Document:

<PAGE>   1

                                                                EXHIBIT 10.108

                                                                EXECUTION COPY

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                       NATIONAL AUTO FINANCE 1999-1 TRUST

                7.26% Class A Automobile Receivables - Backed Notes

               11.13% Class B Automobile Receivables - Backed Notes

                        ----------------------------------

                                    INDENTURE

                          Dated as of September 1, 1999

                        ----------------------------------

                          HARRIS TRUST AND SAVINGS BANK

                  Indenture Trustee and Trust Collateral Agent

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<PAGE>   2

                               TABLE OF CONTENTS

                                   ARTICLE I

                   DEFINITIONS AND INCORPORATION BY REFERENCE

<TABLE>
<CAPTION>
<S>            <C>                                                                                <C>

Section 1.1    Definitions ..................................................................      2
Section 1.2    Rules of Construction ........................................................      9
Section 1.3    Action by or Consent of Noteholders ..........................................      9
Section 1.4    Material Adverse Effect ......................................................      9
</TABLE>

                                   ARTICLE II

                                   THE NOTES
<TABLE>
<S>            <C>                                                                                <C>
Section 2.1    Form .........................................................................      9
Section 2.2    Execution, Authentication and Delivery .......................................     10
Section 2.3    Temporary Notes ..............................................................     10
Section 2.4    Registration; Registration of Transfer and Exchange ..........................     11
Section 2.5    Mutilated, Destroyed, Lost or Stolen Notes ...................................     13
Section 2.6    Persons Deemed Owner .........................................................     14
Section 2.7    Payment of Principal and Interest; Defaulted Interest ........................     14
Section 2.8    Cancellation .................................................................     15
Section 2.9    Release of Collateral ........................................................     15
</TABLE>

                                  ARTICLE III

                                   COVENANTS

<TABLE>
<S>            <C>                                                                                <C>
Section 3.1    Payment of Principal and Interest ...........................................      15
Section 3.2    Maintenance of Office or Agency .............................................      16
Section 3.3    Money for Payments to be Held in Trust ......................................      16
Section 3.4    Existence ...................................................................      17
Section 3.5    Protection of Trust Property ................................................      18
Section 3.6    Opinions as to Trust Property ...............................................      18
Section 3.7    Performance of Obligations; Servicing of Receivables ........................      19
Section 3.8    Negative Covenants ..........................................................      20
Section 3.9    Annual Statement as to Compliance ...........................................      20
Section 3.10   Trust May Not Consolidate ...................................................      21
Section 3.11   [Reserved] ..................................................................      21
Section 3.12   No Other Business ...........................................................      21
Section 3.13   No Borrowing ................................................................      21
</TABLE>

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<PAGE>   3

<TABLE>
<S>            <C>                                                                                <C>
Section 3.14   Servicer's Obligations ......................................................      21
Section 3.15   Guarantees, Loans, Advances and Other Liabilities ...........................      21
Section 3.16   Capital Expenditures ........................................................      21
Section 3.17   Compliance with Laws ........................................................      21
Section 3.18   Restricted Payments .........................................................      21
Section 3.19   Notice of Events of Default .................................................      22
Section 3.20   Further Instruments and Acts ................................................      22
Section 3.21   Amendments of Sale and Servicing Agreement and Trust Agreement ..............      22
Section 3.22   Income Tax Characterization .................................................      22
Section 3.23   Year 2000 ...................................................................      23
</TABLE>

                                   ARTICLE IV

                           SATISFACTION AND DISCHARGE

<TABLE>
<S>            <C>                                                                                <C>

Section 4.1    Satisfaction and Discharge of Indenture .....................................      23
Section 4.2    Application of Trust Money ..................................................      24
Section 4.3    Repayment of Monies Held by Note Paying Agent ...............................      24
</TABLE>

