable Files, any and all other documents that AFL keeps on file
in accordance with its customary procedures relating to the Receivables, the
Obligors or the related Financed Vehicles, an assignment of the rights of the
Seller under the Purchase Agreement, property (including the right to receive
future Liquidation Proceeds) that secures a Receivable and that has been
acquired by or on behalf of the Trust pursuant to liquidation of such
Receivable, all funds on deposit from time to time in the Trust Accounts and all
investments therein and proceeds thereof, and all proceeds of the foregoing. It
is the intention of the Seller that the transfer and assignment contemplated by
this Agreement shall constitute a sale of the Receivables and other Trust
Property from the Seller to the Trust and the beneficial interest in and title
to the

                                      -18-
<PAGE>   23

Receivables and the other Trust Property shall not be part of the Seller's
estate in the event of the filing of a bankruptcy petition by or against the
Seller under any bankruptcy law. In the event that, notwithstanding the intent
of the Seller, the transfer and assignment contemplated hereby is held not to be
a sale, this Agreement shall constitute a grant of a security interest to the
Trust in the property referred to in this Section 2.1.

                  SECTION 2.2. Custody of Receivable Files.

                  (a) In connection with the sale, transfer and assignment of
the Receivables and the other Trust Property to the Trust pursuant to this
Agreement, and simultaneously with the execution and delivery of this Agreement,
the Trust shall enter into the Custodian Agreement with the Custodian, dated as
of the Closing Date, pursuant to which the Owner Trustee, on behalf of the
Trust, shall revocably appoint the Custodian, and the Custodian shall accept
such appointment, to act as the agent of the Trust as Custodian of the following
documents or instruments in its possession which shall be delivered to the
Custodian as agent of the Trust on or before the Closing Date:

                           (i) The fully executed original of the Receivable
                  (together with any agreements modifying the Receivable,
                  including without limitation any extension agreements);

                           (ii) Documents evidencing or related to any Insurance
                  Policy, or copies (including but not limited to microfiche or
                  computer scanned copies) thereof;

                           (iii) The original credit application, or a
                  microfiche or computer scanned copy thereof, of each Obligor,
                  fully executed by each such Obligor on AFL's customary form,
                  or on a form approved by AFL, for such application; and

                           (iv) The original certificate of title (when
                  received) and otherwise such documents, if any, that AFL keeps
                  on file in accordance with its customary procedures indicating
                  that the Financed Vehicle is owned by the Obligor and subject
                  to the interest of AFL as first lienholder or secured party
                  (including any Lien Certificate received by AFL), or, if such
                  original certificate of title has not yet been received, a
                  copy of the application therefor, showing AFL as secured
                  party.

                  In connection with the grant of the security interest in the
Trust Estate to the Indenture Trustee pursuant to the Indenture, the Trust
agrees that from and after the Closing Date through the date of release of such
security interest pursuant to the terms of the Indenture, the Custodian shall
not be acting as agent of the Trust, but rather shall be acting as agent of the
Indenture Trustee.

                  The Indenture Trustee may act as the Custodian, in which case
the Indenture Trustee shall be deemed to have assumed the obligations of the
Custodian specified in the Custodian Agreement.

                                      -19-
<PAGE>   24

                  (b) Upon payment in full on any Receivable, the Servicer will
notify the Custodian by certification of an officer of the Servicer (which
certification shall include a statement to the effect that all amounts received
in connection with such payments which are required to be deposited in the
Collection Account pursuant to Section 4.1 have been so deposited) and shall
request delivery of the Receivable and Receivable File to the Servicer. From
time to time as appropriate for servicing and enforcing any Receivable, the
Custodian shall, upon written request of an officer of the Servicer and delivery
to the Custodian of a receipt signed by such officer, cause the original
Receivable and the related Receivable File to be released to the Servicer. The
Servicer's receipt of a Receivable and/or Receivable File shall obligate the
Servicer to return the original Receivable and the related Receivable File to
the Custodian when its need by the Servicer has ceased unless the Receivable
shall be repurchased as described in Section 2.6 or 3.7.

                  SECTION 2.3. Conditions to Acceptance by Owner Trustee. As
conditions to the Owner Trustee's execution and delivery of the Notes on behalf
of the Trust on the Closing Date, the Owner Trustee shall have received the
following on or before the Closing Date:

                  (a) The Schedule of Receivables certified by a Responsible
Officer of the Seller;

                  (b) The acknowledgment of the Custodian that it holds the
Receivable File relating to each Receivable;

                  (c) Copies of resolutions of the Board of Directors of the
Seller approving the execution, delivery and performance of this Agreement, the
Related Documents and the transactions contemplated hereby and thereby,
certified by a Secretary or an Assistant Secretary of the Seller;

                  (d) Copies of resolutions of the Board of Directors of AFL
approving the execution, delivery and performance of this Agreement, the Related
Documents and the transactions contemplated hereby and thereby, certified by a
Secretary or an Assistant Secretary of AFL;

                  (e) Evidence that all filings (including, without limitation,
UCC filings) required to be made by any Person and actions required to be taken
or performed by any Person in any jurisdiction to give the Owner Trustee a first
priority perfected lien on, or ownership interest in, the Receivables and the
other Trust Property have been made, taken or performed; and

                  (f) Evidence of the deposit of $4,166,738.00 in the Reserve
Account.

                  SECTION 2.4. Representations and Warranties of Seller. By its
execution of this Agreement, the Seller makes the following representations and
warranties on which the Trust relies in accepting the Receivables and the other
Trust Property in trust and on which the Owner Trustee relies in executing the
Notes. Unless otherwise specified, such representations and warranties speak as
of the Closing Date, but shall survive the sale, transfer, and assignment of the
Receivables to the Trust.

                                      -20-
<PAGE>   25

                  (a) Schedule of Representations. The representations and
warranties set forth on the Schedule of Representations are true and correct.

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

                  (c) Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of its property or the conduct of its business requires such qualification
and in which the failure so to qualify would have a material adverse effect on
(i) its business, properties, assets or condition (financial or other) or (ii)
its performance of its obligations under this Agreement and the Related
Documents.

                  (d) Power and Authority. The Seller has the power and
authority to execute and deliver this Agreement and its Related Documents and to
carry out its terms and their terms, respectively; the Seller has full power and
authority to sell and assign the Trust Property to be sold and assigned to and
deposited with the Trust by it and has duly authorized such sale and assignment
to the Trust by all necessary corporate action; and the execution, delivery and
performance of this Agreement and the Related Documents to which the Seller is a
party have been duly authorized by the Seller by all necessary corporate action.

                  (e) Valid Sale; Binding Obligations. This Agreement is
intended to effect a valid sale, transfer and assignment of the Receivables and
the other Trust Property, enforceable against the Seller and creditors of and
purchasers from the Seller; and this Agreement and the Related Documents to
which the Seller is a party, when duly executed and delivered, shall constitute
legal, valid and binding obligations of the Seller enforceable in accordance
with their respective terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law.

                  (f) No Violation. The consummation of the transactions
contemplated by this Agreement and the Related Documents to which the Seller is
a party and the fulfillment of the terms of this Agreement and the Related
Documents to which the Seller is a party shall not conflict with, result in any
breach of any of the terms and provisions of or constitute (with or without
notice, lapse of time or both) a default under the certificate of incorporation
or by-laws of the Seller, or any indenture, agreement, mortgage, deed of trust
or other instrument to which the Seller is a party or by which it is bound, or
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of trust
or other instrument, other than this Agreement, or violate any law, order, rule
or regulation applicable to the Seller of any court or of any

                                      -21-
<PAGE>   26

federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or any of its properties.

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

                  (h) Chief Executive Office. The chief executive office of the
Seller is at 290 East Carpenter Freeway, 7 Decker, Irving, Texas 75062.

                  (i) Registration Statement. No stop order suspending the
effectiveness of the Registration Statement relating to the Notes has been
issued, and no proceeding for that purpose has been instituted or is threatened
by the Securities and Exchange Commission.

                  (j) Filings. Since the effective date of the Registration
Statement relating to the Notes, there has occurred no event required to be set
forth in an amendment or supplement to the Registration Statement or Prospectus
that has not been so set forth, and there has been no document required to be
filed under the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission thereunder that upon such
filing would be deemed to be incorporated by reference in the Prospectus that
has not been so filed.

                  SECTION 2.5. Repurchase of Receivables Upon Breach of
Warranty. Concurrently with the execution and delivery of this Agreement, AFL
and the Seller have entered into the Purchase Agreement, the rights of the
Seller under which have been assigned by the Seller to the Trust. Under the
Purchase Agreement, AFL has made the same representations and warranties to the
Seller with respect to the Receivables as those made by Seller pursuant to the
Schedule of Representations, upon which the Owner Trustee has relied in
accepting the Trust Property in trust and executing the Notes and upon which the
Indenture Trustee has relied in authenticating the Notes. Upon discovery by any
of AFL, the Seller, the Servicer, the Indenture Trustee or the Owner Trustee of
a breach of any of the representations and warranties contained in Section 2.4
that materially and adversely affects the interests of the Noteholders or the
Trust in any Receivable (including any Liquidated Receivable), the party
discovering such breach shall give prompt written notice to the others;
provided, however, that the failure to give any such notice shall not affect any
obligation of AFL or the Seller. As of the second Accounting Date (or, at AFL's
election, the first Accounting Date) following its discovery or its receipt of
notice of any breach of the representations and warranties set forth on the
Schedule of Representations that materially and adversely affects the interests
of the Noteholders, or the Trust in any Receivable (including any Liquidated
Receivable), AFL shall, unless such breach shall have been

                                      -22-
<PAGE>   27

cured in all material respects, purchase such Receivable from the Trust and, on
or before the related Determination Date, AFL shall pay the Purchase Amount to
the Owner Trustee pursuant to Section 4.5. The obligations of the Seller with
respect to any such breach of representations and warranties shall be limited to
taking any and all actions necessary to enable the Owner Trustee to enforce
directly the obligations of AFL under the Purchase Agreement. It is understood
and agreed that, except as set forth in this Section 2.5, the obligation of AFL
to repurchase any Receivable as to which a breach has occurred and is continuing
shall, if such obligation is fulfilled, constitute the sole remedy against AFL
or the Seller for such breach available to the Indenture Trustee on behalf of
the Noteholders.

                  SECTION 2.6. Nonpetition Covenant. None of the Seller, the
Servicer, the Owner Trustee (in its individual capacity or on behalf of the
Trust), nor AFL shall petition or otherwise invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Trust under any federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Trust or any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Trust.

                  SECTION 2.7. Collecting Lien Certificates Not Delivered on the
Closing Date. In the case of any Receivable in respect of which written evidence
from the Dealer selling the related Financed Vehicle that the Lien Certificate
for such Financed Vehicle showing AFL as first lienholder has been applied for
from the Registrar of Titles was delivered to the Custodian on the Closing Date,
in lieu of a Lien Certificate, the Servicer shall use its best efforts to
collect such Lien Certificate from the Registrar of Titles as promptly as
practicable. If such Lien Certificate showing AFL as first lienholder is not
received by the Custodian within 180 days after the Closing Date, then the
representation and warranty in Paragraph 18 of the Schedule of Representations
in respect of such Receivable shall be deemed to have been incorrect in a manner
that materially and adversely affects the Noteholders and the Trust.

                  SECTION 2.8. Trust's Assignment of Administrative Receivables
and Warranty Receivables. With respect to all Administrative Receivables and all
Warranty Receivables purchased by the Servicer, the Seller or AFL, the Owner
Trustee shall take any and all actions reasonably requested by the Seller, AFL
or Servicer, at the expense of the requesting party, to assign, without
recourse, representation or warranty, to the Seller, AFL or the Servicer, as
applicable, all the Trust's right, title and interest in and to such purchased
Receivable, all monies due thereon, the security interests in the related
Financed Vehicles, proceeds from any Insurance Policies, proceeds from recourse
against Dealers on such Receivables and the interests of the Trust in certain
rebates of premiums and other amounts relating to the Insurance Policies and any
documents relating thereto, such assignment being an assignment outright and not
for security; and the Seller, AFL or the Servicer, as applicable, shall
thereupon own such Receivable, and all such security and documents, free of any
further obligation to the Owner Trustee, the Trust, the Indenture Trustee or the
Noteholders with respect thereto.

                                      -23-
<PAGE>   28

                                   ARTICLE III

                   ADMINISTRATION AND SERVICING OF RECEIVABLES

                  SECTION 3.1. Duties of the Servicer. The Servicer is hereby
authorized to act as agent for the Trust and in such capacity shall manage,
service, administer and make collections on the Receivables, and perform the
other actions required by the Servicer under this Agreement. The Servicer agrees
that its servicing of the Receivables shall be carried out in accordance with
customary and usual procedures of institutions which service motor vehicle
retail installment sales contracts and, to the extent more exacting, the degree
of skill and attention that the Servicer exercises from time to time with
respect to all comparable motor vehicle receivables that it services for itself
or others. The Servicer's duties shall include, without limitation, collection
and posting of all payments, responding to inquiries of Obligors on the
Receivables, investigating delinquencies, sending payment coupons to Obligors,
reporting any required tax information to Obligors, policing the collateral,
complying with the terms of the Lockbox Agreement, accounting for collections
and furnishing monthly and annual statements to the Owner Trustee and the
Indenture Trustee with respect to distributions, monitoring the status of
Insurance Policies with respect to the Financed Vehicles and performing the
other duties specified herein. The Servicer shall also administer and enforce
all rights and responsibilities of the holder of the Receivables provided for in
the Dealer Agreements (and shall maintain possession of the Dealer Agreements,
to the extent it is necessary to do so), the Dealer Assignments and the
Insurance Policies, to the extent that such Dealer Agreements, Dealer
Assignments and Insurance Policies relate to the Receivables, the Financed
Vehicles or the Obligors. To the extent consistent with the standards, policies
and procedures otherwise required hereby, the Servicer shall follow its
customary standards, policies, and procedures and shall have full power and
authority, acting alone, to do any and all things in connection with such
managing, servicing, administration and collection that it may deem necessary or
desirable. Without limiting the generality of the foregoing, the Servicer
is hereby authorized and empowered by the Owner Trustee to execute and deliver,
on behalf of the Trust, any and all instruments of satisfaction or cancellation,
or of partial or full release or discharge, and all other comparable
instruments, with respect to the Receivables and with respect to the Financed
Vehicles. The Servicer is hereby authorized to commence, in its own name or in
the name of the Trust (provided the Servicer has obtained the Owner Trustee's
consent, which consent shall not be unreasonably withheld), a legal proceeding
to enforce a Receivable pursuant to Section 3.3 or to commence or participate in
any other legal proceeding (including, without limitation, a bankruptcy
proceeding) relating to or involving a Receivable, an Obligor or a Financed
Vehicle. If the Servicer commences or participates in such a legal proceeding in
its own name, the Trust shall thereupon be deemed to have automatically assigned
such Receivable to the Servicer solely for purposes of commencing or
participating in any such proceeding as a party or claimant, and the Servicer is
authorized and empowered by the Owner Trustee to execute and deliver in the
Servicer's name any notices, demands, claims, complaints, responses, affidavits
or other documents or instruments in connection with any such proceeding. The
Owner Trustee shall furnish the Servicer with any powers of attorney and other
documents which the Servicer may reasonably request and which the Servicer deems
necessary or appropriate and take any other steps which the Servicer may deem
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties under this Agreement.

                                      -24-
<PAGE>   29

                  SECTION 3.2. Collection of Receivable Payments; Modifications
of Receivables; Lockbox Agreements.

                  (a) Consistent with the standards, policies and procedures
required by this Agreement, the Servicer shall make reasonable efforts to
collect all payments called for under the terms and provisions of the
Receivables as and when the same shall become due, and shall follow such
collection procedures as it follows with respect to all comparable automobile
receivables that it services for itself or others and otherwise act with respect
to the Receivables, the Dealer Agreements, the Dealer Assignments, the Insurance
Policies and the other Trust Property in such manner as will, in the reasonable
judgment of the Servicer, maximize the amount to be received by the Trust with
respect thereto. The Servicer is authorized in its discretion to waive any
prepayment charge, late payment charge or any other similar fees that may be
collected in the ordinary course of servicing any Receivable.

                  (b) The Servicer may at any time agree to a modification,
amendment or extension of a Receivable in order to (i) change the Obligor's
regular due date to a date within the Monthly Period in which such due date
occurs, (ii) re-amortize the scheduled payments on the Receivable following a
partial prepayment of principal and (iii) subject to Section 3.2(c) below, grant
extensions on a Receivable, provided that the Servicer shall not be permitted to
extend the monthly payments on a Receivable more than two times in any
twelve-month period, and provided further that the aggregate period of all
extensions on a Receivable shall not exceed six months.

                  (c) The Servicer may grant payment extensions or deferrals on,
or other modifications or amendments to, a Receivable (in addition to those
modifications permitted by Section 3.2(b)) in accordance with its customary
procedures if the Servicer believes in good faith that such extension, deferral,
modification or amendment is necessary to avoid a default on such Receivable,
will maximize the amount to be received by the Trust with respect to such
Receivable, and is otherwise in the best interests of the Trust; provided,
however, that:

                           (i) In no event may a Receivable be extended beyond
                  the Monthly Period immediately preceding the Class B Final
                  Scheduled Distribution Date;

                           (ii) No such extension, modification or amendment
                  shall be granted if such action, when aggregated with all
                  previous extensions, modifications and amendments of
                  Receivables, would have the effect of causing any Notes to be
                  deemed to have been exchanged for other Notes within the
                  meaning of Section 1001 of the Internal Revenue Code of 1986,
                  as amended, or any proposed, temporary or final Treasury
                  Regulations issued thereunder; and

                           (iii) The Servicer may, in its discretion, waive any
                  late payment charge or any other fees that may be collected in
                  the ordinary course of servicing a Receivable. The Servicer
                  shall not voluntarily agree to any reduction of (i) the
                  original interest rate,

                                      -25-
<PAGE>   30

                  (ii) the amount of any Scheduled Payment on a Receivable, or
                  (iii) the Principal Balance of any Receivable.

                  (d) The Servicer shall use its reasonable best efforts to
cause Obligors to make all payments on the Receivables, whether by check or by
direct debit of the Obligor's bank account, to be made directly to one or more
Lockbox Banks, acting as agent for the Trust pursuant to a Lockbox Agreement.
Amounts received by a Lockbox Bank in respect of the Receivables may initially
be deposited into a demand deposit account maintained by the Lockbox Bank as
agent for the Trust and for other owners of automobile receivables serviced by
the Servicer. At any time the conditions specified in Section 4.2(a) are
satisfied, amounts received by the Lockbox Bank with respect to the Receivables
may be transferred daily to one or more accounts designated by the Servicer and
commingled with other general funds of the Servicer or its Affiliates. If at any
time the conditions specified in Section 4.2(a) are not satisfied, then the
Servicer shall use its reasonable best efforts to cause any Lockbox Bank to
deposit all payments on the Receivables in the Lockbox Account no later than the
Business Day after receipt, and to cause all amounts credited to the Lockbox
Account on account of such payments to be transferred to the Collection Account
no later than the second Business Day after receipt of such payments. The
Lockbox Account shall be a demand deposit account held by the Lockbox Bank.

                  Prior to the Closing Date the Servicer shall have notified
each Obligor that makes its payments on the Receivables by check to make such
payments thereafter directly to the Lockbox Bank (except in the case of Obligors
that have already been making such payments to the Lockbox Bank), and shall have
provided each such Obligor with a supply of mailing address labels in order to
enable such Obligors to make such payments directly to the Lockbox Bank for
deposit into the Lockbox Account, and the Servicer will continue, not less often
than every three months, to so notify those Obligors who have failed to make
payments to the Lockbox Bank. If at any time the Lockbox Bank is unable to
directly debit an Obligor's bank account that makes payment on the Receivables
by direct debit and if such inability is not cured within 15 days or cannot be
cured by execution by the Obligor of a new authorization for automatic payment,
the Servicer shall notify such Obligor that it cannot make payment by direct
debit and must thereafter make payment by check.

                  Notwithstanding any Lockbox Agreement, or any of the
provisions of this Agreement relating to the Lockbox Agreement, the Servicer
shall remain obligated and liable to the Owner Trustee, Indenture Trustee and
Noteholders for servicing and administering the Receivables and the other Trust
Property in accordance with the provisions of this Agreement without diminution
of such obligation or liability by virtue thereof.