                                   ARTICLE V

                                    REMEDIES

<TABLE>
<S>            <C>                                                                                <C>
Section 5.1    Events of Default ...........................................................      25
Section 5.2    Rights Upon Event of Default ................................................      27
Section 5.3    Collection of Indebtedness and Suits for Enforcement by Indenture
                    Trustee ................................................................      28
Section 5.4    Remedies ....................................................................      30
Section 5.5    Optional Preservation of the Receivables ....................................      31
Section 5.6    Priorities ..................................................................      32
Section 5.7    Limitation of Suits .........................................................      33
Section 5.8    Unconditional Rights of Noteholders To Receive Principal and Interest .......      34
Section 5.9    Restoration of Rights and Remedies ..........................................      34
Section 5.10   Rights and Remedies Cumulative ..............................................      34
Section 5.11   Delay or Omission Not a Waiver ..............................................      34
Section 5.12   Control by Noteholders ......................................................      34
Section 5.13   Waiver of Past Defaults .....................................................      35
Section 5.14   Undertaking for Costs .......................................................      35
Section 5.15   Waiver of Stay or Extension Laws ............................................      36
Section 5.16   Action on Notes .............................................................      36
Section 5.17   Performance and Enforcement of Certain Obligations ..........................      36
Section 5.18   Subrogation .................................................................      36
Section 5.19   Preference Claims ...........................................................      37
Section 5.20   Optional Purchase of Class A Notes ..........................................      38
</TABLE>

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                                   ARTICLE VI

              THE INDENTURE TRUSTEE AND THE TRUST COLLATERAL AGENT

<TABLE>
<S>            <C>                                                                                <C>
Section 6.1    Duties of Indenture Trustee .................................................      38
Section 6.2    Rights of Indenture Trustee and the Trust Collateral Agent ..................      40
Section 6.3    Individual Rights of Indenture Trustee ......................................      41
Section 6.4    Indenture Trustee's Disclaimer ..............................................      42
Section 6.5    Notice of Defaults ..........................................................      42
Section 6.6    Reports by Indenture Trustee to Holders .....................................      42
Section 6.7    Compensation and Indemnity ..................................................      42
Section 6.8    Replacement of Indenture Trustee ............................................      43
Section 6.9    Successor Indenture Trustee by Merger .......................................      44
Section 6.10   Appointment of Co-Indenture Trustee or Separate Indenture Trustee ...........      44
Section 6.11   Eligibility: Disqualification ...............................................      46
Section 6.12   [Reserved] ..................................................................      46
Section 6.13   Appointment and Powers ......................................................      46
Section 6.14   Performance of Duties .......................................................      46
Section 6.15   Limitation on Liability .....................................................      46
Section 6.16   Reliance Upon Documents .....................................................      47
Section 6.17   Successor Trust Collateral Agent ............................................      47
Section 6.18   Compensation ................................................................      48
Section 6.19   Representations and Warranties of the Indenture Trustee and the Trust
                Collateral Agent ...........................................................      49
Section 6.20   Waiver of Setoffs ...........................................................      49
Section 6.21   Control by the Controlling Party ............................................      49
</TABLE>

                                   ARTICLE VII

                         NOTEHOLDERS' LISTS AND REPORTS

<TABLE>
<S>            <C>                                                                                <C>
Section 7.1    Trust To Furnish To Indenture Trustee Names and Addresses of
                 Noteholders ................................................................     50
Section 7.2    Preservation of Information; Communications to Noteholders ...................     50
Section 7.3    Reports ......................................................................     50
</TABLE>

                                  ARTICLE VIII

                      ACCOUNTS, DISBURSEMENTS AND RELEASES

<TABLE>
<S>            <C>                                                                                <C>
Section 8.1    Collection of Money ..........................................................     50
Section 8.2    Release of Collateral ........................................................     51
Section 8.3    Opinion of Counsel ...........................................................     51
</TABLE>