                  In the event the Servicer shall for any reason no longer be
acting as such, the successor Servicer shall thereupon assume all of the rights
and obligations of the outgoing Servicer under the Lockbox Agreement. In such
event, the successor Servicer shall be deemed to have assumed all of the
outgoing Servicer's interest therein and to have replaced the outgoing Servicer
as a party to each such Lockbox Agreement to the same extent as if such Lockbox
Agreement had been assigned to the successor Servicer, except that the outgoing
Servicer shall not thereby be relieved of any liability or

                                      -26-
<PAGE>   31

obligations on the part of the outgoing Servicer to the Lockbox Bank under such
Lockbox Agreement. The outgoing Servicer shall, upon request of the Owner
Trustee but at the expense of the outgoing Servicer, deliver to the successor
Servicer all documents and records relating to each such Agreement and an
accounting of amounts collected and held by the Lockbox Bank and otherwise use
its best efforts to effect the orderly and efficient transfer of any Lockbox
Agreement to the successor Servicer. In the event that the Indenture Trustee
elects to change the identity of the Lockbox Bank, the outgoing Servicer, at its
expense, shall cause the Lockbox Bank to deliver, at the direction of the
Controlling Noteholders to the Owner Trustee or a successor Lockbox Bank, all
documents and records relating to the Receivables and all amounts held (or
thereafter received) by the Lockbox Bank (together with an accounting of such
amounts) and shall otherwise use its best efforts to effect the orderly and
efficient transfer of the lockbox arrangements and the Servicer shall notify the
Obligors to make payments to the Lockbox established by the successor.

                  (e) Subject to Section 4.2(a) below, the Servicer shall remit
all payments by or on behalf of the Obligors received directly by the Servicer
to the Collection Account or to the Lockbox Bank for deposit into the Collection
Account without deposit into any intervening account as soon as practicable, but
in no event later than the Business Day after receipt thereof.

                  SECTION 3.3.  Realization Upon Receivables.

                  (a) Consistent with the standards, policies and procedures
required by this Agreement, the Servicer shall use all reasonable efforts to
repossess (or otherwise comparably convert the ownership of) and liquidate any
Financed Vehicle securing a Receivable in accordance with customary practices
and procedures as it shall deem necessary or advisable, consistent with the
standard of care required by Section 3.1, which practices and procedures may
include reasonable efforts to realize upon any recourse to Dealers, the sale of
the related Financed Vehicle at public or private sale, the submission of claims
under an Insurance Policy and other actions by the Servicer in order to realize
upon such a Receivable. The foregoing is subject to the provision that, in any
case in which the Financed Vehicle shall have suffered damage, the Servicer
shall not expend funds in connection with any repair or towards the repossession
of such Financed Vehicle unless it shall determine in its discretion that such
repair and/or repossession shall increase the proceeds of liquidation of the
related Receivable by an amount greater than the amount of such expenses. All
amounts received upon liquidation of a Financed Vehicle shall be remitted by the
Servicer to the Collection Account or to the Lockbox Bank in accordance with
Section 3.2(e). The Servicer shall be entitled to recover all reasonable
expenses incurred by it in the course of repossessing and liquidating a Financed
Vehicle into cash proceeds, but only out of the cash proceeds of such Financed
Vehicle, any deficiency obtained from the Obligor or any amounts received from
the related Dealer, which amounts may be retained by the Servicer (and shall not
be required to be deposited as provided in Section 3.2(e)) to the extent of such
expenses. The Servicer shall pay on behalf of the Trust any personal property
taxes assessed on repossessed Financed Vehicles; the Servicer shall be entitled
to reimbursement of any such tax from Liquidation Proceeds with respect to such
Receivable.

                                      -27-
<PAGE>   32

                  (b) If the Servicer elects to commence a legal proceeding to
enforce a Dealer Agreement or Dealer Assignment, the act of commencement shall
be deemed to be an automatic assignment from the Trust to the Servicer of the
rights under such Dealer Agreement and Dealer Assignment for purposes of
collection only. If, however, in any enforcement suit or legal proceeding, it is
held that the Servicer may not enforce a Dealer Agreement or Dealer Assignment
on the grounds that it is not a real party in interest or a Person entitled to
enforce the Dealer Agreement or Dealer Assignment, the Owner Trustee, at the
Servicer's expense, or the Seller, at the Seller's expense, shall take such
steps as the Servicer deems necessary to enforce the Dealer Agreement or Dealer
Assignment, including bringing suit in its name or the name of the Seller or of
the Indenture Trustee for the benefit of the Noteholders. All amounts recovered
shall be remitted by the Servicer as provided in Section 3.2(e).

                  SECTION 3.4. Insurance.

                  (a) The Servicer shall require that each Financed Vehicle be
insured by the Insurance Policies referred to in Paragraph 24 of the Schedule of
Representations and Warranties and shall monitor the status of such physical
loss and damage insurance coverage thereafter, in accordance with its customary
servicing procedures. Each Receivable requires the Obligor to maintain such
physical loss and damage insurance, naming AFL and its successors and assigns as
additional insureds, and permits the holder of such Receivable to obtain
physical loss and damage insurance at the expense of the Obligor if the Obligor
fails to maintain such insurance. If the Servicer shall determine that an
Obligor has failed to obtain or maintain a physical loss and damage Insurance
Policy covering the related Financed Vehicle which satisfies the conditions set
forth in such Paragraph 24 (including, without limitation, during the
repossession of such Financed Vehicle) the Servicer shall enforce the rights of
the holder of the Receivable under the Receivable to require the Obligor to
obtain such physical loss and damage insurance.

                  (b) The Servicer shall not, if an Obligor fails to maintain a
physical loss and damage Insurance Policy, obtain insurance with respect to the
related Financed Vehicle and may not advance, on behalf of such Obligor, the
premiums for such insurance.

                  (c) The Servicer may sue to enforce or collect upon the
Insurance Policies, in its own name, if possible, or as agent of the Trust. If
the Servicer elects to commence a legal proceeding to enforce an Insurance
Policy, the act of commencement shall be deemed to be an automatic assignment of
the rights of the Trust under such Insurance Policy to the Servicer for purposes
of collection only. If, however, in any enforcement suit or legal proceeding it
is held that the Servicer may not enforce an Insurance Policy on the grounds
that it is not a real party in interest or a holder entitled to enforce the
Insurance Policy, the Owner Trustee, on behalf of the Trust, at the Servicer's
expense, or the Seller, at the Seller's expense, shall take such steps as the
Servicer deems necessary to enforce such Insurance Policy, including bringing
suit in its name or the name of the Indenture Trustee for the benefit of the
Noteholders.

                                      -28-
<PAGE>   33

                  (d) The Servicer shall maintain a vendor's single interest or
other collateral protection insurance policy with respect to all Financed
Vehicles, which policy shall by its terms insure against physical damage in the
event any Obligor fails to maintain physical loss and damage insurance with
respect to the related Financed Vehicle. Costs incurred by the Servicer in
maintaining such insurance shall be paid by the Servicer. The Servicer will
cause itself to be named as named insured and the Owner Trustee to be named a
loss payee under all such policies. The Servicer may elect not to maintain such
insurance policy but in such event will be obligated to indemnify the Trust
against any losses arising from an Obligor's failure to maintain physical loss
and damage insurance with respect to the related Financed Vehicle.

                  SECTION 3.5. Maintenance of Security Interests in Vehicles.

                  (a) Consistent with the policies and procedures required by
this Agreement, the Servicer shall take such steps as are necessary to maintain
perfection of the security interest created by each Receivable in the related
Financed Vehicle on behalf of the Trust, including but not limited to obtaining
the execution by the Obligors and the recording, registering, filing,
re-recording, re-filing, and re-registering of all security agreements,
financing statements and continuation statements as are necessary to maintain
the security interest granted by the Obligors under the respective Receivables.
The Owner Trustee hereby authorizes the Servicer, and the Servicer agrees, to
take any and all steps necessary to re-perfect such security interest on behalf
of the Trust as necessary because of the relocation of a Financed Vehicle or for
any other reason. In the event that the assignment of a Receivable to the Owner
Trustee on behalf of the Trust is insufficient, without a notation on the
related Financed Vehicle's certificate of title, or without fulfilling any
additional administrative requirements under the laws of the state in which the
Financed Vehicle is located, to perfect a security interest in the related
Financed Vehicle in favor of the Trust, the Servicer hereby agrees that the
Servicer's designation as the secured party on the certificate of title is in
its capacity as agent of the Trust.

                  (b) Upon the occurrence of a Servicer Termination Event, the
Owner Trustee and the Servicer shall take or cause to be taken such action as
may, in the opinion of counsel to the Owner Trustee, be necessary to perfect or
re-perfect the security interests in the Financed Vehicles securing the
Receivables in the name of the Trust by amending the title documents of such
Financed Vehicles or by such other reasonable means as may, in the opinion of
counsel to the Owner Trustee, be necessary or prudent. AFL hereby agrees to pay
all expenses related to such perfection or re-perfection and to take all action
necessary therefor.

                  SECTION 3.6. Covenants, Representations, and Warranties of
Servicer. By its execution and delivery of this Agreement, the Servicer makes
the following representations, warranties and covenants on which the Owner
Trustee relies in accepting the Receivables in trust and issuing the Notes on
behalf of the Trust, on which the Indenture Trustee relies in authenticating the
Notes.

                  (a)      The Servicer covenants as follows:

                                      -29-
<PAGE>   34

                           (i) Liens in Force. The Financed Vehicle securing
                           each Receivable shall not be released in whole or in
                           part from the security interest granted by the
                           Receivable, except upon payment in full of the
                           Receivable or as otherwise contemplated herein;

                           (ii) No Impairment. The Servicer shall do nothing to
                           impair the rights of the Trust, the Noteholders in
                           the Receivables, the Dealer Agreements, the Dealer
                           Assignments, the Insurance Policies or the other
                           Trust Property; and

                           (iii) No Amendments. The Servicer shall not extend or
                           otherwise amend the terms of any Receivable, except
                           in accordance with Section 3.2.

                  (b)      The Servicer represents, warrants and covenants as of
                           the Closing Date as to itself:

                           (i) Organization and Good Standing. The Servicer has
                           been duly organized and is validly existing and in
                           good standing under the laws of its jurisdiction of
                           organization, with power, authority and legal right
                           to own its properties and to conduct its business as
                           such properties are currently owned and such business
                           is currently conducted, and had at all relevant
                           times, and now has, power, authority and legal right
                           to enter into and perform its obligations under this
                           Agreement;

                           (ii) Due Qualification. The Servicer is duly
                           qualified to do business as a foreign corporation in
                           good standing, and has obtained all necessary
                           licenses and approvals, in all jurisdictions in which
                           the ownership or lease of property or the conduct of
                           its business (including the servicing of the
                           Receivables as required by this Agreement) requires
                           or shall require such qualification and in which the
                           failure so to qualify would have a material adverse
                           effect on (A) its business, properties, assets or
                           condition (financial or other) or (B) its performance
                           of its obligations under this Agreement and the
                           Related Documents to which the Servicer is a party;

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

                           (iv) Binding Obligation. This Agreement and the
                           Related Documents to which the Servicer is a party
                           shall constitute legal, valid and binding obligations
                           of the Servicer enforceable in accordance with their
                           respective terms, except as

                                      -30-
<PAGE>   35

                           enforceability may be limited by bankruptcy,
                           insolvency, reorganization, or other similar laws
                           affecting the enforcement of creditors' rights
                           generally and by equitable limitations on the
                           availability of specific remedies, regardless of
                           whether such enforceability is considered in a
                           proceeding in equity or at law;

                           (v) No Violation. The consummation of the
                           transactions contemplated by this Agreement and the
                           Related Documents to which the Servicer is a party,
                           and the fulfillment of the terms of this Agreement
                           and the Related Documents to which the Servicer is a
                           party, shall not conflict with, result in any breach
                           of any of the terms and provisions of, or constitute
                           (with or without notice or lapse of time) a default
                           under, the articles of incorporation or bylaws of the
                           Servicer, or any indenture, agreement, mortgage, deed
                           of trust or other instrument to which the Servicer is
                           a party or by which it is bound, or result in the
                           creation or imposition of any Lien upon any of its
                           properties pursuant to the terms of any such
                           indenture, agreement, mortgage, deed of trust or
                           other instrument, other than this Agreement, or
                           violate any law, order, rule or regulation applicable
                           to the Servicer of any court or of any federal or
                           state regulatory body, administrative agency or other
                           governmental instrumentality having jurisdiction over
                           the Servicer or any of its properties;

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

                           (vii) No Consents. The Servicer is not required to
                           obtain the consent of any other party or any consent,
                           license, approval or authorization, or registration
                           or declaration with, any governmental authority,
                           bureau or agency in connection with the execution,
                           delivery, performance, validity or enforceability of
                           this Agreement; and

                           (viii) Collateral Insurance. The Collateral Insurance
                           is in full force and effect.

                                      -31-
<PAGE>   36

                           (ix) No Amendment or Waiver. No provision of any
                           Receivable has been received, altered or modified in
                           any respect, except pursuant to a document,
                           instrument or writing included in the relevant
                           Receivable File, and no such amendment, waiver,
                           alteration or modification causes such Receivable not
                           to conform to the other warranties contained in this
                           Section 3.6 or those of the Seller contained in
                           Section 2.4.

                           (x) Location of Receivable Files. The Receivable
                           Files are kept in the offices of the Seller or at
                           such other office specified in accordance with
                           Section 2.2.

                  SECTION 3.7. Purchase of Receivables Upon Breach of Covenant.
Upon discovery by any of the Servicer, the Owner Trustee or the Indenture
Trustee of a breach of any of the covenants set forth in Sections 3.5(a) or
3.6(a), the party discovering such breach shall give prompt written notice to
the others; provided, however, that the failure to give any such notice shall
not affect any obligation of the Servicer. As of the second Accounting Date
following its discovery or receipt of notice of any breach of any covenant set
forth in Sections 3.5(a) or 3.6(a) which materially and adversely affects the
interests of the Noteholders or the Trust in any Receivable (including any
Liquidated Receivable) (or, at the Servicer's election, the first Accounting
Date so following), the Servicer shall, unless it shall have cured such breach
in all material respects, purchase from the Trust the Receivable affected by
such breach and, on the related Determination Date, the Servicer shall pay the
related Purchase Amount. It is understood and agreed that the obligation of the
Servicer to purchase any Receivable (including any Liquidated Receivable) with
respect to which such a breach has occurred and is continuing shall, if such
obligation is fulfilled, constitute the sole remedy against the Servicer for
such breach available to the Noteholders or the Indenture Trustee on behalf of
Noteholders.

                  SECTION 3.8. Total Servicing Fee; Payment of Certain Expenses
by Servicer. On each Distribution Date, the Servicer shall be entitled to
receive out of the Collection Account the Basic Servicing Fee and any
Supplemental Servicing Fee for the related Monthly Period pursuant to Section
4.6(iii). The Servicer shall be required to pay all expenses incurred by it in
connection with its activities under this Agreement (including taxes imposed on
the Servicer, expenses incurred in connection with distributions and reports to
Noteholders and all other fees and expenses of the Trust, including taxes levied
or assessed against the Trust, and claims against the Trust in respect of
indemnification, unless such fees, expenses or claims in respect of
indemnification are expressly stated to be for the account of AFL or not to be
for the account of the Servicer). The Servicer shall be liable for the fees and
expenses of the Owner Trustee, the Administrator, the Indenture Trustee, the
Custodian, the Lockbox Bank (and any fees under the Lockbox Agreement) with
respect to the Trust and the Independent Accountants. Notwithstanding the
foregoing, if the Servicer shall not be AFL, a successor to AFL as Servicer
permitted by Section 7.2 or an Affiliate of any of the foregoing, such Servicer
shall not be liable for taxes levied or assessed against the Trust or claims
against the Trust in respect of indemnification.

                                      -32-
<PAGE>   37

                  SECTION 3.9. Servicer's Certificate. No later than 10:00 a.m.
New York City time on each Determination Date, the Servicer shall deliver to the
Owner Trustee, the Indenture Trustee and each Rating Agency a Servicer's
Certificate executed by a Responsible Officer of the Servicer containing, among
other things, (i) all information necessary to enable the Indenture Trustee to
make any withdrawal and deposit required by Section 5.1, to make the
distributions required by Section 4.6 and to determine the amount to which the
Servicer is entitled to be reimbursed or has been reimbursed during the related
Monthly Period for Monthly Advances pursuant to Section 4.4(c), (ii) all
information necessary to enable the Indenture Trustee to send the statements to
Noteholders required by Section 4.8, (iii) a listing of all Warranty Receivables
and Administrative Receivables purchased as of the related Determination Date,
identifying the Receivables so purchased, and (iv) all information necessary to
enable the Indenture Trustee to reconcile all deposits to, and withdrawals from,
the Collection Account for the related Monthly Period and Distribution Date,
including the accounting required by Section 4.7. Receivables purchased by the
Servicer or by the Seller or AFL on the related Determination Date and each
Receivable which became a Liquidated Receivable or which was paid in full during
the related Monthly Period shall be identified by account number (as set forth
in the Schedule of Receivables). A copy of such certificate may be obtained by
any Noteholder (or by a Note Owner, upon certification that such Person is a
Note Owner and payment of any expenses associated with the distribution thereof)
by a request in writing to the Indenture Trustee addressed to the Corporate
Trust Office. The Indenture Trustee will make such statement (and, at its
option, any additional files containing the same information in an alternative
format) available each month to Noteholders and other parties to the Related
Documents via the Indenture Trustee's internet website, which is presently
located at www.abs.bankone.com.

                  If such statement is not accessible on the Indenture Trustee's
internet website, the Indenture Trustee shall forward a hard copy of it to each
Noteholder, the Servicer, the Seller, and each Rating Agency immediately after
the Indenture Trustee becomes aware that it is not accessible by any of them via
the Indenture Trustee's internet website. Assistance in using the Indenture
Trustee's internet website may be obtained by calling the Indenture Trustee's
customer service desk at (800) 524-9472. The Indenture Trustee shall notify each
of the above in writing of any change in the address or means of access to the
internet website where such statement is accessible.

                  SECTION 3.10. Annual Statement as to Compliance; Notice of
Servicer Termination Event.

                  (a) The Servicer shall deliver to the Owner Trustee, the
Indenture Trustee and each Rating Agency, on or before April 30 (or 120 days
after the end of the Servicer's fiscal year, if other than December 31) of each
year, beginning on April 30, 2001, an officer's certificate signed by any
Responsible Officer of the Servicer, dated as of December 31 (or other
applicable date) of the immediately preceding year, stating that (i) a review of
the activities of the Servicer during the preceding 12-month period (or such
other period as shall have elapsed from the Closing Date to the date of the
first such certificate) and of its performance under this Agreement has been
made under such officer's supervision, and (ii) to such officer's knowledge,
based on such review, the Servicer has fulfilled all its obligations under this
Agreement throughout such period, or, if there has been a default in the
fulfillment

                                      -33-
<PAGE>   38

of any such obligation, specifying each such default known to such officer and
the nature and status thereof.

                  (b) The Servicer shall deliver to the Owner Trustee, the
Indenture Trustee, and each Rating Agency, promptly after having obtained
knowledge thereof, but in no event later than two Business Days thereafter,
written notice in an officer's certificate of any event which with the giving of
notice or lapse of time, or both, would become a Servicer Termination Event
under Section 8.1(a). The Seller or the Servicer shall deliver to the Owner
Trustee, the Indenture Trustee, the Servicer or the Seller (as applicable) and
each Rating Agency promptly after having obtained knowledge thereof, but in no
event later than two Business Days thereafter, written notice in an officer's
certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Termination Event under any other clause of
Section 8.1.

                  SECTION 3.11. Annual Independent Accountants' Report.

                  (a) On or before April 30 of each calendar year, beginning
with April 30, 2001, the Servicer shall cause a firm of nationally recognized
independent certified public accountants, who may also render other services to
the Servicer or Seller (the "Independent Accountants"), to furnish a report to
the Owner Trustee, the Indenture Trustee, the Servicer and each Rating Agency to
the effect that they have applied certain procedures agreed upon with the
Servicer to compare the mathematical calculations of certain amounts set forth
in the Servicer's Certificates delivered pursuant to Section 3.9 during the
period covered by such report with the Servicer's computer reports that were the
source of such amounts and that on the basis of such agreed-upon procedures and
comparison, such Independent Accountants can confirm that such amounts are in
agreement, except for such exceptions as shall be set forth in such statement.
Such report shall set forth the agreed-upon procedures performed.

                  (b) The Accountants' Report shall also indicate that the firm
is independent of the Seller and the Servicer within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants.

                  (c) A copy of the Accountants' Report may be obtained by any
Noteholder (or by any Note Owner, upon certification that such Person is a Note
Owner and payment of any expenses associated with the distribution thereof) by a
request in writing to the Indenture Trustee addressed to the Corporate Trust
Office.

                  SECTION 3.12. Access to Certain Documentation and Information
Regarding Receivables. The Servicer shall provide to representatives of the
Owner Trustee, and the Indenture Trustee reasonable access to the documentation
regarding the Receivables. The Servicer shall provide such access to any
Noteholder (or Note Owner) only in such cases where the Servicer is required by
applicable statutes or regulations (whether applicable to the Servicer or
to such Noteholder or Note Owner) to permit such Noteholder (or Note Owner) to
review such documentation. In each case, such access shall be afforded without
charge but only upon reasonable request and during normal business hours.
Nothing in this Section shall derogate from the obligation of the Servicer to
observe

                                      -34-
<PAGE>   39

any applicable law prohibiting disclosure of information regarding the Obligors,
and the failure of the Servicer to provide access as provided in this Section as
a result of such obligation shall not constitute a breach of this Section. Any
Noteholder (or Note Owner), by its acceptance of a Note (or by acquisition of
its beneficial interest therein), as applicable, shall be deemed to have agreed
to keep confidential and not to use for its own benefit any information obtained
by it pursuant to this Section, except as may be required by applicable law.