                                     -iii-
<PAGE>   5

                                   ARTICLE IX

                             SUPPLEMENTAL INDENTURES

<TABLE>
<S>            <C>                                                                                <C>
Section 9.1    Supplemental Indentures ......................................................     51
Section 9.2    Execution of Supplemental Indentures .........................................     53
Section 9.3    Effect of Supplemental Indenture .............................................     53
Section 9.4    Reference in Notes to Supplemental Indentures ................................     53
</TABLE>

                                    ARTICLE X

                              REDEMPTION OF NOTES

<TABLE>
<S>            <C>                                                                                <C>

Section 10.1   Redemption ..................................................................      54
Section 10.2   Form of Redemption Notice ...................................................      54
Section 10.3   Notes Payable on Redemption Date ............................................      55
</TABLE>

                                   ARTICLE XI

                                 MISCELLANEOUS

<TABLE>
<S>            <C>                                                                                <C>
Section 11.1   Compliance Certificates and Opinions, etc ..................................       55
Section 11.2   Form of Documents Delivered to Indenture Trustee ...........................       56
Section 11.3   Acts of Noteholders ........................................................       56
Section 11.4   Notices, etc. to Indenture Trustee, Trust and Rating Agencies ..............       57
Section 11.5   Notices to Noteholders; Waiver .............................................       58
Section 11.6   Alternate Payment and Notice Provisions ....................................       59
Section 11.7   Effect of Headings and Table of Contents ...................................       59
Section 11.8   Successors and Assigns .....................................................       59
Section 11.9   Separability ...............................................................       59
Section 11.10  Benefits of Indenture ......................................................       59
Section 11.11  Rule 144A Information ......................................................       59
Section 11.12  Legal Holidays .............................................................       60
Section 11.13  GOVERNING LAW ..............................................................       60
Section 11.14  Counterparts ...............................................................       60
Section 11.15  Recording of Indenture .....................................................       60
Section 11.16  Trust Obligation ...........................................................       60
Section 11.17  No Petition ................................................................       60
Section 11.18  Inspection .................................................................       61
Section 11.19  Limitation of Liability ....................................................       61
Section 11.20  Use of Proceeds ............................................................       61
</TABLE>

    EXHIBIT

Exhibit A - Form of Class A Note

Exhibit B - Form of Class B Note

Exhibit C - Form of Class A Investor Letter

Exhibit D - Form of Class B Investor Letter

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<PAGE>   6

               INDENTURE dated as of September 1, 1999, between NATIONAL AUTO
FINANCE 1999-1 TRUST, a Delaware business trust (the "Trust"), and HARRIS TRUST
AND SAVINGS BANK, an Illinois banking corporation, as indenture trustee (the
"Indenture Trustee") and trust collateral agent ("Trust Collateral Agent").

               Each party agrees as follows for the benefit of the other party
and for the equal and ratable benefit of the Holders of the Trust's 7.26% Class
A Automobile Receivables - Backed Notes, Series 1999-1 (the "Class A Notes") and
the 11.13% Class B Automobile Receivables - Backed Notes, Series 1999-1 (the
"Class B Notes"; and together with the Class A Notes, the "Notes"):

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

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

               As an inducement to the Insurer to issue and deliver the Class A
Note Policy, the Trust and the Insurer have executed and delivered the Insurance
and Indemnity Agreement, dated as of September 1, 1999 (as amended,
supplemented, restated or otherwise modified from time to time, the "Insurance
Agreement"), among the Insurer, the Trust, National Auto Finance Company, Inc.
("NAFI") and National Financial Auto Funding Trust.

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

               Each party agrees as follows for the benefit of the other party
and for the equal and ratable benefit of the Holders of the Trust's Class A
Notes and Class B Notes:

                                 GRANTING CLAUSE

               The Trust hereby Grants to the Trust Collateral Agent at the
Closing Date, for the benefit of the Trust Secured Parties all of the Trust's
right, title and interest in and to (a) the Receivables and all monies received
thereon on or after the Cut-off Date (including amounts due on or before the
Cut-off Date but received by NAFI, the Seller or the Issuer on or after the
Cut-off Date); (b) any proceeds and the right to receive proceeds with respect
to the Receivables from claims on any physical damage, credit life or disability
insurance policies or other insurance policies covering Financed Vehicles or
Obligors, including rebates of insurance premiums relating to the Receivables
and any proceeds from the liquidation of the Receivables; (c) all