                  SECTION 3.13. Monthly Tape. On or before the third Business
Day, but in no event later than the fifth calendar day, of each month, the
Servicer will deliver to the Indenture Trustee a computer tape and a diskette
(or any other electronic transmission acceptable to the Indenture Trustee) in a
format acceptable to the Indenture Trustee containing the information with
respect to the Receivables as of the preceding Accounting Date necessary for
preparation of the Servicer's Certificate relating to the immediately succeeding
Determination Date and necessary to determine the application of collections as
provided in Section 4.3.

                  SECTION 3.14. Duties of the Servicer under the Indenture. The
Servicer shall, and hereby agrees that it will, perform on behalf of the Trust
and the Owner Trustee the following duties of the Trust or the Owner Trustee, as
applicable, under the Indenture (references are to the applicable Sections in
the Indenture):

                  (a) the direction to the Paying Agents, if any, to deposit
moneys with the Indenture Trustee (Section 3.03);

                  (b) the obtaining and preservation of the Issuer's
qualification to do business in each jurisdiction in which such qualification is
or shall be necessary to protect the validity and enforceability of the
Indenture, the Notes, the Collateral and each other instrument and agreement
included in the Trust Estate (Section 3.04);

                  (c) the preparation of all supplements, amendments, financing
statements, continuation statements, instruments of further assurance and other
instruments, in accordance with Section 3.05 of the Indenture, necessary to
protect the Trust Estate (Section 3.05);

                  (d) the delivery of the Opinion of Counsel on the Closing Date
and the annual delivery of Opinions of Counsel, in accordance with Section 3.06
of the Indenture, as to the Trust Estate, and the annual delivery of the
Officer's Certificate and certain other statements, in accordance with Section
3.09 of the Indenture, as to compliance with the Indenture (Sections 3.06 and
3.09);

                  (e) the preparation and obtaining of documents and instruments
required for the release of the Issuer from its obligations under the Indenture
(Section 3.10(b));

                  (f) the monitoring of the Issuer's obligations as to the
satisfaction and discharge of the Indenture and the preparation of an Officer's
Certificate and the obtaining of the Opinion of Counsel and the Independent
Certificate relating thereto (Section 4.01);

                                      -35-
<PAGE>   40

                  (g) the preparation of any written instruments required to
confirm more fully the authority of any co-trustee or separate trustee and any
written instruments necessary in connection with the resignation or removal of
any co-trustee or separate trustee (Sections 6.08 and 6.10);

                  (h) the opening of one or more accounts in the Trust's name,
the preparation of Issuer Orders, Officer's Certificates and Opinions of Counsel
and all other actions necessary with respect to investment and reinvestment of
funds in the Trust Accounts (Sections 8.02 and 8.03);

                  (i) the preparation of Trust Orders and the obtaining of
Opinions of Counsel with respect to the execution of supplemental indentures
(Sections 9.01, 9.02 and 9.03);

                  (j) the preparation of all Officer's Certificates, Opinions of
Counsel and Independent Certificates with respect to any requests by the Issuer
to the Indenture Trustee or the Indenture Collateral Agent to take any action
under the Indenture (Section 11.01(a));

                  (k) the preparation and delivery of Officer's Certificates and
the obtaining of Independent Certificates, if necessary, for the release of
property from the lien of the Indenture (Section 11.01(b)); and

                  (l) the recording of the Indenture, if applicable (Section
11.15).

In addition to the duties of the Servicer set forth above, the Servicer shall,
and hereby agrees that it will, prepare, distribute and file any reports
required by Section 313(b) of the Trust Indenture Act of 1939, as amended, as a
result of any transfer of Subsequent Receivables. Such distribution and filing
is to be effected by the Servicer's distribution and filing of the Servicer's
Certificate.

                  SECTION 3.15. Certain Duties of the Servicer under the Trust
Agreement. The Servicer shall, and hereby agrees that it will, monitor the
Trust's compliance with all applicable provisions of state and federal
securities laws, notify the Trust and the Administrator (as defined in the Trust
Agreement) of any actions to be taken by the Trust necessary for compliance with
such laws and prepare on behalf of the Trust and the Administrator all notices,
filings or other documents or instruments required to be filed under such law.

                  SECTION 3.16. Fidelity Bond. The Servicer shall maintain with
a responsible company, and at its own expense, a blanket fidelity bond and an
errors and omissions insurance policy, in an amount that is commercially
available at a cost that is not generally regarded as excessive by industry
standards, with broad coverage on all officers, employees or other persons
acting in any capacity requiring such persons to handle funds, money, documents
or papers relating to the Receivables (the "Servicer Employees"). Any such
fidelity bond and errors and omissions insurance shall protect and insure the
Servicer against losses, including losses resulting from forgery, theft,
embezzlement, fraud, errors and omissions and negligent acts of such Servicer
Employees. No provision of this Section 3.16 requiring such fidelity bond and
errors and omissions insurance shall diminish or relieve the Servicer from its
duties and obligations as set forth in this Agreement. Upon the

                                      -36-
<PAGE>   41

request of the Indenture Trustee or the Owner Trustee, the Servicer shall cause
to be delivered to the Indenture Trustee and the Owner Trustee a certified true
copy of such fidelity bond and insurance policy.

                                   ARTICLE IV

                    DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS

         SECTION 4.1. Trust Accounts.

         (a) The Servicer shall establish the Collection Account in the name of
the Indenture Trustee for the benefit of the Noteholders and Certificateholders.
The Collection Account shall be an Eligible Account and initially shall be a
segregated trust account established with the Indenture Trustee and maintained
with the Indenture Trustee.

         (b) The Servicer shall establish the Principal Distribution Account in
the name of the Indenture Trustee for the benefit of the Noteholders and
Certificateholders. The Principal Distribution Account shall be an Eligible
Account and initially shall be a segregated trust account established with the
Indenture Trustee and maintained with the Indenture Trustee.

         (c) The Servicer shall establish the Note Interest Distribution Account
in the name of the Indenture Trustee for the benefit of the Noteholders. The
Note Interest Distribution Account shall be an Eligible Account and initially
shall be a segregated trust account established with the Indenture Trustee and
maintained with the Indenture Trustee.

         (d) The Servicer shall establish and maintain the Certificate
Distribution Account in the name of the Trust for the benefit of the
Certificateholders. The Certificate Distribution Account shall be an Eligible
Account and initially shall be a segregated trust account established with the
Owner Trustee and maintained with the Owner Trustee.

         (e) The Servicer shall establish the Reserve Account in the name of the
Indenture Trustee for the benefit of the Noteholders. The Reserve Account shall
be an Eligible Account and initially shall be a segregated trust account
established with the Indenture Trustee and maintained with the Indenture
Trustee.

         (f) All amounts held in the Collection Account, the Principal
Distribution Account, the Note Interest Distribution Account and the Reserve
Account (collectively, the "Trust Accounts") and the Certificate Distribution
Account shall, to the extent permitted by applicable laws, rules and
regulations, be invested, as directed in writing by the Servicer, in Eligible
Investments that, in the case of amounts held in the Collection Account, the
Principal Distribution Account and the Note Interest Distribution Account,
mature not later than one Business Day prior to the Distribution Date for the
Monthly Period to which such amounts relate, and, in the case of amounts held
in the Reserve Account,

                                      -37-
<PAGE>   42

mature in such amounts and on such dates as the Servicer may direct in writing;
provided, however, that the amounts held in the Trust Accounts shall be held
uninvested for the period of time from the Business Day prior to the
Distribution Date or the maturity of Reserve Account investments, as applicable,
until such Distribution Date or the maturity of Reserve Account investments, as
applicable. Any such written direction shall certify that any such investment is
authorized by this Section 4.1. Investments in Eligible Investments shall be
made in the name of the Indenture Trustee on behalf of the Trust, and such
investments shall not be sold or disposed of prior to their maturity. Any
investment of funds in the Trust Accounts shall be made in Eligible Investments
held by a financial institution in accordance with the following requirements:

                  (i) all Eligible Investments shall be held in an account with
         such financial institution in the name of the Indenture Trustee;

                  (ii) all Eligible Investments held in such account shall be
         delivered to the Indenture Trustee in the following manner:

                  (A) with respect to bankers' acceptances, commercial paper,
                  negotiable certificates of deposit and other obligations that
                  constitute "instruments" within the meaning of Section
                  9-105(1)(i) of the UCC (other than certificated securities)
                  and are susceptible of physical delivery, transferred to the
                  Indenture Trustee by physical delivery to the Indenture
                  Trustee, indorsed to, or registered in the name of, the
                  Indenture Trustee or its nominee or indorsed in blank; or such
                  additional or alternative procedures as may hereafter become
                  appropriate to effect the complete transfer of ownership of
                  any such Eligible Investments to the Indenture Trustee free of
                  any adverse claims, consistent with changes in applicable law
                  or regulations or the interpretation thereof;

                           (B) with respect to a "certificated security" (as
                           defined in Section 8- 102(a)(4) of the UCC),
                           transferred:

                                    (1) by physical delivery of such
                                    certificated security to the Indenture
                                    Trustee, provided that if the certificated
                                    security is in registered form, it shall be
                                    indorsed to, or registered in the name of,
                                    the Indenture Trustee or indorsed in blank;

                                    (2) by physical delivery of such
                                    certificated security in registered form to
                                    a "securities intermediary" (as defined in
                                    Section 8-102(a)(14) of the UCC) acting on
                                    behalf of the Indenture Trustee if the
                                    certificated security has been specially
                                    indorsed to the Indenture Trustee by an
                                    effective indorsement.

                           (C) with respect to any security issued by the U.S.
                           Treasury, the Federal Home Loan Mortgage Corporation
                           or by the Federal National Mortgage Association that
                           is a book-entry security held through the Federal
                           Reserve

                                      -38-
<PAGE>   43

                           System pursuant to Federal book entry regulations,
                           the following procedures, all in accordance with
                           applicable law, including applicable federal
                           regulations and Articles 8 and 9 of the UCC:
                           book-entry registration of such property to an
                           appropriate book-entry account maintained with a
                           Federal Reserve Bank by a securities intermediary
                           which is also a "depositary" pursuant to applicable
                           federal regulations and issuance by such securities
                           intermediary of a deposit advice or other written
                           confirmation of such book-entry registration to the
                           Indenture Trustee of the purchase by the securities
                           intermediary on behalf of the Indenture Trustee of
                           such book-entry security; the making by such
                           securities intermediary of entries in its books and
                           records identifying such book-entry security held
                           through the Federal Reserve System pursuant to
                           Federal book-entry regulations as belonging to the
                           Indenture Trustee and indicating that such securities
                           intermediary holds such book-entry security solely as
                           agent for the Indenture Trustee; or such additional
                           or alternative procedures as may hereafter become
                           appropriate to effect complete transfer of ownership
                           of any such Eligible Investments to the Indenture
                           Trustee free of any adverse claims, consistent with
                           changes in applicable law or regulations or the
                           interpretation thereof;

                           (D) with respect to any "uncertificated security" (as
                           defined in Section 8- 102(a)(18) of the UCC) that is
                           not governed by clause (C) above, transferred:

                                    (1)(A) by registration to the Indenture
                                    Trustee as the registered owner thereof, on
                                    the books and records of the issuer thereof,
                                    or

                                    (B) by another Person (not a securities
                                    intermediary) either becomes the registered
                                    owner of the uncertificated security on
                                    behalf of the Indenture Trustee, or having
                                    become the registered owner acknowledges
                                    that it holds for the Indenture Trustee; or

                                    (2) by the issuer thereof having agreed that
                                    it will comply with instructions originated
                                    by the Indenture Trustee without further
                                    consent of the registered owner thereof;

                           (E) with respect to any "security entitlement" (as
                           defined in Section 8- 102(a)(17) of the UCC):

                                    (1) if a securities intermediary (A)
                                    indicates by book entry that a "financial
                                    asset" (as defined in Section 8-102(a)(9) of
                                    the UCC) has been credited to the Indenture
                                    Trustee's "securities account" (as defined
                                    in Section 8-501(a) of the UCC), (B)
                                    receives a financial asset (as so defined)
                                    from the Indenture Trustee or acquires a
                                    financial asset for the Indenture Trustee,
                                    and in either case, accepts it for credit to
                                    the

                                      -39-
<PAGE>   44

                                    Indenture Trustee's securities account (as
                                    so defined), (C) becomes obligated under
                                    other law, regulation or rule to credit a
                                    financial asset to the Indenture Trustee's
                                    securities account, or (D) has agreed that
                                    it will comply with "entitlement orders"
                                    (as defined in Section 8-102(a)(8) of the
                                    UCC) originated by the Indenture Trustee,
                                    without further consent by the "entitlement
                                    holder" (as defined in Section 8-102(a)(7)
                                    of the UCC), of a confirmation of the
                                    purchase and the making by such securities
                                    intermediary of entries on its books and
                                    records identifying as belonging to the
                                    Indenture Trustee of (I) a specific
                                    certificated security in the securities
                                    intermediary's possession, (II) a quantity
                                    of securities that constitute or are part
                                    of a fungible bulk of certificated
                                    securities in the securities intermediary's
                                    possession, or (III) a quantity of
                                    securities that constitute or are part of a
                                    fungible bulk of securities shown on the
                                    account of the securities intermediary on
                                    the books of another securities
                                    intermediary.

                           (F) in each case of delivery contemplated pursuant to
                           clauses (A) through (E) of subsection (ii) hereof,
                           the Indenture Trustee shall make appropriate
                           notations on its records, and shall cause the same to
                           be made on the records of its nominees, indicating
                           that such Eligible Investment is held in trust
                           pursuant to and as provided in this Indenture.

Any cash held by the Indenture Trustee shall not be considered a "financial
asset" for purposes of this Section 4.1(e). Subject to the other provisions
hereof, the Indenture Trustee 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 Indenture Trustee or
its agent, together with each document of transfer, if any, necessary to
transfer title to such investment to the Indenture Trustee in a manner which
complies with this Section 4.1. All interest, dividends, gains upon sale and
other income from, or earnings on, investments of funds in the Trust Accounts
(other than the Reserve Account) shall be deposited in the Collection Account
and distributed on the next Distribution Date pursuant to Section 4.6. The
Servicer shall deposit in the applicable Trust Account an amount equal to any
net loss on such investments immediately as realized. All interest, dividends,
gains upon sale and other income from, or earnings on, investments of funds in
the Reserve Account shall be deposited in the Reserve Account.

                  SECTION 4.2. Collections.

                  (a) The Servicer shall remit directly to the Collection
Account or to the Lockbox Bank for deposit into the Collection Account, without
deposit into any other intervening account, all payments by or on behalf of the
Obligors on the Receivables and all Liquidation Proceeds received by the
Servicer, in each case, as soon as practicable, but in no event later than the
Business Day after receipt thereof. Within two days of deposit of payments into
the Lockbox Account, the Servicer shall cause the Lockbox Bank to transfer all
amounts credited to the Lockbox Account on account of such

                                      -40-
<PAGE>   45

payments to the Collection Account. Amounts in the Collection Account shall not
be invested. Notwithstanding the foregoing, the Servicer may deposit such funds
in one or more accounts designated by the Servicer and commingle such funds
with the general funds of the Servicer or its Affiliates, and remit such funds
to the Collection Account on the Draw Date with respect to the Distribution
Date, unless:

                  (1)      a Servicer Termination Event has occurred and is
                           continuing;

                  (2)      an Event of Default has occurred and is continuing;

                  (3)      Arcadia Financial is no longer the Servicer; or

                  (4)      (a)      Arcadia Financial is no longer a wholly
                                    owned direct or indirect subsidiary of
                                    Associates First Capital Corporation, or

                           (b)      the short-term senior unsecured debt of
                                    Associates Corporation of North America is
                                    not rated at least P-1 by Moody's and A-1 by
                                    S&P or any such rating is suspended or
                                    withdrawn.

Upon the occurrence the events specified above, the Servicer shall not be
permitted to deposit funds in one or more accounts established by the Servicer
or to commingle such funds with the general funds of the Servicer or its
Affiliates, and the Indenture Trustee shall notify the Lockbox Bank to deposit
such funds directly into the Collection Account.

                  (b) Notwithstanding the provisions of subsection (a) hereof,
the Servicer will be entitled to be reimbursed from amounts on deposit in the
Collection Account with respect to a Monthly Period for amounts previously
deposited in the Collection Account but later determined by the Servicer or the
Lockbox Bank to have resulted from mistaken deposits or postings or checks
returned for insufficient funds. The amount to be reimbursed hereunder shall be
paid to the Servicer on the related Distribution Date pursuant to Section
4.6(iii) upon certification by the Servicer of such amounts and the provision of
such information to the Indenture Trustee as may be necessary in the opinion of
the Indenture Trustee to verify the accuracy of such certification.

                  SECTION 4.3. Application of Collections. For the purposes of
this Agreement, all collections for a Monthly Period shall be applied by the
Servicer as follows:

                  (a) With respect to each Receivable, payments by or on behalf
of the Obligor thereof (other than of Supplemental Servicing Fees with respect
to such Receivable, to the extent collected) shall be applied to interest and
principal with respect to such Receivable in accordance with the terms of such
Receivable. With respect to each Liquidated Receivable, Liquidation Proceeds
shall be applied to interest and principal with respect to such Receivable in
accordance with the terms of such Receivable. The Servicer shall not be entitled
to any Supplemental Servicing Fees with respect to a Liquidated Receivable.

                                      -41-
<PAGE>   46

                  (b) With respect to each Receivable that has become a
Purchased Receivable on any Determination Date, the Purchase Amount shall be
applied, for purposes of this Agreement only, to interest and principal on the
Receivable in accordance with the terms of the Receivable as if the Purchase
Amount had been paid by the Obligor on the Accounting Date. The Servicer shall
not be entitled to any Supplemental Servicing Fees with respect to such a
Receivable. Nothing contained herein shall relieve any Obligor of any obligation
relating to any Receivable.

                  (c) All amounts collected that are payable to the Servicer as
Supplemental Servicing Fees hereunder shall be deposited in the Collection
Account and paid to the Servicer in accordance with Section 4.6(iii).

                  (d) All payments by or on behalf of an Obligor received with
respect to any Purchased Receivable after the Accounting Date immediately
preceding the Determination Date on which the Purchase Amount was paid by the
Seller, AFL or the Servicer shall be paid to the Seller, AFL or the Servicer,
respectively, and shall not be included in the Available Funds.

                  SECTION 4.4. Monthly Advances.

                  (a) If with respect to a Receivable, the amount deposited into
the Collection Account during a Monthly Period in respect of such Receivable and
allocable to interest (determined in accordance with Section 4.3) is less than
an amount of interest equal to interest accrued on such Receivable (for the
number of calendar days in such Monthly Period) (calculated according to the
method specified in the related retail installment sale contract or promissory
note at the APR on the Principal Balance of such Receivable as of the Accounting
Date preceding such Distribution Date), the Servicer shall make a Monthly
Advance equal to the amount of such shortfall; provided, however, that the
Servicer shall not be required to make a Monthly Advance with respect to a
Receivable extended pursuant to Section 3.2(b) for any Monthly Period during
which no Scheduled Payment is due according to the terms of such extension; and
provided further, that the Servicer shall not be required to make a Monthly
Advance with respect to a Receivable that is less than 31 days delinquent; and
provided, further, that the Servicer shall not be required to make a Monthly
Advance with respect to a Receivable if the Servicer determines, in good faith
and its sole discretion, that such Monthly Advance will not ultimately be
recoverable from collections with respect to such Receivable or other
Receivables.

                  (b) On or before each Draw Date, the Servicer shall deposit in
the Collection Account the aggregate amount of Monthly Advances required for the
related Monthly Period in immediately available funds (subject to Section 4.7).

                  (c) The Servicer shall be entitled to be reimbursed for
Outstanding Monthly Advances with respect to a Receivable pursuant to Section
4.6(i) or pursuant to Section 4.7 from the following sources with respect to
such Receivable on any day subsequent to the Distribution Date in respect of
which such Monthly Advance was made: (i) subsequent payments by or on behalf of
the Obligor with respect to such Receivable, (ii) collections of Liquidation
Proceeds with respect to such

                                      -42-
<PAGE>   47

Receivable if such Receivable becomes a Liquidated Receivable and (iii) payment
of any Purchase Amount with respect to such Receivable if such Receivable
becomes a Purchased Receivable. If any Receivable shall become a Liquidated
Receivable and the Servicer shall not have been fully reimbursed for Outstanding
Monthly Advances with respect to such Receivable from the sources of funds
previously described in this paragraph, the Servicer shall be entitled to
reimbursement from collections on Receivables other than the Receivable in
respect of which such Outstanding Monthly Advance shall have been made.

                  SECTION 4.5. Additional Deposits. On or before each Draw Date,
the Servicer or AFL shall deposit in the Collection Account the aggregate
Purchase Amounts with respect to Administrative Receivables and Warranty
Receivables, respectively. All such deposits of Purchase Amounts shall be made
in immediately available funds.

                  SECTION 4.6. Distributions. On each Distribution Date, the
Indenture Trustee shall (based on the information contained in the Servicer's
Certificate delivered on the related Determination Date) distribute the
following amounts and in the order of priority specified below.

                  (i) first, from the Actual Funds, to the Servicer, the amount
of Outstanding Monthly Advances for which the Servicer is entitled to be
reimbursed pursuant to Section 4.4(c) and for which the Servicer has not
previously been reimbursed pursuant to Section 4.7;

                  (ii) second, from the Actual Funds then remaining on deposit
in the Collection Account, to the Owner Trustee, any accrued and unpaid fees of
the Owner Trustee in accordance with the Trust Agreement and including amounts
with respect to which the Administrator is entitled to be reimbursed pursuant to
the Administration Agreement; to the Indenture Trustee, any accrued and unpaid
fees of the Indenture Trustee in accordance with the Indenture; to any Lockbox
Bank, Custodian, or Administrator (including the Owner Trustee or Indenture
Trustee if acting in any such additional capacity), any accrued and unpaid fees
(in each case, to the extent such Person has not previously received such amount
from the Servicer or AFL) due from the Trust;

                  (iii) third, from the Actual Funds then remaining on deposit
in the Collection Account, to the Servicer, the Basic Servicing Fee for the
related Monthly Period, any Supplemental Servicing Fees for the related Monthly
Period, and any amounts specified in Section 4.2(b), to the extent the Servicer
has not reimbursed itself in respect of such amounts pursuant to Section 4.7;

                  (iv) fourth, from the Actual Funds then remaining on deposit
in the Collection Account, to the Note Interest Distribution Account, the Class
A Interest Distributable Amount;

                  (v) fifth, from the Actual Funds then remaining on deposit in
the Collection Account, to the Principal Distribution Account, the First
Priority Principal Distribution Amount;

                  (vi) sixth, from the Actual Funds then remaining on deposit in
the Collection Account, to the Note Interest Distribution Account, the Class M
Interest Distributable Amount;

                                      -43-
<PAGE>   48

                  (vii) seventh, from the Actual Funds then remaining on deposit
in the Collection Account, to the Principal Distribution Account, the Second
Priority Principal Distribution Amount;

                  (viii) eighth, from the Actual Funds then remaining on deposit
in the Collection Account, to the Note Interest Distribution Account, the Class
B Interest Distributable Amount;

                  (ix) ninth, from the Actual Funds then remaining on deposit in
the Collection Account, to the Reserve Account, the amount required to reinstate
the amount on deposit in the Reserve Account up to the Specified Reserve
Balance;

                  (x) tenth, from the Actual Funds then remaining on deposit in
the Collection Account, to the Principal Distribution Account, the Regular
Principal Distribution Amount; and

                  (xi) eleventh, any remaining Actual Funds to the Certificate
Distribution Account.

                  SECTION 4.7. Net Deposits. Subject to payment by the Servicer
of amounts otherwise payable pursuant to Section 4.6(ii) and provided that no
Servicer Termination Event shall have occurred and be continuing with respect to
such Servicer, the Servicer may make the remittances to be made by it pursuant
to Sections 3.2(d), 3.2(e), 4.2, 4.4 and 4.5 net of amounts (which amounts may
be netted prior to any such remittance for a Monthly Period) to be distributed
to it pursuant to Sections 3.8, 4.2(b) and 4.6(i); provided, however, that the
Servicer shall account for all of such amounts in the related Servicer's
Certificate as if such amounts were deposited and distributed separately; and,
provided, further, that if an error is made by the Servicer in calculating the
amount to be deposited or retained by it, with the result that an amount less
than required is deposited in the Collection Account, the Servicer shall make a
payment of the deficiency to the Collection Account, immediately upon becoming
aware, or receiving notice from the Indenture Trustee, of such error.

                  SECTION 4.8. Statements to Noteholders.

                  (a) On each Distribution Date, the Indenture Trustee shall
include with each distribution to each Noteholder and to the Owner Trustee, the
Servicer's Certificate (which statement shall also have been provided to each
Rating Agency by the Servicer) delivered on the related Determination Date
pursuant to Section 3.9, setting forth for the Monthly Period relating to such
Payment Date the following information with respect to each class of Notes:

                           (i) the amount of such distribution allocable to
                  principal;

                           (ii) the amount of such distribution allocable to
                  interest;

                           (iii) the amount of such distribution payable out of
                  amounts withdrawn from the Reserve Account;

                                      -44-
<PAGE>   49

                           (iv) the outstanding principal balance of the Notes
                  (after giving effect to distributions made on such
                  Distribution Date);

                           (v) the Class A-1 Interest Carryover Shortfall, the
                  Class A-2 Interest Carryover Shortfall, the Class A-3 Interest
                  Carryover Shortfall, the Class M Interest Carryover Shortfall
                  and the Class B Interest Carryover Shortfall, if any, and the
                  change in such amounts from the preceding statement;

                           (vi) the amount of fees paid by the Trust with
                  respect to such Monthly Period;

                           (vii) the Specified Reserve Balance and the amount on
                  deposit in the Reserve Account; and

                           (viii) the Note Pool Factor with respect to each
                  class of Notes (after giving effect to distributions made on
                  such Distribution Date).

Each amount set forth pursuant to subclauses (i) through (iv) above may be
expressed as a dollar amount per $1,000 of original principal balance of a Note.

                  (b) Note Owners may obtain copies of the statements delivered
by the Indenture Trustee pursuant to subsection (a) above upon written request
to the Indenture Trustee at its Corporate Trust Office (together with a
certification that such Person is a Note Owner and payment of any expenses
associated with the distribution thereof). The Indenture Trustee will make such
statement (and, at its option, any additional files containing the same
information in an alternative format) available to Note Owners and other parties
to the Related Documents via the Indenture Trustee's internet website, which is
presently located at www.abs.bankone.com.

                  If such statement is not accessible on the Indenture Trustee's
internet website, the Indenture Trustee shall forward a hard copy of it to each
Note Owner immediately after the Indenture Trustee becomes aware that it is not
accessible by any of them via the Indenture Trustee's internet website.
Assistance in using the Indenture Trustee's internet website may be obtained by
calling the Indenture Trustee's customer service desk at (800) 524-9472. The
Indenture Trustee shall notify each of the above in writing of any change in the
address or means of access to the internet website where such statement is
accessible.

                  SECTION 4.9. Indenture Trustee as Agent. The Indenture
Trustee, in holding all funds in the Trust Accounts and in making distributions
as provided in this Agreement, shall act solely on behalf of and as agent for
the Noteholders.

                  SECTION 4.10. Eligible Accounts. Any account which is required
to be established as an Eligible Account pursuant to this Agreement and which
ceases to be an Eligible Account shall within five Business Days (or such longer
period, not to exceed 30 days, as to which each Rating

                                      -45-
<PAGE>   50

Agency may consent) be established as a new account which shall be an Eligible
Account and any cash and/or any investments shall be transferred to such new
account.

                                    ARTICLE V

                               THE RESERVE ACCOUNT

                  SECTION 5.1. Withdrawals from the Reserve Account. In the
event that the Servicer's Certificate with respect to any Determination Date
shall state that the amount of Available Funds with respect to such
Determination Date is less than the Total Required Payment for the related
Distribution Date, then on the Draw Date immediately preceding such Distribution
Date, the Indenture Trustee, in accordance with written instructions from the
Servicer, shall (i) withdraw amounts on deposit in the Reserve Account (up to
the amount by which the Total Required Payment for the related Distribution Date
exceeds the amount of Available Funds with respect to such Determination Date)
and (ii) deposit the amounts so withdrawn from the Reserve Account into the
Collection Account. In addition, the Indenture Trustee shall withdraw amounts on
deposit in the Reserve Account on any Distribution Date to the extent that such
amounts, together with the Collected Funds for such Distribution Date, would be
sufficient to pay the sum of the Servicing Fee and the Outstanding Amount of the
Notes, and deposit the Servicing Fee into the Collection Account and an amount
equal to the Outstanding Amount of the Notes into the Principal Distribution
Account. On each Distribution Date, any Reserve Account Excess Amount (after
giving effect to any withdrawals on the immediately preceding Draw Date as
described above) shall be distributed to the Certificateholders.

                                   ARTICLE VI

                                   THE SELLER

                  SECTION 6.1. Liability of Seller.

                  (a) The Seller shall be liable hereunder only to the extent of
the obligations in this Agreement specifically undertaken by the Seller and the
representations made by the Seller.

                  SECTION 6.2. Merger or Consolidation of, or Assumption of the
Obligations of, Seller. Any Person (a) into which the Seller may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Seller shall be a party or (c) which may succeed to the properties and assets of
the Seller substantially as a whole, shall be the successor to the Seller
without the execution or filing of any document or any further act by any of the
parties to this Agreement; provided, however, that the Seller hereby covenants
that it will not consummate any of the foregoing transactions except upon
satisfaction of the following: (i) the surviving Seller executes an agreement of
assumption to perform every obligation of the Seller under this Agreement, (ii)
immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 2.4 shall have been breached and no Event of
Default, and no event that, after notice of lapse of time, or both, would

                                      -46-
<PAGE>   51

become an Event of Default shall have happened and be continuing, (iii) the
Seller shall have delivered to the Owner Trustee and the Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, and that the Rating Agency
Condition shall have been satisfied with respect to such transaction, (iv) the
Surviving Seller shall have a consolidated net worth at least equal to that of
the predecessor Seller, (v) such transaction will not result in a material
adverse federal or state tax consequence to the Issuer, the Noteholders or the
Certificateholders and (vi) the Seller shall have delivered to the Owner Trustee
and the Trustee an Opinion of Counsel either (A) stating that, in the opinion of
such counsel, all financing statements and continuation statements and
amendments thereto have been executed and filed that are necessary fully to
preserve and protect the interest of the Owner Trustee and Indenture Trustee,
respectively, in the Receivables and reciting the details of such filings, or
(B) stating that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interests.

                  SECTION 6.3. Limitation on Liability of Seller and Others. The
Seller and any director or officer or employee or agent of the Seller may rely
in good faith on the advice of counsel or on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising under this Agreement. The Seller shall not be under any obligation to
appear in, prosecute or defend any legal action that is not incidental to its
obligations as Seller of the Receivables under this Agreement and that in its
opinion may involve it in any expense or liability.

                  SECTION 6.4. Seller May Own Notes. Each of the Seller and any
Affiliate of the Seller may in its individual or any other capacity become the
owner or pledgee of Notes with the same rights as it would have if it were not
the Seller or an Affiliate thereof except as otherwise specifically provided
herein or in the Related Documents. Notes so owned by or pledged to the Seller
or such Affiliate shall have an equal and proportionate benefit under the
provisions of this Agreement or any Related Document, without preference,
priority, or distinction as among all of the Notes, provided that any Notes
owned by the Seller or any Affiliate thereof, during the time such Notes are
owned by them, shall be without voting rights for any purpose set forth in this
Agreement or any Related Document. The Seller shall notify the Owner Trustee and
the Indenture Trustee promptly after it or any of its Affiliates become the
owner or pledgee of a Note.

                  SECTION 6.5. Corporate Existence.

                  (a) During the term of this Agreement, the Seller will keep in
full force and effect its existence, rights and franchises as a corporation
under the laws of the jurisdiction of its incorporation and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Related Documents and each other
instrument or agreement necessary or appropriate to the proper administration of
this Agreement and the transactions contemplated hereby.

                                      -47-
<PAGE>   52

                  (b) During the term of this Agreement, the Seller shall
observe the applicable legal requirements for the recognition of the Seller as a
legal entity separate and apart from its affiliates, including as follows:

                  (i) the Seller shall maintain corporate records and books of
account separate from those of its affiliates;

                  (ii) except as otherwise provided in this Agreement, the
Seller shall not commingle its assets and funds with those of its affiliates;

                  (iii) the Seller shall hold such appropriate meetings of its
Board of Directors as are necessary to authorize all the Seller's corporate
actions required by law to be authorized by the Board of Directors, shall keep
minutes of such meetings and of meetings of its stockholder(s) and observe all
other customary corporate formalities (and any successor Seller not a
corporation shall observe similar procedures in accordance with its governing
documents and applicable law);

                  (iv) the Seller shall at all times hold itself out to the
public under the Seller's own name as a legal entity separate and distinct from
its affiliates; and

                  (v) all transactions and dealings between the Seller and its
affiliates will be conducted on an arm's-length basis.

                  SECTION 6.6. Security Interest. During the term of this
Agreement, the Seller will not take any action to assign the security interest
in any Financed Vehicles other than pursuant to the Related Documents.

                                   ARTICLE VII

                                  THE SERVICER

                  SECTION 7.1. Liability of Servicer; Indemnities.

                  (a) The Servicer (in its capacity as such and, in the case of
AFL, without limitation of its obligations under the Purchase Agreement) shall
be liable hereunder only to the extent of the obligations in this Agreement
specifically undertaken by the Servicer and the representations made by the
Servicer.

                  (b) The Servicer shall defend, indemnify and hold harmless the
Trust, the Owner Trustee, the Indenture Trustee, their respective officers,
directors, agents and employees, and the Noteholders from and against any and
all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel and expenses of litigation arising out
of or resulting from the use, ownership or operation by the Servicer or any
Affiliate thereof of any Financed Vehicle.

                                      -48-
<PAGE>   53

                  (c) The Servicer shall indemnify, defend and hold harmless the
Trust, the Owner Trustee, the Indenture Trustee, their respective officers,
directors, agents and employees and the Noteholders from and against any taxes
that may at any time be asserted against the Trust, the Owner Trustee, the
Indenture Trustee, or the Noteholders with respect to the transactions
contemplated in this Agreement, including, without limitation, any sales, gross
receipts, withholding, general corporation, tangible personal property,
privilege or license taxes (but not including (i) income taxes on fees and
expenses payable to the Owner Trustee or the Indenture Trustee, (ii) income
taxes arising out of distributions on the Notes or (iii) transfer taxes arising
in connection with transfers of Notes).

                  (d) The Servicer shall indemnify, defend and hold harmless the
Trust, the Owner Trustee, the Indenture Trustee, their respective officers,
directors, agents and employees and the Noteholders from and against any and all
costs, expenses, losses, claims, damages, and liabilities to the extent that
such cost, expense, loss, claim, damage, or liability arose out of, or was
imposed upon the Trust, the Owner Trustee, the Indenture Trustee, or the
Noteholders through the breach of this Agreement, the negligence, willful
misfeasance, or bad faith of the Servicer in the performance of its duties under
this Agreement or by reason of reckless disregard of its obligations and duties
under this Agreement.

                  (e) The Servicer shall indemnify, defend, and hold harmless
the Owner Trustee and the Indenture Trustee, in their individual capacities,
their officers, directors, agents and employees, from and against all costs,
taxes (other than income taxes on fees and expenses payable to the Owner Trustee
and the Indenture Trustee), expenses, losses, claims, damages and liabilities
arising out of or incurred in connection with the acceptance or performance of
the trusts and duties contained in the Trust Agreement and the Related
Documents, except to the extent that such cost, taxes (other than income taxes),
expense, loss, claim, damage or liability (A) is due to the willful misfeasance
or gross negligence of the Owner Trustee, or (B) arises from the Owner Trustee's
breach of any of its representations or warranties set forth in Section 7.3 of
the Trust Agreement; provided, however, that amounts payable under this
paragraph shall be increased by the amount of income taxes actually paid by the
Owner Trustee in respect of any indemnity payment unless the Owner Trustee
received or can reasonably be expected to receive a tax deduction for the
related loss or cost.

                  (f) Indemnification under this Article shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation.
If the Servicer has made any indemnity payments pursuant to this Article and the
recipient thereafter collects any of such amounts from others, the recipient
shall promptly repay such amounts collected to the Servicer, without interest.

                  (g) AFL, in its individual capacity, hereby acknowledges that
the indemnification provisions in the Purchase Agreement benefitting the Trust,
the Owner Trustee and the Indenture Trustee are enforceable by each hereunder.

                                      -49-
<PAGE>   54

                  SECTION 7.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer. The Servicer shall not merge or consolidate with
any other person, convey, transfer or lease substantially all its assets as an
entirety to another Person, or permit any other Person to become the successor
to the Servicer's business unless, after the merger, consolidation, conveyance,
transfer, lease or succession, the successor or surviving entity shall be an
Eligible Servicer and shall be capable of fulfilling the duties of the Servicer
contained in this Agreement. Any corporation (i) into which the Servicer may be
merged or consolidated, (ii) resulting from any merger or consolidation to which
the Servicer shall be a party, (iii) which acquires by conveyance, transfer, or
lease substantially all of the assets of the Servicer, or (iv) succeeding to the
business of the Servicer, in any of the foregoing cases shall execute an
agreement of assumption to perform every obligation of the Servicer under this
Agreement and, whether or not such assumption agreement is executed, shall be
the successor to the Servicer under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties to this
Agreement, anything in this Agreement to the contrary notwithstanding; provided,
however, that nothing contained herein shall be deemed to release the Servicer
from any obligation. The Servicer shall provide notice of any merger,
consolidation or succession pursuant to this Section 7.2 to the Owner Trustee,
the Indenture Trustee, and each Rating Agency. Notwithstanding the foregoing,
the Servicer shall not merge or consolidate with any other Person or permit any
other Person to become a successor to the Servicer's business, unless (x)
immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 3.6 shall have been breached (for purposes
hereof, such representations and warranties shall speak as of the date of the
consummation of such transaction), (y) the Servicer shall have delivered to the
Owner Trustee and the Indenture Trustee an Officer's Certificate and an Opinion
of Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section 7.2 and that all conditions
precedent, if any, provided for in this Agreement relating to such transaction
have been complied with, and (z) the Servicer shall have delivered to the Owner
Trustee and the Indenture Trustee an Opinion of Counsel, stating that, in the
opinion of such counsel, either (A) all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary to preserve and protect the interest of the Owner Trustee in the Trust
Property and reciting the details of the filings or (B) no such action shall be
necessary to preserve and protect such interest.

                  SECTION 7.3. Limitation on Liability of Servicer and Others.
Neither the Servicer nor any of the directors or officers or employees or agents
of the Servicer shall be under any liability to the Trust, or the Noteholders,
except as provided in this Agreement, for any action taken or for refraining
from the taking of any action pursuant to this Agreement; provided, however,
that this provision shall not protect the Servicer or any such person against
any liability that would otherwise be imposed by reason of a breach of this
Agreement or willful misfeasance, bad faith or negligence (excluding errors in
judgment) in the performance of duties, by reason of reckless disregard of
obligations and duties under this Agreement or any violation of law by the
Servicer or such person, as the case may be; provided further, that this
provision shall not affect any liability to indemnify the Owner Trustee and the
Indenture Trustee for costs, taxes, expenses, claims, liabilities, losses or
damages paid by the Owner Trustee or the Indenture Trustee, each in its
individual capacity. The Servicer and any director, officer, employee or agent
of the Servicer may rely in good faith on the advice of counsel or

                                      -50-
<PAGE>   55

on any document of any kind prima facie properly executed and submitted by any
Person respecting any matters arising under this Agreement.

                  SECTION 7.4. Delegation of Duties. The Servicer may delegate
duties under this Agreement to an Affiliate of AFL with the prior written
consent of the Indenture Trustee and the Owner Trustee. The Servicer also may at
any time perform the specific duties hereunder through sub- contractors who are
in the business of servicing automotive receivables; provided, however, that no
such delegation or sub-contracting duties by the Servicer shall relieve the
Servicer of its responsibility with respect to such duties.

                  SECTION 7.5. Servicer Not to Resign. Subject to the provisions
of Section 7.2, the Servicer shall not resign from the obligations and duties
imposed on it by this Agreement as Servicer except upon a determination that by
reason of a change in legal requirements the performance of its duties under
this Agreement would cause it to be in violation of such legal requirements in a
manner which would have a material adverse effect on the Servicer and the
Controlling Noteholders do not elect to waive the obligations of the Servicer to
perform the duties which render it legally unable to act or to delegate those
duties to another Person. Any such determination permitting the resignation of
the Servicer shall be evidenced by an Opinion of Counsel to such effect
delivered and reasonably acceptable to the Owner Trustee and the Indenture
Trustee. No resignation of the Servicer shall become effective until a successor
Servicer that is an Eligible Servicer shall have assumed the responsibilities
and obligations of the Servicer.

                                  ARTICLE VIII

                           SERVICER TERMINATION EVENTS

                  SECTION 8.1. Servicer Termination Event. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination
Event":

                  (a) Any failure by the Servicer to deliver to the Indenture
Trustee for distribution to Noteholders any proceeds or payment required to be
so delivered under the terms of this Agreement (or, if AFL is the Servicer, the
Purchase Agreement) that continues unremedied for a period of two Business Days
(one Business Day with respect to payment of Purchase Amounts) after written
notice is received by the Servicer from the Indenture Trustee; or

                  (b) Failure by the Servicer to deliver to the Indenture
Trustee and the Owner Trustee, the Servicer's Certificate by the Distribution
Date, or failure on the part of the Servicer to observe its covenants and
agreements set forth in Section 7.2; or

                  (c) Failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement (or, if AFL is the Servicer, the Purchase
Agreement), which failure (i) materially and adversely affects the rights of
Noteholders, and (ii) continues unremedied for a period of 30 days after the
date on which written

                                      -51-
<PAGE>   56

notice of such failure, requiring the same to be remedied, shall have been given
to the Servicer by the Owner Trustee, the Indenture Trustee or any Noteholder;
or

                  (d) (i) The commencement of an involuntary case under the
federal bankruptcy laws, as now or hereinafter in effect, or another present or
future federal or state bankruptcy, insolvency or similar law and such case is
not dismissed within 60 days; or (ii) the entry of a decree or order for relief
by a court or regulatory authority having jurisdiction in respect of the
Servicer or the Seller in an involuntary case under the federal bankruptcy laws,
as now or hereafter in effect, or another present or future, federal or state,
bankruptcy, insolvency or similar law, or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Servicer or the Seller or of any substantial part of their respective properties
or ordering the winding up or liquidation of the affairs of the Servicer or the
Seller; or

                  (e) The commencement by the Servicer or the Seller of a
voluntary case under the federal bankruptcy laws, as now or hereafter in effect,
or any other present or future, federal or state, bankruptcy, insolvency or
similar law, or the consent by the Servicer or the Seller to the appointment of
or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Servicer or the Seller or of any
substantial part of its property or the making by the Servicer or the Seller of
an assignment for the benefit of creditors or the failure by the Servicer or the
Seller generally to pay its debts as such debts become due or the taking of
corporate action by the Servicer or the Seller in furtherance of any of the
foregoing; or

                  (f) Any representation, warranty or statement of the Servicer
or the Seller made in this Agreement or any certificate, report or other writing
delivered pursuant hereto shall prove to be incorrect in any material respect as
of the time when the same shall have been made (excluding, however, any
representation or warranty set forth in Section 2.4(a)), and the incorrectness
of such representation, warranty or statement has a material adverse effect on
the Trust and, within 30 days after written notice thereof shall have been given
to the Servicer or the Seller by the Owner Trustee, the Indenture Trustee or a
Noteholder), the circumstances or condition in respect of which such
representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured.

                  SECTION 8.2. Consequences of a Servicer Termination Event. If
a Servicer Termination Event shall occur and be continuing, the Indenture
Trustee, the Owner Trustee, or the Controlling Noteholders, by notice given in
writing to the Servicer (and to the Indenture Trustee, and the Owner Trustee if
given by the Noteholders) may terminate all of the rights and obligations of the
Servicer under this Agreement. On or after the receipt by the Servicer of such
written notice, all authority, power, obligations and responsibilities of the
Servicer under this Agreement, whether with respect to the Notes or the Trust
Property or otherwise, shall be terminated and automatically shall pass to, be
vested in and become obligations and responsibilities of the Indenture Trustee
(or such other successor Servicer appointed pursuant to Section 8.3(b);
provided, however, that the successor Servicer shall have no liability with
respect to any obligation which was required to be performed by the terminated
Servicer prior to the date that the successor Servicer becomes the Servicer or
any claim of a third party based on any alleged action or inaction of the
terminated Servicer. The successor Servicer

                                      -52-
<PAGE>   57

is authorized and empowered by this Agreement to execute and deliver, on behalf
of the terminated Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and endorsement of the Receivables and the
other Trust Property and related documents to show the Owner Trustee as
lienholder or secured party on the related Lien Certificates, or otherwise. The
terminated Servicer agrees to cooperate with the successor Servicer in effecting
the termination of the responsibilities and rights of the terminated Servicer
under this Agreement, including, without limitation, the transfer to the
successor Servicer for administration by it of all cash amounts that shall at
the time be held by the terminated Servicer for deposit, or have been deposited
by the terminated Servicer, in the Collection Account or thereafter received
with respect to the Receivables and the delivery to the successor Servicer of
all Receivable Files, Monthly Records and Collection Records and a computer tape
in readable form as of the most recent Business Day containing all information
necessary to enable the successor Servicer or a successor Servicer to service
the Receivables and the other Trust Property. In addition to any other amounts
that are then payable to the terminated Servicer under this Agreement, the
terminated Servicer shall then be entitled to receive out of Available Funds
reimbursements for any Outstanding Monthly Advances (in accordance with Section
4.4(c)) made during the period prior to the notice pursuant to this Section 8.2
which terminates the obligation and rights of the terminated Servicer under this
Agreement. The Owner Trustee, the Indenture Trustee and the successor Servicer
may set off and deduct any amounts owed by the terminated Servicer from any
amounts payable to the terminated Servicer pursuant to the preceding sentence.
The terminated Servicer shall grant the Owner Trustee, the Indenture Trustee and
the successor Servicer reasonable access to the terminated Servicer's premises
at the terminated Servicer's expense.

                  SECTION 8.3. Appointment of Successor.

                  (a) On and after (i) the time the Servicer receives a notice
of termination pursuant to Section 8.2, or (ii) the resignation of the Servicer
pursuant to Section 7.5, the Indenture Trustee shall be the successor in all
respects to the Servicer in its capacity as servicer under this Agreement and
the transactions set forth or provided for in this Agreement, and shall be
subject to all the responsibilities, restrictions, duties, liabilities and
termination provisions relating thereto placed on the Servicer by the terms and
provisions of this Agreement. The Owner Trustee and such successor shall take
such action, consistent with this Agreement, as shall be necessary to effectuate
any such succession. If a successor Servicer is acting as Servicer hereunder, it
shall be subject to termination under Section 8.2 upon the occurrence of any
Servicer Termination Event applicable to it as Servicer.

                  (b) Notwithstanding the above, if the Indenture Trustee shall
be legally unable or unwilling to act as Servicer, the Indenture Trustee, the
Controlling Noteholders or the Owner Trustee may petition a court of competent
jurisdiction to appoint any Eligible Servicer as the successor to the Servicer.
Pending appointment pursuant to the preceding sentence, the Indenture Trustee
shall act as successor Servicer unless it is legally unable to do so, in which
event the outgoing Servicer shall continue to act as Servicer until a successor
has been appointed and accepted such appointment. Subject to Section 7.5, no
provision of this Agreement shall be construed as relieving the Indenture

                                      -53-
<PAGE>   58

Trustee of its obligation to succeed as successor Servicer upon the termination
of the Servicer pursuant to Section 8.2 or the resignation of the Servicer
pursuant to Section 7.5.

                  (c) Any successor Servicer shall be entitled to such
compensation (whether payable out of the Collection Account or otherwise) as the
Servicer would have been entitled to under the Agreement if the Servicer had not
resigned or been terminated hereunder.

                  SECTION 8.4. Notification to Noteholders. Upon any termination
of, or appointment of a successor to, the Servicer pursuant to this Article
VIII, the Indenture Trustee shall give prompt written notice thereof to
Noteholders at their respective addresses appearing in the Note Register.

                  SECTION 8.5. Waiver of Past Defaults. The Controlling
Noteholders may, on behalf of all Holders of Notes, waive any default by the
Servicer in the performance of its obligations hereunder and its consequences.
Upon any such waiver of a past default, such default shall cease to exist, and
any Servicer Termination Event arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon. Nothing in
this Section 8.5 shall preclude the Controlling Noteholders from waiving any
default for a period of time or subject to any contingency or from waiving some
but not all of the consequences of such default.

                                   ARTICLE IX

                                   TERMINATION

                  SECTION 9.1. Optional Purchase of All Receivables; Liquidation
of Trust Estate.

                  (a) On each Determination Date as of which the Pool Balance is
less than 10% of the Original Pool Balance, the Servicer shall have the option
to purchase the corpus of the Trust; provided, however, that the amount to be
paid for such purchase (as set forth in the following sentence) shall be
sufficient to pay the full amount of principal and interest then due and payable
on the Notes. To exercise such option, the Servicer or the Seller, as the case
may be, shall pay the aggregate Purchase Amounts for the Receivables, plus the
appraised value of any other property (including the right to receive any future
recoveries) held as part of the Trust, such appraisal to be conducted by an
appraiser mutually agreed upon by the Servicer and the Indenture Trustee, and
shall succeed to all interests in and to the Trust Property. The fees and
expenses related to such appraisal shall be paid by the Servicer. The Servicer
shall deposit the aggregate Purchase Amounts for the Receivables and the amount
of the appraised value of any other property held as part of the Trust into the
Collection Account, and the Indenture Trustee shall distribute the amounts so
deposited in accordance with Section 4.6.

                  (b) Notice of any termination of the Trust shall be given by
the Servicer to the Owner Trustee and the Indenture Trustee as soon as
practicable after the Servicer has received notice thereof.

                                      -54-
<PAGE>   59

                                    ARTICLE X

                            MISCELLANEOUS PROVISIONS

                  SECTION 10.1. Amendment.

                  (a) This Agreement may be amended by the Seller, the Servicer
and the Trust, with the prior written consent of the Indenture Trustee but
without the consent of any of the Noteholders, (i) to cure any ambiguity, (ii)
to correct or supplement any provisions in this Agreement or (iii) for the
purpose of adding any provision to or changing in any manner or eliminating any
provision of this Agreement or of modifying in any manner the rights of the
Noteholders; provided, however, that such provisions or revisions: (A) only
amend items that are administrative in nature, (B) cannot change the substantive
provisions affecting the terms of the Trust, collecting cash proceeds from
assets held, reinvesting proceeds from collections, otherwise servicing the
assets and distribution proceeds to the Noteholders and (C) cannot be contrary
to powers that are allowed for GAAP sales treatment under existing accounting
literature; and that such action shall not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of the
Noteholders.

                  (b) This Agreement may also be amended from time to time by
the Seller, the Servicer and the Trust with the prior written consent of the
Indenture Trustee and with the consent of a majority of each class of
Noteholders (which consent of any Holder of a Note given pursuant to this
Section or pursuant to any other provision of this Agreement shall be conclusive
and binding on such Holder and on all future Holders of such Note and of any
Note issued upon the transfer thereof or in exchange thereof or in lieu thereof
whether or not notation of such consent is made upon the Note) for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, or of modifying in any manner the rights of the
Holders of Notes; provided, however, that, no such amendment shall (a) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions required to be made on
any Note or the Class A-1 Interest Rate, Class A-2 Interest Rate, Class A-3
Interest Rate, Class M Interest Rate or Class B Interest Rate, (b) amend any
provisions of Section 4.6 in such a manner as to affect the priority of payment
of interest or principal to Noteholders, or (c) reduce the aforesaid percentage
required to consent to any such amendment or any waiver hereunder, without the
consent of the Holders of all Notes then outstanding.

                  (c) Prior to the execution of any amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Rating Agency.

                  (d) Promptly after the execution of any amendment or consent,
the Owner Trustee shall furnish a copy of such amendment or consent to the
Indenture Trustee.

                  (e) It shall not be necessary for the consent of Noteholders
pursuant to Section 10.1(b) to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents (and any

                                      -55-
<PAGE>   60

other consents of Noteholders provided for in this Agreement) and of evidencing
the authorization of the execution thereof by Noteholders shall be subject to
such reasonable requirements as the Indenture Trustee may prescribe, including
the establishment of record dates.

                  (f) Prior to the execution of, or consent to, any amendment to
this Agreement, the Owner Trustee and the Indenture Trustee shall be entitled to
receive and rely upon an Opinion of Counsel stating that the execution of such
amendment is authorized or permitted by this Agreement, in addition to the
Opinion of Counsel referred to in Section 10.2(i). The Owner Trustee and the
Indenture Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Owner Trustee's or the Indenture Trustee's own
rights, duties or immunities under this Agreement or otherwise.

                  SECTION 10.2. Protection of Title to Trust Property.

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

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

                  (c) Each of the Seller, the Servicer and the Trust shall give
the Owner Trustee and the Indenture Trustee at least 60 days' prior written
notice of any relocation of its principal executive office if, as a result of
such relocation, the applicable provisions of the UCC would require the filing
of any amendment of any previously filed financing or continuation statement or
of any new financing statement. The Servicer shall at all times maintain each
office from which it services Receivables and its principal executive office
within the United States of America.

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

                                      -56-
<PAGE>   61

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

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

                  (g) The Servicer shall permit the Owner Trustee and the
Indenture Trustee and their respective agents, at any time to inspect, audit and
make copies of and abstracts from the Servicer's records regarding any
Receivables or any other portion of the Trust Property.

                  (h) The Servicer shall furnish to the Owner Trustee and the
Indenture Trustee at any time upon request a list of all Receivables then held
as part of the Trust, together with a reconciliation of such list to the
Schedule of Receivables and to each of the Servicer's Certificates furnished
before such request indicating removal of Receivables from the Trust. Upon
request, the Servicer shall furnish a copy of any list to the Seller. The Owner
Trustee shall hold any such list and Schedule of Receivables for examination by
interested parties during normal business hours at the Corporate Trust Office
upon reasonable notice by such Persons of their desire to conduct an
examination.

                  (i) The Seller and the Servicer shall deliver to the Owner
Trustee and the Indenture Trustee simultaneously with the execution and delivery
of this Agreement and of each amendment thereto and upon the occurrence of the
events giving rise to an obligation to give notice pursuant to Section 10.2(b)
or (c), an Opinion of Counsel either (a) stating that, in the opinion of such
counsel, all financing statements and continuation statements have been executed
and filed that are necessary fully to preserve and protect the interest of the
Owner Trustee and the Indenture Trustee in the Receivables and the other Trust
Property, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (b) stating that, in the
opinion of such counsel, no such action is necessary to preserve and protect
such interest.

                  (j) The Servicer shall deliver to the Owner Trustee and the
Indenture Trustee, within 120 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months after
the Closing Date, an Opinion of Counsel, either (a) stating that, in the opinion
of such counsel, all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the interest
of the Trust and the Indenture

                                      -57-
<PAGE>   62

Trustee in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or (b)
stating that, in the opinion of such counsel, no action shall be necessary to
preserve and protect such interest.

                  SECTION 10.3. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
regard to the principles of conflicts of laws thereof and the obligations,
rights and remedies of the parties under this Agreement shall be determined in
accordance with such laws.

                  SECTION 10.4. Severability of Provisions. If any one or more
of the covenants, agreements, provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Notes or the
rights of the Holders thereof.

                  SECTION 10.5. Assignment. Notwithstanding anything to the
contrary contained in this Agreement, except as provided in Section 7.2 or
Section 8.2 (and as provided in the provisions of the Agreement concerning the
resignation of the Servicer), this Agreement may not be assigned by the Seller
or the Servicer without the prior written consent of the Owner Trustee, the
Indenture Trustee and the Controlling Noteholders.

                  SECTION 10.6. Limitations on Rights of Others. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement, express
or implied, shall give to any Person, other than the parties hereto and their
successors hereunder, any benefit or any legal or equitable right, remedy or
claim under this Agreement.

                  SECTION 10.7. Counterparts. For the purpose of facilitating
its execution and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and all of which counterparts shall constitute but
one and the same instrument.

                  SECTION 10.8. Intention of Parties. The execution and delivery
of this Agreement shall constitute an acknowledgment by the Seller, that it is
intended that the assignment and transfer herein contemplated constitute a sale
and assignment outright, and not for security, of the Receivables and the other
Trust Property, conveying good title thereto free and clear of any Liens, from
the Seller to the Trust, and that the Receivables and the other Trust Property
shall not be a part of the Seller's estate in the event of the insolvency,
receivership, conservatorship or the occurrence of another similar event, of, or
with respect to, the Seller. In the event that such conveyance is determined to
be made as security for a loan made by the Trust to the Seller, the Seller
intends that it shall have granted to the Owner Trustee a first priority
security interest in all of the Seller's right, title and interest in and to the

                                      -58-
<PAGE>   63

Trust Property conveyed to the Trust pursuant to Section 2.1 of this Agreement,
and that this Agreement shall constitute a security agreement under applicable
law.

                  SECTION 10.9. Notices. All demands, notices and communications
under this Agreement shall be in writing, personally delivered, sent by
facsimile or mailed by certified mail-return receipt requested, and shall be
deemed to have been duly given upon receipt (a) in the case of AFL, the Seller
or the Servicer, at the following address: Arcadia Financial Ltd., 2001 Beach
Street, Suite 300, Fort Worth, Texas 76103, with copies to: Associates
Corporation of North America, 250 East Carpenter Freeway, Irving, Texas 75062,
Attention: Senior Vice President - Capital Markets, (b) in the case of the Owner
Trustee, Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890, Attention: Corporate Trust Administration, (c) in the case of the
Indenture Trustee, to the Corporate Trust Office, at 1 Bank One Plaza, Suite
IL1-0126, Chicago, Illinois 60670-0126, Attention: Global Corporate Trust
Services, (d) in the case of each Rating Agency, 99 Church Street, New York, New
York 10007 (for Moody's) and 55 Water Street, New York, New York 10041 (for
Standard & Poor's), Attention: Asset-Backed Surveillance, or at such other
address as shall be designated by any such party in a written notice to the
other parties. Any notice required or permitted to be mailed to a Noteholder
shall be given by first class mail, postage prepaid, at the address of such
Holder as shown in the Note Register, and any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Noteholder receives such notice.

                  SECTION 10.10. Limitation of Liability. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is executed
and delivered by Wilmington Trust Company, not individually or personally but
solely as Owner Trustee of the Trust under the Trust Agreement, in the exercise
of the powers and authority conferred and vested in it, (b) each of the
representations, undertakings and agreements herein made on the part of the
Trust is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
for binding only the Trust, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company, individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties to this Agreement and
by any person claiming by, through or under them and (d) under no circumstances
shall Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Trust or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by the
Trust under this Agreement or any related documents.

                  SECTION 10.11. Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement, the Servicer and the Seller shall not, prior to
the date which is one year and one day after the termination of this Agreement
with respect to the Issuer, acquiesce, petition or otherwise invoke or cause the
Issuer to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer under any Federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.

                                      -59-
<PAGE>   64

                            [SIGNATURE PAGE FOLLOWS]

                                      -60-
<PAGE>   65

                  IN WITNESS WHEREOF, the Issuer, the Seller, AFL and the
Servicer have caused this Sale and Servicing Agreement to be duly executed by
their respective officers as of the day and year first above written.

                                    ISSUER:
                                    ASSOCIATES AUTOMOBILE RECEIVABLES
                                        TRUST 2000-1

                                    By  WILMINGTON TRUST COMPANY,
                                        not in its individual capacity but
                                        solely as Owner Trustee

                                    By:         /s/ Anita Dallago
                                        -------------------------
                                        Name: Anita Dallago
                                        Title: Financial Services Officer

                                    SELLER:
                                    ARCADIA RECEIVABLES FINANCE CORP.

                                    By       /s/ Scott W. McCarthy
                                        --------------------------
                                        Name: Scott W. McCarthy
                                        Title: Senior Vice President

                                    ARCADIA FINANCIAL LTD.
                                    In its individual capacity and as Servicer

                                    By       /s/ Scott W. McCarthy
                                        --------------------------
                                        Name: Scott W. McCarthy
                                        Title: Senior Vice President

Acknowledged and Accepted:

BANK ONE, NATIONAL
ASSOCIATION, not in its
individual capacity but as
Indenture Trustee

By:       /s/ Barbara G. Grosse
     --------------------------
     Name: Barbara G. Grosse
     Title: Vice President and Assistant Secretary

<PAGE>   66

                                   SCHEDULE A

                REPRESENTATIONS AND WARRANTIES OF SELLER AND AFL

                  1. Characteristics of Receivables. Each Receivable (A) was
originated by a Dealer for the retail sale of a Financed Vehicle in the ordinary
course of such Dealer's business and such Dealer had all necessary licenses and
permits to originate Receivables in the state where such Dealer was located, was
fully and properly executed by the parties thereto, was purchased by AFL from
such Dealer under an existing Dealer Agreement with AFL and was validly assigned
by such Dealer to AFL, (B) contains customary and enforceable provisions such as
to render the rights and remedies of the holder thereof adequate for realization
against the collateral security, and (C) is fully amortizing and provides for
level monthly payments (provided that the payment in the first Monthly Period
and the final Monthly Period of the life of the Receivable may be minimally
different from the level payment) which, if made when due, shall fully amortize
the Amount Financed over the original term.

                  2. No Fraud or Misrepresentation. Each Receivable was
originated by a Dealer and was sold by the Dealer to AFL without any fraud or
misrepresentation on the part of such Dealer in either case.

                  3. Compliance with Law. All requirements of applicable
federal, state and local laws, and regulations thereunder (including, without
limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the
Fair Debt Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations "B" and "Z",
the Soldiers' and Sailors' Civil Relief Act of 1940, the Minnesota Motor Vehicle
Retail Installment Sales Act, and state adaptations of the National Consumer Act
and of the Uniform Consumer Credit Code and other consumer credit laws and equal
credit opportunity and disclosure laws) in respect of all of the Receivables and
each and every sale of Financed Vehicles, have been complied with in all
material respects, and each Receivable and the sale of the Financed Vehicle
evidenced by each Receivable complied at the time it was originated or made and
now complies in all material respects with all applicable legal requirements.

                  4. Origination. Each Receivable was originated in the United
States.

                  5. Binding Obligation. Each Receivable represents the genuine,
legal, valid and binding payment obligation of the Obligor thereon, enforceable
by the holder thereof in accordance with its terms, except (A) as enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law and (B) as such
Receivable may be modified by the application after the Cutoff Date of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended; and all parties to
each Receivable had full legal capacity to execute and deliver such Receivable
and all other documents related thereto and to grant the security interest
purported to be granted thereby.

                                     S-A-1
<PAGE>   67

                  6. No Government Obligor. No Obligor is the United States of
America or any State or any agency, department, subdivision or instrumentality
thereof.

                  7. Obligor Bankruptcy. At the Cutoff Date no Obligor had been
identified on the records of AFL as being the subject of a current bankruptcy
proceeding.

                  8. Schedule of Receivables. The information set forth in the
Schedule of Receivables has been produced from the Electronic Ledger and was
true and correct in all material respects as of the close of business on the
Cutoff Date.

                  9. Marking Records. By the Closing Date, the Seller will have
caused the portions of the Electronic Ledger relating to the Receivables to be
clearly and unambiguously marked to show that the Receivables constitute part of
the Trust Property and are owned by the Trust in accordance with the terms of
the Agreement.

                  10. Computer Tape. The Computer Tape made available by the
Seller to the Owner Trustee on the Closing Date was complete and accurate as of
the Cutoff Date and includes a description of the same Receivables that are
described in the Schedule of Receivables.

                  11. Adverse Selection. No selection procedures adverse to the
Noteholders were utilized in selecting the Receivables from those receivables
owned by AFL which met the selection criteria contained in the Sale and
Servicing Agreement.

                  12. Chattel Paper. The Receivables constitute chattel paper
within the meaning of the UCC as in effect in the States of Minnesota, New York
and Texas.

                  13. One Original. There is only one original executed copy of
each Receivable.

                  14. Receivable Files Complete. There exists a Receivable File
pertaining to each Receivable and such Receivable File contains (a) a fully
executed original of the Receivable, (b) a certificate of insurance, application
form for insurance signed by the Obligor, or a signed representation letter from
the Obligor named in the Receivable pursuant to which the Obligor has agreed to
obtain physical damage insurance for the related financial vehicle, or
microfiche or computer scanned copies thereof, (c) the original Lien Certificate
or application therefor and (d) a credit application signed by the Obligor, or a
microfiche or computer scanned copy thereof. Each of such documents which is
required to be signed by the Obligor has been signed by the Obligor in the
appropriate spaces. All blanks on any form have been properly filled in and each
form has otherwise been correctly prepared. The complete Receivable File for
each Receivable currently is in the possession of the Custodian.

                  15. Receivables in Force. No Receivable has been satisfied,
subordinated or rescinded, and the Financed Vehicle securing each such
Receivable has not been released from the lien of the related Receivable in
whole or in part. No provisions of any Receivable have been waived, altered or
modified in any respect since its origination, except by instruments or
documents identified in

                                     S-A-2
<PAGE>   68

the Receivable File. No Receivable has been modified as a result of application
of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended.

                  16. Lawful Assignment. No Receivable was originated in, or is
subject to the laws of, any jurisdiction the laws of which would make unlawful,
void or voidable the sale, transfer and assignment of such Receivable under this
Agreement or pursuant to transfers of the Notes. Neither AFL nor the Seller has
entered into any agreement with any account debtor that prohibits, restricts or
conditions the assignment of all or any portion of such Receivable.

                  17. Good Title. No Receivable has been sold, transferred,
assigned or pledged by AFL to any Person other than the Seller or by the Seller
to any Person other than the Trust; immediately prior to the conveyance of the
Receivables pursuant to the Purchase Agreement, AFL was the sole owner of and
had good and indefeasible title thereto, free and clear of any Lien; immediately
prior to the conveyance of the Receivables to the Trust pursuant to this
Agreement, the Seller was the sole owner thereof and had good and indefeasible
title thereto, free of any Lien and, upon execution and delivery of this
Agreement, by the Seller, the Trust shall have good and indefeasible title to
and will be the sole owner of such Receivables, free of any Lien. No Dealer has
a participation in, or other right to receive, proceeds of any Receivable.
Neither AFL nor the Seller has taken any action to convey any right to any
Person that would result in such Person having a right to payments received
under the related Insurance Policies or the related Dealer Agreements or Dealer
Assignments or to payments due under such Receivables.

                  18. Security Interest in Financed Vehicle. Each Receivable
created or shall create a valid, binding and enforceable first priority security
interest in favor of AFL in the Financed Vehicle. The Lien Certificate and
original certificate of title for each Financed Vehicle show, or if a new or
replacement Lien Certificate is being applied for with respect to such Financed
Vehicle the Lien Certificate will be received within 180 days of the Closing
Date and will show AFL named as the original secured party under each Receivable
as the holder of a first priority security interest in such Financed Vehicle.
With respect to each Receivable for which the Lien Certificate has not yet been
returned from the Registrar of Titles, AFL has received written evidence from
the related Dealer that such Lien Certificate showing AFL as first lienholder
has been applied for. AFL's security interest has been validly assigned by AFL
to the Seller and by the Seller to the Owner Trustee pursuant to this Agreement.
Immediately after the sale, transfer and assignment thereof to the Trust, each
Receivable will be secured by an enforceable and perfected first priority
security interest in the Financed Vehicle in favor of the Trust as secured
party, which security interest is prior to all other liens upon and security
interests in such Financed Vehicle which now exist or may hereafter arise or be
created (except, as to priority, for any lien for taxes, labor or materials
affecting a Financed Vehicle). As of the Cutoff Date, there were no Liens or
claims for taxes, work, labor or materials affecting a Financed Vehicle which
are or may be Liens prior or equal to the lien of the related Receivable.

                  19. All Filings Made. All filings (including, without
limitation, UCC filings) required to be made by any Person and actions required
to be taken or performed by any Person in any

                                     S-A-3
<PAGE>   69

jurisdiction to give the Trust a first priority perfected lien on, or ownership
interest in, the Receivables and the proceeds thereof and the other Trust
Property have been made, taken or performed.

                  20. No Impairment. Neither AFL nor the Seller has done
anything to convey any right to any Person that would result in such Person
having a right to payments due under the Receivable or otherwise to impair the
rights of the Trust, the Indenture Trustee and the Noteholders and
Certificateholders in any Receivable or the proceeds thereof.

                  21. Receivable Not Assumable. No Receivable is assumable by
another Person in a manner which would release the Obligor thereof from such
Obligor's obligations to the Seller with respect to such Receivable.

                  22. No Defenses. No Receivable is subject to any right of
rescission, setoff, counterclaim or defense and no such right has been asserted
or threatened with respect to any Receivable.

                  23. No Default. There has been no default, breach, violation
or event permitting acceleration under the terms of any Receivable (other than
payment delinquencies of not more than 30 days), and no condition exists or
event has occurred and is continuing that with notice, the lapse of time or both
would constitute a default, breach, violation or event permitting acceleration
under the terms of any Receivable, and there has been no waiver of any of the
foregoing. As of the Cutoff Date, no Financed Vehicle had been repossessed.

                  24. Insurance. As of the Closing Date, each Financed Vehicle
is covered by a comprehensive and collision insurance policy (i) in an amount at
least equal to the lesser of (a) its maximum insurable value or (b) the
principal amount due from the Obligor under the related Receivable, (ii) naming
AFL as loss payee and (iii) insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by comprehensive and
collision coverage. Each Receivable requires the Obligor to maintain physical
loss and damage insurance, naming AFL and its successors and assigns as
additional insured parties, and each Receivable permits the holder thereof to
obtain physical loss and damage insurance at the expense of the Obligor if the
Obligor fails to do so. No Financed Vehicle was or had previously been insured
under a policy of Force-Placed Insurance on the Cutoff Date.

                  25. Past Due. At the Cutoff Date, no Receivable was more than
30 days past due.

                  26. Remaining Principal Balance. At the Cutoff Date, each
Receivable had a remaining principal balance equal to or greater than $500.00,
and the Principal Balance of each Receivable set forth in the Schedule of
Receivables is true and accurate in all material respects.

                  27. Final Scheduled Maturity Date. No Receivable has a final
scheduled maturity later than February 28, 2007.

                                     S-A-4
<PAGE>   70

                  28. No Amendment. No Receivable has been amended, except as
permitted by Section 3.1 and as reflected in the Receivable File.

                  29. No Repossessions. As of the Cutoff Date, no Financed
Vehicle securing any Receivable is in repossession status.

                  30. Certain Characteristics. (A) Each Receivable had a
remaining maturity, as of the Cutoff Date, of at least 3 months but not more
than 84 months; (B) each Receivable had an original maturity of at least 12
months but not more than 84 months; (C) each Receivable had an original
principal balance of at least $4,124 and not more than $56,431; (D) each
Receivable had a remaining Principal Balance as of the Cutoff Date of at least
$500 and not more than $56,431; (E) each Receivable has an Annual Percentage
Rate of at least 7.75% and not more than 26.99%; (F) no Receivable was more than
30 days past due as of the Cutoff Date; (G) no funds have been advanced by the
Seller, the Servicer, any Dealer, or anyone acting on behalf of any of them in
order to cause any Receivable to qualify under clause (F) above; (H) no
Receivable has a final scheduled payment date on or before May 29, 2000; (I) the
Principal Balance of each Receivable set forth in Schedule of Receivables is
true and accurate in all material respects as of the Cutoff Date; and (J) 11.43%
of the Receivables, by principal balance as of the Cutoff Date, was attributable
to loans for the purchase of new Financed Vehicles and 88.57% of the Receivables
was attributable to loans for the purchase of used Financed Vehicles.

                                     S-A-5<PAGE>   1
                                                                     EXHIBIT 4.4

                  RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT

                                     between

                        ARCADIA RECEIVABLES FINANCE CORP.
                                    Purchaser

                                       and

                             ARCADIA FINANCIAL LTD.
                                     Seller

                                   dated as of

                                  June 1, 2000

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                            <C>
ARTICLE I         DEFINITIONS.....................................................................................1
         SECTION 1.1.          General............................................................................1
         SECTION 1.2.          Specific Terms.....................................................................1
         SECTION 1.3.          Usage of Terms.....................................................................3
         SECTION 1.4.          Certain References.................................................................3
         SECTION 1.5.          No Recourse........................................................................3
         SECTION 1.6.          Action by or Consent of Noteholders................................................3

ARTICLE II        CONVEYANCE OF THE RECEIVABLES AND THE
                  OTHER CONVEYED PROPERTY.........................................................................4
         SECTION 2.1.          Conveyance of the Receivables and the Other Conveyed Property......................4
         SECTION 2.2.          Purchase Price of Receivables......................................................4

ARTICLE III       REPRESENTATIONS AND WARRANTIES..................................................................4
         SECTION 3.1.          Representations and Warranties of AFL..............................................4
         SECTION 3.2.          Representations and Warranties of ARFC.............................................6

ARTICLE IV        COVENANTS OF AFL................................................................................8
         SECTION 4.1.          Protection of Title of ARFC and the Trust..........................................8
         SECTION 4.2.          Other Liens or Interests...........................................................9
         SECTION 4.3.          Costs and Expenses.................................................................9
         SECTION 4.4.          Indemnification....................................................................9

ARTICLE V         REPURCHASES....................................................................................11
         SECTION 5.1.          Repurchase of Receivables Upon Breach of Warranty.................................11
         SECTION 5.2.          Reassignment of Purchased Receivables.............................................11
         SECTION 5.3.          Waivers...........................................................................12

ARTICLE VI        MISCELLANEOUS..................................................................................12
         SECTION 6.1.          Liability of AFL..................................................................12
         SECTION 6.2.          Merger or Consolidation of AFL or ARFC............................................12
         SECTION 6.3.          Limitation on Liability of AFL and Others.........................................13
         SECTION 6.4.          AFL May Own Notes.................................................................13
         SECTION 6.5.          Amendment.........................................................................13
         SECTION 6.6.          Notices...........................................................................14
         SECTION 6.7.          Merger and Integration............................................................14
         SECTION 6.8.          Severability of Provisions........................................................14
         SECTION 6.9.          Intention of the Parties..........................................................14
         SECTION 6.10.         Governing Law.....................................................................14
</TABLE>

                                      - i -
<PAGE>   3

<TABLE>
<S>                                                                                                            <C>
         SECTION 6.11.         Counterparts......................................................................15
         SECTION 6.12.         Conveyance of the Receivables and the Other Conveyed
                               Property to the Trust.............................................................15
         SECTION 6.13.         Nonpetition Covenant..............................................................15
</TABLE>

                                    SCHEDULES

Schedule A       --      Schedule of Receivables

Schedule B       --      Representations and Warranties of AFL

                                     - ii -
<PAGE>   4

                  RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT

                  THIS RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT, dated as
of June 1, 2000, executed between Arcadia Receivables Finance Corp., a Delaware
corporation, as purchaser ("ARFC"), and Arcadia Financial Ltd., a Minnesota
corporation, as seller ("AFL").

                                   WITNESSETH:

                  WHEREAS, ARFC has agreed to purchase from AFL and AFL,
pursuant to this Agreement, has agreed to transfer to ARFC the Receivables and
Other Conveyed Property.

                  NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter contained, and for other good and valuable
consideration, the receipt of which is acknowledged, ARFC and AFL, intending to
be legally bound, hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

                  SECTION 1.1. General. The specific terms defined in this
Article include the plural as well as the singular. The words "herein," "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or other subdivision, and
Article, Section, Schedule and Exhibit references, unless otherwise specified,
refer to Articles and Sections of and Schedules and Exhibits to this Agreement.
Capitalized terms used herein without definition shall have the respective
meanings assigned to such terms in the Sale and Servicing Agreement, dated as of
June 1, 2000, by and among Arcadia Receivables Finance Corp. (as Seller),
Arcadia Financial Ltd. (in its individual capacity and as Servicer) and
Associates Automobile Receivables Trust 2000-1 (as Issuer) (the "Trust").

                  SECTION 1.2. Specific Terms. Whenever used in this Agreement,
the following words and phrases, unless the context otherwise requires, shall
have the following meanings:

                  "Agreement" shall mean this Receivables Purchase Agreement and
Assignment and all amendments hereof and supplements hereto.

                  "Closing Date" means June 22, 2000.

                  "Indenture Trustee" means Bank One, National Association, a
national banking association, as trustee under the Indenture, dated as of June
1, 2000, between the Trust and the Indenture Trustee.

                  "Other Conveyed Property" means all monies at any time paid or
payable on the Receivables or in respect thereof after the Cutoff Date
(including amounts due on or before the Cutoff Date but received by AFL after
the Cutoff Date), an assignment of security interests in the Financed

<PAGE>   5

Vehicles, the Collection Account (including all Eligible Investments therein and
all proceeds therefrom), the Insurance Policies and any proceeds from any
Insurance Policies relating to the Receivables, the Obligors or the related
Financed Vehicles, including rebates of premiums, rights under any Collateral
Insurance relating to the Receivables, an assignment of the rights of AFL
against Dealers with respect to the Receivables under the Dealer Agreements and
the Dealer Assignments, all items contained in the Receivable Files relating to
the Receivables, any and all other documents or electronic records that AFL
keeps on file in accordance with its customary procedures relating to the
Receivables, the Obligors or the related Financed Vehicles, property (including
the right to receive future Liquidation Proceeds) that secures a Receivable and
that has been acquired by or on behalf of the Trust pursuant to liquidation of
such Receivable, and all proceeds of the foregoing.

                  "Owner Trustee" means Wilmington Trust Company, a Delaware
corporation, not in its individual capacity but solely as trustee of the Trust,
and any successor trustee appointed and acting pursuant to the Trust Agreement.

                  "Receivables" means the Receivables listed on the Schedule of
Receivables attached hereto as Schedule A.

                  "Related Documents" means the Trust Agreement, the Indenture,
the Notes, the Certificates, the Sale and Servicing Agreement, the
Administration Agreement, the Custodian Agreement, the Lockbox Agreement, the
Depository Agreement, the letter agreement between Associates Corporation of
North America and the underwriters of the Notes and the Underwriting Agreement
among AFL, ARFC and the underwriters of the Notes. The Related Documents
executed by any party are referred to herein as "such party's Related
Documents," "its Related Documents" or by a similar expression.

                  "Repurchase Event" means the occurrence of a breach of any of
AFL's representations and warranties hereunder or any other event which requires
the repurchase of a Receivable by AFL under the Sale and Servicing Agreement.

                  "Sale and Servicing Agreement" means the Sale and Servicing
Agreement, dated as of June 1, 2000, executed and delivered by ARFC, as Seller,
AFL, in its individual capacity as Servicer, and Associates Automobile
Receivables Trust 2000-1, as Issuer.

                  "Schedule of Receivables" means the schedule of all retail
installment sales contracts and promissory notes sold and transferred pursuant
to this Agreement which is attached hereto as Schedule A.

                  "Schedule of Representations" means the Representations and
Warranties of AFL attached hereto as Schedule B.

                  "Trust" means the trust created by the Trust Agreement, the
estate of which consists of the Trust Property.

                                     - 2 -
<PAGE>   6

                  "Trust Property" means the property and proceeds of every
description conveyed pursuant to Section 2.5 of the Trust Agreement, Section 2.1
of the Sale and Servicing Agreement and Section 2.1 hereof, together with the
Trust Accounts (including all Eligible Investments therein and all proceeds
therefrom).

                  SECTION 1.3. Usage of Terms. With respect to all terms used in
this Agreement, the singular includes the plural and the plural the singular;
words importing any gender include the other gender; references to "writing"
include printing, typing, lithography, and other means of reproducing words in a
visible form; references to agreements and other contractual instruments include
all subsequent amendments thereto or changes therein entered into in accordance
with their respective terms and not prohibited by this Agreement or the Sale and
Servicing Agreement; references to Persons include their permitted successors
and assigns; and the terms "include" or "including" mean "include without
limitation" or "including without limitation."

                  SECTION 1.4. Certain References. All references to the
Principal Balance of a Receivable as of an Accounting Date shall refer to the
close of business on such day, or as of the first day of a Monthly Period shall
refer to the opening of business on such day. All references to the last day of
a Monthly Period shall refer to the close of business on such day.

                  SECTION 1.5. No Recourse. Without limiting the obligations of
AFL hereunder, no recourse may be taken, directly or indirectly, under this
Agreement or any certificate or other writing delivered in connection herewith
or therewith, against any stockholder, officer or director, as such, of AFL, or
of any predecessor or successor of AFL.

                  SECTION 1.6. Action by or Consent of Noteholders. Whenever any
provision of this Agreement refers to action to be taken, or consented to, by
Noteholders, such provision shall be deemed to refer to Noteholders of record as
of the Record Date immediately preceding the date on which such action is to be
taken, or consent given, by Noteholders. Solely for the purposes of any action
to be taken, or consented to, by Noteholders, any Note registered in the name of
the Seller, AFL or any Affiliate thereof shall be deemed not to be outstanding,
and the related Outstanding Amount (as defined in the Indenture), evidenced
thereby shall not be taken into account in determining whether the requisite
Outstanding Amount necessary to effect any such action or consent has been
obtained; provided, however, that, solely for the purpose of determining whether
the Indenture Trustee is entitled to rely upon any such action or consent, only
Notes which the Indenture Trustee knows to be so owned shall be so disregarded.

                                     - 3 -
<PAGE>   7

                                   ARTICLE II
                          CONVEYANCE OF THE RECEIVABLES
                         AND THE OTHER CONVEYED PROPERTY

                  SECTION 2.1. Conveyance of the Receivables and the Other
Conveyed Property. Subject to the terms and conditions of this Agreement, AFL
hereby sells, transfers, assigns, and otherwise conveys to ARFC without recourse
(but without limitation of its obligations in this Agreement), and ARFC hereby
purchases, all right, title and interest of AFL in and to the Receivables and
the Other Conveyed Property. It is the intention of AFL and ARFC that the
transfer and assignment contemplated by this Agreement shall constitute a sale
of the Receivables and the Other Conveyed Property from AFL to ARFC, conveying
good title thereto free and clear of any Liens, and the Receivables and the
Other Conveyed Property shall not be part of AFL's estate in the event of the
filing of a bankruptcy petition by or against AFL under any bankruptcy or
similar law.

                  SECTION 2.2. Purchase Price of Receivables. Simultaneously
with the conveyance of the Receivables and the Other Conveyed Property to ARFC,
ARFC has paid or caused to be paid to or upon the order of AFL approximately
$743,967,757.00 by wire transfer of immediately available funds (representing
the proceeds to ARFC from the sale of the Receivables to the Trust after
depositing $4,166,738.00 in the Reserve Account).

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

                  SECTION 3.1. Representations and Warranties of AFL. AFL makes
the following representations and warranties, on which ARFC relies in purchasing
the Receivables and the Other Conveyed Property and in transferring the
Receivables and the Other Conveyed Property to the Trust under the Sale and
Servicing Agreement. Such representations are made as of the execution and
delivery of this Agreement, but shall survive the sale, transfer and assignment
of the Receivables and the Other Conveyed Property hereunder and the sale,
transfer and assignment thereof by ARFC to the Trust under the Sale and
Servicing Agreement. AFL and ARFC agree that ARFC will assign to the Trust all
of ARFC's rights under this Agreement and that the Trust will thereafter be
entitled to enforce this Agreement against AFL in the Trust's own name.

                  (a) Schedule of Representations. The representations and
         warranties set forth on the Schedule of Representations are true and
         correct.

                  (b) Organization and Good Standing. AFL has been duly
         organized and is validly existing as a corporation in good standing
         under the laws of the State of Minnesota, with power and authority to
         own its properties and to conduct its business as such properties are
         currently owned and such business is currently conducted, and had at
         all relevant times, and now has, power, authority and legal right to
         acquire, own and sell the Receivables and the Other Conveyed Property
         transferred to ARFC.

                                     - 4 -
<PAGE>   8

                  (c) Due Qualification. AFL is duly qualified to do business as
         a foreign corporation in good standing, and has obtained all necessary
         licenses and approvals, in all jurisdictions in which the ownership or
         lease of its property or the conduct of its business requires such
         qualification and in which the failure so to qualify would have a
         material adverse effect on (a) its business, properties, assets or
         condition (financial or other) or (b) its performance of its
         obligations under this Agreement and its Related Documents.

                  (d) Power and Authority. AFL has the power and authority to
         execute and deliver this Agreement and its Related Documents and to
         carry out its terms and their terms, respectively; AFL has full power
         and authority to sell and assign the Receivables and the Other Conveyed
         Property to be sold and assigned to and deposited with ARFC hereunder
         and has duly authorized such sale and assignment to ARFC by all
         necessary corporate action; and the execution, delivery and performance
         of this Agreement and AFL's Related Documents have been duly authorized
         by AFL by all necessary corporate action.

                  (e) Binding Obligations. This Agreement and AFL's Related
         Documents have been duly executed and delivered and constitute legal,
         valid and binding obligations of AFL enforceable in accordance with
         their respective terms, except as enforceability may be limited by
         bankruptcy, insolvency, reorganization or other similar laws affecting
         the enforcement of creditors' rights generally and by equitable
         limitations on the availability of specific remedies, regardless of
         whether such enforceability is considered in a proceeding in equity or
         at law.

                  (f) No Violation. The consummation of the transactions
         contemplated by this Agreement and the Related Documents and the
         fulfillment of the terms of this Agreement and the Related Documents
         shall not conflict with, result in any breach of any of the terms and
         provisions of or constitute (with or without notice, lapse of time or
         both) a default under, the articles of incorporation or bylaws of AFL,
         or any indenture, agreement, mortgage, deed of trust or other
         instrument to which AFL is a party or by which it is bound, or result
         in the creation or imposition of any Lien upon any of its properties
         pursuant to the terms of any such indenture, agreement, mortgage, deed
         of trust or other instrument, other than this Agreement and the Sale
         and Servicing Agreement, or violate any law, order, rule or regulation
         applicable to AFL of any court or of any federal or state regulatory
         body, administrative agency or other governmental instrumentality
         having jurisdiction over AFL or any of its properties.

                  (g) No Proceedings. There are no proceedings or investigations
         pending or, to AFL's knowledge, threatened against AFL, before any
         court, regulatory body, administrative agency or other tribunal or
         governmental instrumentality having jurisdiction over AFL or its
         properties (i) asserting the invalidity of this Agreement or any of the
         Related Documents, (ii) seeking to prevent the issuance of the Notes or
         the Certificates or the consummation of any of the transactions
         contemplated by this Agreement or any of the Related Documents, (iii)
         seeking any determination or ruling that might materially and adversely
         affect the performance by AFL of its obligations under, or the validity
         or enforceability of, this Agreement or any of the Related Documents or
         (iv) seeking to affect adversely the federal income tax or

                                     - 5 -
<PAGE>   9

         other federal, state or local tax attributes of, or seeking to impose
         any excise, franchise, transfer or similar tax upon, the transfer and
         acquisition of the Receivables and the Other Conveyed Property
         hereunder or under the Sale and Servicing Agreement.

                  (h) Chief Executive Office. The chief executive office of AFL
         is located at 2001 Beach Street, Suite 300, Fort Worth, Texas 76103.

                  SECTION 3.2. Representations and Warranties of ARFC. ARFC
makes the following representations and warranties, on which AFL relies in
selling, assigning, transferring and conveying the Receivables and the Other
Conveyed Property to ARFC hereunder. Such representations are made as of the
execution and delivery of this Agreement, but shall survive the
sale, transfer and assignment of the Receivables and the Other Conveyed Property
hereunder and the sale, transfer and assignment thereof by ARFC to the Trust
under the Sale and Servicing Agreement.

                  (a) Organization and Good Standing. ARFC has been duly
         organized and is validly existing and in good standing as a corporation
         under the laws of the State of Delaware, with the power and authority
         to own its properties and to conduct its business as such properties
         are currently owned and such business is currently conducted, and had
         at all relevant times, and has, full power, authority and legal right
         to acquire and own the Receivables and the Other Conveyed Property and
         to transfer the Receivables and the Other Conveyed Property to the
         Trust pursuant to the Sale and Servicing Agreement.

                  (b) Due Qualification. ARFC is duly qualified to do business
         as a foreign corporation in good standing, and has obtained all
         necessary licenses and approvals in all jurisdictions where the failure
         to do so would materially and adversely affect (i) ARFC's ability to
         acquire the Receivables or the Other Conveyed Property, (ii) the
         validity or enforceability of the Receivables and the Other Conveyed
         Property or (iii) ARFC's ability to perform its obligations hereunder
         and under the Related Documents.

                  (c) Power and Authority. ARFC has the power, authority and
         legal right to execute and deliver this Agreement and its Related
         Documents and to carry out the terms hereof and thereof and to acquire
         the Receivables and the Other Conveyed Property hereunder; and the
         execution, delivery and performance of this Agreement and its Related
         Documents and all of the documents required pursuant hereto or thereto
         have been duly authorized by ARFC by all necessary action.

                  (d) No Consent Required. ARFC is not required to obtain the
         consent of any other Person, or any consent, license, approval or
         authorization or registration or declaration with, any governmental
         authority, bureau or agency in connection with the execution, delivery
         or performance of this Agreement and the Related Documents, except for
         such as have been obtained, effected or made.

                                     - 6 -
<PAGE>   10

                  (e) Binding Obligation. This Agreement and each of its Related
         Documents constitutes a legal, valid and binding obligation of ARFC,
         enforceable against ARFC in accordance with its terms, subject, as to
         enforceability, to applicable bankruptcy, insolvency, reorganization,
         conservatorship, receivership, liquidation and other similar laws and
         to general equitable principles.

                  (f) No Violation. The execution, delivery and performance by
         ARFC of this Agreement, the consummation of the transactions
         contemplated by this Agreement and the Related Documents and the
         fulfillment of the terms of this Agreement and the Related Documents do
         not and will not conflict with, result in any breach of any of the
         terms and provisions of or constitute (with or without notice or lapse
         of time) a default under the certificate of incorporation or bylaws of
         ARFC, or conflict with or breach any of the terms or provisions of, or
         constitute (with or without notice or lapse of time) a default under,
         any indenture, agreement, mortgage, deed of trust or other instrument
         to which ARFC is a party or by which ARFC is bound or to which any of
         its properties are subject, or result in the creation or imposition of
         any Lien upon any of its properties pursuant to the terms of any such
         indenture, agreement, mortgage, deed of trust or other instrument
         (other than the Sale and Servicing Agreement and the Indenture), or
         violate any law, order, rule or regulation, applicable to ARFC or its
         properties, of any federal or state regulatory body or any court,
         administrative agency, or other governmental instrumentality having
         jurisdiction over ARFC or any of its properties.

                  (g) No Proceedings. There are no proceedings or investigations
         pending, or, to the knowledge of ARFC, threatened against ARFC, before
         any court, regulatory body, administrative agency, or other tribunal or
         governmental instrumentality having jurisdiction over ARFC or its
         properties: (i) asserting the invalidity of this Agreement or any of
         the Related Documents, (ii) seeking to prevent the consummation of any
         of the transactions contemplated by this Agreement or any of the
         Related Documents, (iii) seeking any determination or ruling that might
         materially and adversely affect the performance by ARFC of its
         obligations under, or the validity or enforceability of, this Agreement
         or any of the Related Documents or (iv) that may adversely affect the
         federal or state income tax attributes of, or seeking to impose any
         excise, franchise, transfer or similar tax upon, the transfer and
         acquisition of the Receivables and the Other Conveyed Property
         hereunder or the transfer of the Receivables and the Other Conveyed
         Property to the Trust pursuant to the Sale and Servicing Agreement.

In the event of any breach of a representation and warranty made by ARFC
hereunder, AFL covenants and agrees that it will not take any action to pursue
any remedy that it may have hereunder, in law, in equity or otherwise, until a
year and a day have passed since the later of (i) the date on which all
pass-through certificates or other similar securities issued by the Trust, or a
trust or similar vehicle formed by ARFC, have been paid in full, or (ii) all
Notes or other similar securities issued by the Trust, or a trust or similar
vehicle formed by ARFC, have been paid in full. AFL and ARFC agree that damages
will not be an adequate remedy for such breach and that this covenant may be
specifically enforced by ARFC or by the Owner Trustee on behalf of the Trust.

                                     - 7 -
<PAGE>   11

                                   ARTICLE IV
                                COVENANTS OF AFL

                  SECTION 4.1. Protection of Title of ARFC and the Trust.

                  (a) At or prior to the Closing Date, AFL shall have filed or
caused to be filed a UCC-1 financing statement, executed by AFL as seller or
debtor, naming ARFC as purchaser or secured party and describing the Receivables
and the Other Conveyed Property being sold by it to ARFC as collateral, with the
office of the Secretary of State of the State of Texas and in such other
locations as ARFC shall have required. From time to time thereafter, AFL shall
execute and file such financing statements and cause to be executed and filed
such continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of ARFC
under this Agreement and of the Trust under the Sale and Servicing Agreement in
the Receivables and the Other Conveyed Property and in the proceeds thereof. AFL
shall deliver (or cause to be delivered) to ARFC, the Owner Trustee and the
Indenture Trustee file-stamped copies of, or filing receipts for, any document
filed as provided above, as soon as available following such filing. In the
event that AFL fails to perform its obligations under this subsection, ARFC or
the Owner Trustee may do so at the expense of AFL.

                  (b) AFL shall not change its name, identity, or corporate
structure in any manner that would, could or might make any financing statement
or continuation statement filed by AFL (or by ARFC or the Owner Trustee on
behalf of AFL) in accordance with paragraph (a) above seriously misleading
within the meaning of Section 9-402(7) of the UCC, unless it shall have given
ARFC and the Owner Trustee at least 60 days' prior written notice thereof, and
shall promptly file appropriate amendments to all previously filed financing
statements and continuation statements.

                  (c) AFL shall give ARFC, the Indenture Trustee and the Owner
Trustee at least 60 days' prior written notice of any relocation of its
principal executive office if, as a result of such relocation, the applicable
provisions of the UCC would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement. AFL shall at all times maintain each office from which it services
Receivables and its principal executive office within the United States of
America.

                  (d) AFL shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables to ARFC, and the
conveyance of the Receivables by ARFC to the Trust, AFL's master computer
records (including archives) that shall refer to a Receivable, indicate clearly
that such Receivable has been sold to ARFC and has been conveyed by ARFC to the
Trust. Indication of the Trust's ownership of a Receivable shall be deleted from
or modified on AFL's computer systems when, and only when, the Receivable shall
become a Purchased Receivable or shall have been paid in full.

                                     - 8 -
<PAGE>   12

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

                  SECTION 4.2. Other Liens or Interests. Except for the
conveyances hereunder, AFL will not sell, pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to exist any Lien on the
Receivables or the Other Conveyed Property, or any interest therein, and AFL
shall defend the right, title, and interest of ARFC and the Trust in and to the
Receivables and the Other Conveyed Property against all claims of third parties
claiming through or under AFL.

                  SECTION 4.3. Costs and Expenses. AFL shall pay all reasonable
costs and disbursements in connection with the performance of its obligations
hereunder and under the Related Documents.

                  SECTION 4.4. Indemnification.

                  (a) AFL shall defend, indemnify and hold harmless ARFC, the
Trust, the Owner Trustee, the Indenture Trustee and the Noteholders from and
against any and all costs, expenses, losses, damages, claims, and liabilities,
arising out of or resulting from any breach of any of AFL's representations and
warranties contained herein.

                  (b) AFL shall defend, indemnify and hold harmless ARFC, the
Trust, the Owner Trustee, the Indenture Trustee and the Noteholders from and
against any and all costs, expenses, losses, damages, claims, and liabilities,
arising out of or resulting from the use, ownership or operation by AFL or any
Affiliate thereof of a Financed Vehicle.

                  (c) AFL shall defend and indemnify ARFC, the Trust, the Owner
Trustee, the Indenture Trustee and the Noteholders against any and all costs,
expenses, losses, damages, claims and liabilities arising out of or resulting
from any action taken, or failed to be taken, by it in respect of any portion of
the Trust Property other than in accordance with this Agreement or the Sale and
Servicing Agreement.

                  (d) AFL agrees to pay, and shall defend, indemnify and hold
harmless ARFC, the Trust, the Owner Trustee, the Indenture Trustee and the
Noteholders from and against any taxes that may at any time be asserted against
ARFC, the Owner Trustee, the Indenture Trustee and the Noteholders with respect
to the transactions contemplated in this Agreement, including, without
limitation, any sales, gross receipts, general corporation, tangible or
intangible personal property, privilege, or license taxes (but not including any
taxes asserted with respect to, and as of the date of, the sale, transfer and
assignment of the Receivables and the Other Conveyed Property to ARFC and of the
Trust Property to the Trust or the issuance and original sale of the Notes, or
asserted with respect to

                                     - 9 -
<PAGE>   13

ownership of the Receivables and Other Conveyed Property or the Receivables or
Other Conveyed Property or the Trust Property which shall be indemnified by AFL
pursuant to clause (e) below, or federal, state or other income taxes, arising
out of distributions on the Notes or transfer taxes arising in connection with
the transfer of the Notes) and costs and expenses in defending against the same,
arising by reason of the acts to be performed by AFL under this Agreement or
imposed against such Persons.

                  (e) AFL agrees to pay, and to indemnify, defend and hold
harmless ARFC, the Trust, the Owner Trustee, the Indenture Trustee and the
Noteholders from, any taxes which may at any time be asserted against such
Persons with respect to, and as of the date of, the conveyance or ownership of
the Receivables or the Other Conveyed Property hereunder and the conveyance or
ownership of the Trust Property under the Sale and Servicing Agreement or the
issuance and original sale of the Notes, including, without limitation, any
sales, gross receipts, personal property, tangible or intangible personal
property, privilege or license taxes (but not including any federal or other
income taxes, including franchise taxes, arising out of the transactions
contemplated hereby or transfer taxes arising in connection with the transfer of
Notes) and costs and expenses in defending against the same, arising by reason
of the acts to be performed by AFL under this Agreement or imposed against such
Persons.

                  (f) AFL shall defend, indemnify, and hold harmless ARFC, the
Owner Trustee, the Indenture Trustee, the Trust and the Noteholders from and
against any and all costs, expenses, losses, claims, damages, and liabilities to
the extent that such cost, expense, loss, claim, damage, or liability arose out
of, or was imposed upon ARFC, the Trust, the Indenture Trustee and the
Noteholders through the negligence, willful misfeasance, or bad faith of AFL in
the performance of its duties under this Agreement or by reason of reckless
disregard of AFL's obligations and duties under this Agreement.

                  (g) AFL shall indemnify, defend and hold harmless ARFC, the
Owner Trustee, the Indenture Trustee, the Trust and the Noteholders from and
against any loss, liability or expense incurred by reason of the violation by
AFL of federal or state securities laws in connection with the registration or
the sale of the Notes.

                  (h) AFL shall indemnify, defend and hold harmless ARFC, the
Owner Trustee, the Indenture Trustee, the Trust and the Noteholders from and
against any loss, liability or expense imposed upon, or incurred by, ARFC, the
Owner Trustee, the Indenture Trustee, the Trust or the Noteholders as a result
of the failure of any Receivable, or the sale of the related Financed Vehicle,
to comply with all requirements of applicable law.

                  (i) AFL shall defend, indemnify, and hold harmless ARFC from
and against all costs, expenses, losses, claims, damages, and liabilities
arising out of or incurred in connection with the acceptance or performance of
AFL's trusts and duties as Servicer under the Sale and Servicing Agreement,
except to the extent that such cost, expense, loss, claim, damage, or liability
shall be due to the willful misfeasance, bad faith, or negligence (except for
errors in judgment) of ARFC.

                                     - 10 -
<PAGE>   14

                  (j) AFL shall indemnify, defend and hold harmless ARFC, the
Owner Trustee, the Indenture Trustee, the Trust and the Noteholders from and
against any loss, liability or expense imposed upon, or incurred by, ARFC, the
Owner Trustee and the Indenture Trustee, the Trust and the Noteholders as a
result of AFL's or ARFC's use of the name "Arcadia."

                  Indemnification under this Section 4.4 shall include
reasonable fees and expenses of counsel and expenses of litigation and shall
survive termination of the Trust. The indemnity obligations hereunder shall be
in addition to any obligation that AFL may otherwise have.

                                    ARTICLE V
                                   REPURCHASES

                  SECTION 5.1. Repurchase of Receivables Upon Breach of
Warranty. Upon the occurrence of a Repurchase Event, AFL shall, unless such
breach shall have been cured in all material respects, repurchase such
Receivable from the Trust and, on or before the related Draw Date, AFL shall pay
the Purchase Amount to the Trust pursuant to Section 4.5 of the Sale and
Servicing Agreement. It is understood and agreed that, except as set forth in
Section 6.1, the obligation of AFL to repurchase any Receivable as to which a
breach has occurred and is continuing shall, if such obligation is fulfilled,
constitute the sole remedy against AFL for such breach available to ARFC, the
Noteholders or the Indenture Trustee on behalf of the Noteholders. The
provisions of this Section 5.1 are intended to grant the Owner Trustee and the
Indenture Trustee a direct right against AFL to demand performance hereunder,
and in connection therewith, AFL waives any requirement of prior demand against
ARFC with respect to such repurchase obligation. Any such purchase shall take
place in the manner specified in Section 2.5 of the Sale and Servicing
Agreement. Notwithstanding any other provision of this Agreement or the Sale and
Servicing Agreement to the contrary, the obligation of AFL under this Section
shall not terminate upon a termination of AFL as Servicer under the Sale and
Servicing Agreement and shall be performed in accordance with the terms hereof
notwithstanding the failure of the Servicer or ARFC to perform any of their
respective obligations with respect to such Receivable under the Sale and
Servicing Agreement.

                  SECTION 5.2. Reassignment of Purchased Receivables. Upon
deposit in the Collection Account of the Purchase Amount of any Receivable
repurchased by AFL under Section 5.1, ARFC and the Owner Trustee shall take such
steps as may be reasonably requested by AFL in order to assign to AFL all of
ARFC's and the Trust's right, title and interest in and to such Receivable and
all security and documents and all Other Conveyed Property conveyed to ARFC and
the Trust directly relating thereto, without recourse, representation or
warranty, except as to the absence of liens, charges or encumbrances created by
or arising as a result of actions of ARFC or the Owner Trustee. Such assignment
shall be a sale and assignment outright, and not for security. If, following the
reassignment of a Purchased Receivable, in any enforcement suit or legal
proceeding, it is held that AFL may not enforce any such Receivable on the
ground that it shall not be a real party in interest or a holder entitled to
enforce the Receivable, ARFC and the Owner Trustee shall, at the expense of AFL,
take such steps as AFL deems reasonably necessary to enforce the Receivable,
including bringing suit in ARFC's or the Owner Trustee's name.

                                     - 11 -
<PAGE>   15

                  SECTION 5.3. Waivers. No failure or delay on the part of ARFC,
or the Owner Trustee as assignee of ARFC, in exercising any power, right or
remedy under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or remedy preclude any other
or future exercise thereof or the exercise of any other power, right or remedy.

                                   ARTICLE VI
                                  MISCELLANEOUS

                  SECTION 6.1. Liability of AFL. AFL shall be liable in
accordance herewith only to the extent of the obligations in this Agreement
specifically undertaken by AFL and the representations and warranties of AFL.

                  SECTION 6.2. Merger or Consolidation of AFL or ARFC. Any
corporation or other entity (i) into which AFL or ARFC may be merged or
consolidated, (ii) resulting from any merger or consolidation to which AFL or
ARFC is a party or (iii) succeeding to the business of AFL or ARFC, in the case
of ARFC, which corporation has a certificate of incorporation containing
provisions relating to limitations on business and other matters substantively
identical to those contained in ARFC's certificate of incorporation, provided
that in any of the foregoing cases such corporation shall execute an agreement
of assumption to perform every obligation of AFL or ARFC, as the case may be,
under this Agreement and, whether or not such assumption agreement is executed,
shall be the successor to AFL or ARFC, as the case may be, hereunder (without
relieving AFL or ARFC of its responsibilities hereunder, if it survives such
merger or consolidation) without the execution or filing of any document or any
further act by any of the parties to this Agreement. AFL or ARFC shall promptly
inform the other party, the Owner Trustee and the Indenture Trustee of such
merger, consolidation or purchase and assumption. Notwithstanding the foregoing,
as a condition to the consummation of the transactions referred to in clauses
(i), (ii) and (iii) above, (x) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Sections 3.1 and 3.2
of this Agreement shall have been breached (for purposes hereof, such
representations and warranties shall speak as of the date of the consummation of
such transaction), (y) AFL or ARFC, as applicable, shall have delivered written
notice of such consolidation, merger or purchase and assumption to the Rating
Agencies prior to the consummation of such transaction and shall have delivered
to the Owner Trustee and the Indenture Trustee an Officer's Certificate and an
Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section 6.2 and that all
conditions precedent, if any, provided for in this Agreement relating to such
transaction have been complied with and none of the Rating Agencies shall have
indicated that the transaction will result in a downgrade of any Notes, and (z)
AFL or ARFC, as applicable, shall have delivered to the Owner Trustee and the
Indenture Trustee an Opinion of Counsel, stating that, in the opinion of such
counsel, either (A) all financing statements and continuation statements and
amendments thereto have been executed and filed that are necessary to preserve
and protect the interest of the Owner Trustee in the Trust Property and reciting
the details of the filings or (B) no such action shall be necessary to preserve
and protect such interest.

                                     - 12 -
<PAGE>   16

                  SECTION 6.3. Limitation on Liability of AFL and Others. AFL
and any director, officer, employee or agent may rely in good faith on the
advice of counsel or on any document of any kind prima facie properly executed
and submitted by any Person respecting any matters arising under this Agreement.
AFL shall not be under any obligation to appear in, prosecute or defend any
legal action that is not incidental to its obligations under this Agreement or
its Related Documents and that in its opinion may involve it in any expense or
liability.

                  SECTION 6.4. AFL May Own Notes. Subject to the provisions of
the Sale and Servicing Agreement, AFL and any Affiliate of AFL may in its
individual or any other capacity become the owner or pledgee of Notes or
Certificates with the same rights as it would have if it were not AFL or an
Affiliate thereof.

                  SECTION 6.5. Amendment.

                  (a) This Agreement may be amended by AFL and ARFC without the
consent of the Owner Trustee, the Indenture Trustee or any of the Noteholders
(A) to cure any ambiguity or (B) to correct any provisions in this Agreement;
provided, however, that such action shall not, as evidenced by an Opinion of
Counsel delivered to the Owner Trustee and the Indenture Trustee, adversely
affect in any material respect the interests of any Noteholder.

                  (b) This Agreement may also be amended from time to time by
AFL and ARFC, with the prior written consent of the Owner Trustee, the Indenture
Trustee and a Note Majority, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement,
or of modifying in any manner the rights of the Noteholders; provided, however,
that no such amendment shall (i) increase or reduce in any manner the amount of,
or accelerate or delay the timing of, collections of payments on Receivables,
distributions that shall be required to be made on any Note or the Note Interest
Rate or (ii) reduce the aforesaid percentage required to consent to any such
amendment or any waiver hereunder, without the consent of the Holders of all
Notes then outstanding.

                  (c) Prior to the execution of any such amendment or consent,
AFL shall have furnished written notification of the substance of such amendment
or consent to each Rating Agency.

                  (d) Promptly after the execution of any such amendment or
consent, the Owner Trustee or the Indenture Trustee, as applicable, shall
furnish written notification of the substance of such amendment or consent to
each Noteholder.

                  (e) It shall not be necessary for the consent of Noteholders
pursuant to this Section to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Noteholders shall be subject to
such reasonable requirements as the Owner Trustee or the Indenture Trustee, as
applicable, may prescribe, including the establishment of record dates. The
consent of any Holder of a Note given pursuant to this Section or pursuant to
any other provision of this Agreement shall be conclusive and binding on such
Holder and

                                     - 13 -
<PAGE>   17

on all future Holders of such Note and of any Note issued upon the transfer
thereof or in exchange thereof or in lieu thereof whether or not notation of
such consent is made upon the Note.

                  SECTION 6.6. Notices. All demands, notices and communications
to AFL or ARFC hereunder shall be in writing, personally delivered, or sent by
telecopier (subsequently confirmed in writing), reputable overnight courier or
mailed by certified mail, return receipt requested, and shall be deemed to have
been given upon receipt (a) in the case of AFL, to Arcadia Financial Ltd., 2001
Beach Street, Suite 300, Fort Worth, Texas 76103, Attention: President, with a
copy to Associates Corporation of North America, 250 East Carpenter Freeway,
Irving, Texas 75062, Attention: Senior Vice President - Capital Markets, or such
other address as shall be designated by AFL in a written notice delivered to the
other party or to the Owner Trustee or the Indenture Trustee, as applicable, or
(b) in case of ARFC, to Arcadia Receivables Finance Corp., 290 East Carpenter
Freeway, 7 Decker, Irving, Texas 75062, Attention: Assistant General Counsel,
with a copy to Associates Corporation of North America, 250 East Carpenter
Freeway, Irving, Texas 75062, Attention: Senior Vice President - Capital
Markets.

                  SECTION 6.7. Merger and Integration. Except as specifically
stated otherwise herein, this Agreement and the Related Documents set forth the
entire understanding of the parties relating to the subject matter hereof, and
all prior understandings, written or oral, are superseded by this Agreement and
the Related Documents. This Agreement may not be modified, amended, waived or
supplemented except as provided herein.

                  SECTION 6.8. Severability of Provisions. If any one or more of
the covenants, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, provisions or terms shall be
deemed severable from the remaining covenants, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the other
provisions of this Agreement.

                  SECTION 6.9. Intention of the Parties. The execution and
delivery of this Agreement shall constitute an acknowledgment by AFL and ARFC
that they intend that each assignment and transfer herein and therein
contemplated constitute a sale and assignment outright, and not for security, of
the Receivables and the Other Conveyed Property, conveying good title thereto
free and clear of any Liens, from AFL to ARFC, and that the Receivables and the
Other Conveyed Property shall not be a part of AFL's estate in the event of the
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding,
or other proceeding under any federal or state bankruptcy or similar law, or the
occurrence of another similar event, of, or with respect to, AFL. In the event
that such conveyance is determined to be made as security for a loan made by
ARFC, the Trust or the Noteholders to AFL, the parties intend that AFL shall
have granted to ARFC a security interest in all of AFL's right, title and
interest in and to the Receivables and the Other Conveyed Property conveyed
pursuant to Section 2.1 hereof, and that this Agreement shall constitute a
security agreement under applicable law.

                  SECTION 6.10. Governing Law. This Agreement shall be construed
in accordance with, the laws of the State of New York without regard to the
principles of conflicts of laws thereof,

                                     - 14 -
<PAGE>   18

and the obligations, rights and remedies of the parties under this Agreement
shall be determined in accordance with such laws.

                  SECTION 6.11. Counterparts. For the purpose of facilitating
the execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.

                  SECTION 6.12. Conveyance of the Receivables and the Other
Conveyed Property to the Trust. AFL acknowledges that ARFC intends, pursuant to
the Sale and Servicing Agreement, to convey the Receivables and the Other
Conveyed Property, together with its rights under this Agreement, to the Trust
on the date hereof. AFL acknowledges and consents to such conveyance and waives
any further notice thereof and covenants and agrees that the representations and
warranties of AFL contained in this Agreement and the rights of ARFC hereunder
are intended to benefit the Owner Trustee, the Indenture Trustee, the Trust and
the Noteholders. In furtherance of the foregoing, AFL covenants and agrees to
perform its duties and obligations hereunder, in accordance with the terms
hereof for the benefit of the Owner Trustee, the Indenture Trustee, the Trust
and the Noteholders and that, notwithstanding anything to the contrary in this
Agreement, AFL shall be directly liable to the Owner Trustee and the Trust
(notwithstanding any failure by the Servicer or ARFC to perform its duties and
obligations hereunder or under the Sale and Servicing Agreement) and that the
Owner Trustee may enforce the duties and obligations of AFL under this Agreement
against AFL for the benefit of the Trust and the Noteholders.

                  SECTION 6.13. Nonpetition Covenant. Neither ARFC nor AFL shall
petition or otherwise invoke the process of any court or government authority
for the purpose of commencing or sustaining a case against the Trust (or, in the
case of AFL, against ARFC) under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Trust (or ARFC) or any substantial
part of its property, or ordering the winding up or liquidation of the affairs
of the Trust (or ARFC).

                                     - 15 -
<PAGE>   19

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

                                       ARCADIA RECEIVABLES FINANCE CORP.,
                                         as Purchaser

                                       By /s/ Scott W. McCarthy
                                         ----------------------------
                                       Name: Scott W. McCarthy
                                         Title: Senior Vice President

                                       ARCADIA FINANCIAL LTD., as Seller

                                       By /s/ Scott W. McCarthy
                                         ----------------------------
                                       Name: Scott W. McCarthy
                                         Title: Senior Vice President

                                     - 16 -
<PAGE>   20

                                   SCHEDULE A

                             SCHEDULE OF RECEIVABLES

                       [Available in transactional files.]

                                       A-1
<PAGE>   21

                                   SCHEDULE B

                      REPRESENTATIONS AND WARRANTIES OF AFL

                  1. Characteristics of Receivables. Each Receivable (A) was
originated by a Dealer for the retail sale of a Financed Vehicle in the ordinary
course of such Dealer's business and such Dealer had all necessary licenses and
permits to originate Receivables in the state where such Dealer was located, was
fully and properly executed by the parties thereto, was purchased by AFL from
such Dealer under an existing Dealer Agreement with AFL and was validly assigned
by such Dealer to AFL, (B) contains customary and enforceable provisions such as
to render the rights and remedies of the holder thereof adequate for realization
against the collateral security, and (C) is fully amortizing and provides for
level monthly payments (provided that the payment in the first Monthly Period
and the final Monthly Period of the life of the Receivable may be minimally
different from the level payment) which, if made when due, shall fully amortize
the Amount Financed over the original term.

                  2. No Fraud or Misrepresentation. Each Receivable was
originated by a Dealer and was sold by the Dealer to AFL without any fraud or
misrepresentation on the part of such Dealer in either case.

                  3. Compliance with Law. All requirements of applicable
federal, state and local laws, and regulations thereunder (including, without
limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the
Fair Debt Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations "B" and "Z",
the Soldiers' and Sailors' Civil Relief Act of 1940, the Minnesota Motor Vehicle
Retail Installment Sales Act, and state adaptations of the National Consumer Act
and of the Uniform Consumer Credit Code and other consumer credit laws and equal
credit opportunity and disclosure laws) in respect of all of the Receivables and
each and every sale of Financed Vehicles, have been complied with in all
material respects, and each Receivable and the sale of the Financed Vehicle
evidenced by each Receivable complied at the time it was originated or made and
now complies in all material respects with all applicable legal requirements.

                  4. Origination. Each Receivable was originated in the United
States.

                  5. Binding Obligation. Each Receivable represents the genuine,
legal, valid and binding payment obligation of the Obligor thereon, enforceable
by the holder thereof in accordance with its terms, except (A) as enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law and (B) as such
Receivable may be modified by the application after the Cutoff Date of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended; and all parties to
each Receivable

                                       B-1
<PAGE>   22

had full legal capacity to execute and deliver such Receivable and all other
documents related thereto and to grant the security interest purported to be
granted thereby.

                  6. No Government Obligor. No Obligor is the United States of
America or any State or any agency, department, subdivision or instrumentality
thereof.

                  7. Obligor Bankruptcy. At the Cutoff Date no Obligor had been
identified on the records of AFL as being the subject of a current bankruptcy
proceeding.

                  8. Schedule of Receivables. The information set forth in the
Schedule of Receivables has been produced from the Electronic Ledger and was
true and correct in all material respects as of the close of business on the
Cutoff Date.

                  9. Marking Records. By the Closing Date AFL will have caused
the portions of the Electronic Ledger relating to the Receivables to be clearly
and unambiguously marked to show that the Receivables constitute part of the
Trust Property and are owned by the Trust in accordance with the terms of the
Sale and Servicing Agreement.

                  10. Computer Tape. The Computer Tape made available by AFL to
ARFC, the Owner Trustee and the Indenture Trustee on the Closing Date was
complete and accurate as of the Cutoff Date and includes a description of the
same Receivables that are described in the Schedule of Receivables.

                  11. Adverse Selection. No selection procedures adverse to the
Noteholders were utilized in selecting the Receivables from those receivables
owned by AFL which met the selection criteria contained in the Sale and
Servicing Agreement.

                  12. Chattel Paper. The Receivables constitute chattel paper
within the meaning of the UCC as in effect in the States of Minnesota, Texas and
New York.

                  13. One Original. There is only one original executed copy of
each Receivable.

                  14. Receivable Files Complete. There exists a Receivable File
pertaining to each Receivable, and such Receivable File contains (a) a fully
executed original of the Receivable, (b) a certificate of insurance, application
form for insurance signed by the Obligor or a signed representation letter from
the Obligor named in the Receivable pursuant to which the Obligor has agreed to
obtain physical damage insurance for the Financed Vehicle, or microfiche or
computer scanned copies thereof, (c) the original Lien Certificate or
application therefor and (d) a credit application signed by the Obligor, or a
microfiche or computer scanned copy thereof. Each of such documents which is
required to be signed by the Obligor has been signed by the Obligor in the
appropriate spaces. All blanks on any form have been properly filled in and each
form has otherwise been correctly prepared. The complete file for each
Receivable currently is in the possession of the Custodian.

                                      B-2
<PAGE>   23

                  15. Receivables in Force. No Receivable has been satisfied,
subordinated or rescinded, and the Financed Vehicle securing each such
Receivable has not been released from the lien of the related Receivable in
whole or in part. No provisions of any Receivable have been waived, altered or
modified in any respect since its origination, except by instruments or
documents identified in the Receivable File. No Receivable has been modified as
a result of application of the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended.

                  16. Lawful Assignment. No Receivable was originated in, or is
subject to the laws of, any jurisdiction the laws of which would make unlawful,
void or voidable the sale, transfer and assignment of such Receivable under this
Agreement or pursuant to transfers of the Notes.

                  17. Good Title. No Receivable has been sold, transferred,
assigned or pledged by AFL to any Person other than ARFC; immediately prior to
the conveyance of the Receivables to ARFC pursuant to this Agreement, ARFC or
AFL had good and indefeasible title thereto, free and clear of any Lien, and
immediately upon the transfer thereof, ARFC shall have good and indefeasible
title to and will be the sole owner of each Receivable, free of any Lien. No
Dealer has a participation in, or other right to receive, proceeds of any
Receivable. AFL has not taken any action to convey any right to any Person that
would result in such Person having a right to payments received under the
related Insurance Policies or the related Dealer Agreements or Dealer
Assignments or to payments due under such Receivables.

                  18. Security Interest in Financed Vehicle. Each Receivable
created or shall create a valid, binding and enforceable first priority security
interest in favor of AFL in the Financed Vehicle. The Lien Certificate and
original certificate of title for each Financed Vehicle show, or if a new or
replacement Lien Certificate is being applied for with respect to such Financed
Vehicle, the Lien Certificate will be received within 180 days of the Closing
Date and will show, AFL named as the original secured party under each
Receivable as the holder of a first priority security interest in such Financed
Vehicle. With respect to each Receivable for which the Lien Certificate has not
yet been returned from the Registrar of Titles, AFL has received written
evidence from the related Dealer that such Lien Certificate showing AFL as first
lienholder has been applied for. AFL's security interest has been validly
assigned by AFL to ARFC pursuant to this Agreement. Immediately after the sale,
transfer and assignment thereof by ARFC to the Trust, each Receivable will be
secured by an enforceable and perfected first priority security interest in the
Financed Vehicle in favor of the Trust as secured party, which security interest
is prior to all other Liens upon and security interests in such Financed Vehicle
which now exist or may hereafter arise or be created (except, as to priority,
for any lien for taxes, labor or materials affecting a Financed Vehicle). As of
the Cutoff Date there were no Liens or claims for taxes, work, labor or
materials affecting a Financed Vehicle which are or may be Liens prior or equal
to the lien of the related Receivable.

                  19. All Filings Made. All filings (including, without
limitation, UCC filings) required to be made by any Person and actions required
to be taken or performed by any Person in any jurisdiction to give the Trust a
first priority perfected lien on, or ownership interest in, the Receivables and
the Other Conveyed Property have been made, taken or performed.

                                      B-3
<PAGE>   24

                  20. No Impairment. AFL has not done anything to convey any
right to any Person that would result in such Person having a right to payments
due under a Receivable or otherwise to impair the rights of ARFC, the Trust, the
Indenture Trustee and the Noteholders in any Receivable or the proceeds thereof.

                  21. Receivable Not Assumable. No Receivable is assumable by
another Person in a manner which would release the Obligor thereof from such
Obligor's obligations to AFL with respect to such Receivable.

                  22. No Defenses. No Receivable is subject to any right of
rescission, setoff, counterclaim or defense and no such right has been asserted
or threatened with respect to any Receivable.

                  23. No Default. There has been no default, breach, violation
or event permitting acceleration under the terms of any Receivable (other than
payment delinquencies of not more than 30 days), and no condition exists or
event has occurred and is continuing that with notice, the lapse of time or both
would constitute a default, breach, violation or event permitting acceleration
under the terms of any Receivable, and there has been no waiver of any of the
foregoing. As of the Cutoff Date, no Financed Vehicle had been repossessed.

                  24. Insurance. As of the date hereof, each Financed Vehicle is
covered by a comprehensive and collision insurance policy (i) in an amount at
least equal to the lesser of (a) its maximum insurable value or (b) the
principal amount due from the Obligor under the relate Receivable, (ii) naming
AFL as loss payee and (iii) insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by comprehensive and
collision coverage. Each Receivable requires the Obligor to maintain physical
loss and damage insurance, naming AFL and its successors and assigns as
additional insured parties, and each Receivable permits the holder thereof to
obtain physical loss and damage insurance at the expense of the Obligor if the
Obligor fails to do so. No Financed Vehicle was or had previously been insured
under a policy of Force-Placed Insurance on the Cutoff Date.

                  25. Past Due. At the Cutoff Date no Receivable was more than
30 days past due.

                  26. Remaining Principal Balance. At the Cutoff Date each
Receivable had a remaining principal balance equal to or greater than $500.00
and the Principal Balance of each Receivable set forth in the Schedule of
Receivables is true and accurate in all material respects.

                  27. Final Scheduled Maturity Date. No Receivable has a final
maturity later than February 28, 2007.

                  28. Certain Characteristics. (A) Each Receivable had a
remaining maturity, as of the Cutoff Date, of at least 3 months but not more
than 84 months; (B) each Receivable had an original maturity of at least 12
months but not more than 84 months; (C) each Receivable had an original

                                      B-4
<PAGE>   25

principal balance of at least $4,124 and not more than $56,431; (D) each
Receivable had a remaining Principal Balance as of the Cutoff Date of at least
$500 and not more than $56,431; (E) each Receivable has an Annual Percentage
Rate of at least 7.75% and not more than 26.99%; (F) no Receivable was more than
30 days past due as of the Cutoff Date; (G) no funds have been advanced by the
Seller, the Servicer, any Dealer, or anyone acting on behalf of any of them in
order to cause any Receivable to qualify under clause (F) above; (H) no
Receivable has a final scheduled payment date on or before May 29, 2000; (I) the
Principal Balance of each Receivable set forth in Schedule of Receivables is
true and accurate in all material respects as of the Cutoff Date; and (J) 11.43%
of the Receivables, by principal balance as of the Cutoff Date, was attributable
to loans for the purchase of new Financed Vehicles and 88.57% of the Receivables
was attributable to loans for the purchase of used Financed Vehicles.

                                      B-5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00014-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00014-of-00352.parquet"}]]