<PAGE>   7

rights against Dealers pursuant to Dealer Agreements or against Originators
pursuant to Originator Agreements; (d) the related Receivables Files and any and
all other documents that NAFI keeps on file in accordance with its customary
procedures relating to the Receivables, the Obligors or the Financed Vehicles;
(e) 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; (f) all funds on deposit from time
to time in the Trust Accounts (less all investments and proceeds thereof), and
all rights of the Issuer therein; (g) the rights and benefits, but none of its
obligations or burdens, under the Conveyance Agreements, including the delivery
requirements, representations and warranties and the cure and repurchase
obligations of NAFI thereunder; and (h) the income and proceeds of any and all
of the foregoing (the "Collateral").

               The foregoing Grant is made in trust to the Trust Collateral
Agent, for the benefit first, of the Indenture Trustee on behalf of the Holders
of the Notes, and second, for the benefit of the Insurer. The Trust Collateral
Agent hereby acknowledges such Grant and accepts the trusts under this
Indenture.

                                    ARTICLE I

                   DEFINITIONS AND INCORPORATION BY REFERENCE

               Section 1.1 Definitions. Except as otherwise specified herein,
the following terms have the respective meanings set forth below for all
purposes of this Indenture. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to them in the Sale and
Servicing Agreement.

               Act: As defined in Section 11.3(a) hereof.

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

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

                                       -2-

<PAGE>   8

               Business Day: Any day other than (i) a Saturday or a Sunday or
(ii) a day on which commercial banks in Florida, Illinois, Delaware or the state
of New York are authorized or obligated by law, executive order or governmental
decree to be closed.

               Certificate of Trust: The certificate of trust of the Trust
substantially in the form of Exhibit B to the Trust Agreement.

               Class A Note(s): The 7.26% Automobile Receivables - Backed
Notes, substantially in the form of Exhibit A.

               Class A Noteholder: The Person in whose name a Class A Note is
registered on the Note Registrar.

               Class A Note Policy: The insurance policy issued by the Insurer
with respect to the Class A Notes, including any endorsements thereto.

               Class B Note(s): The 11.13% Automobile Receivables - Backed
Notes, substantially in the form of Exhibit B.

               Class B Noteholder: The Person in whose name a Class B Note is
registered on the Note Registrar.

               Closing Date: September 24, 1999.

               Collateral: As defined in the Granting Clause hereof.

               Controlling Class: The Holders of not less than 51% of the
Outstanding Amount of the Class A Notes or, if the Class A Notes are no longer
outstanding, the Holders of not less than 51% of the Outstanding Amount of the
Class B Notes.

               Controlling Party: The Insurer, so long as no Insurer Default
shall have occurred and be continuing, or the Controlling Class, for so long as
an Insurer Default shall have occurred and be continuing.

               Conveyance Agreements: The Sale and Servicing Agreement, the Sale
Agreement and the Assignment Agreement.

               Corporate Trust Office: The principal office of the Indenture
Trustee, at which at any particular time its corporate trust business shall be
administered, which office at date of the execution of this Agreement is located
at 311 West Monroe Street, 12th Floor, Chicago, Illinois 60606, Attention:
Indenture Trust Division or at such other address as the Indenture Trustee may
designate from time to time by notice to the Noteholders, the Insurer, the
Servicer and the Trust, or the principal corporate trust office of any successor
Indenture Trustee (the address of which the successor Indenture Trustee will
notify the Noteholders and the Trust).

               Cut-off Date: July 31, 1999.

                                      -3-

<PAGE>   9

               Default: Any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.

               Event of Default: As defined in Section 5.1 hereof.

               Exchange Act: The Securities Exchange Act of 1934, as amended.

               Final Scheduled Distribution Date: The Distribution Date
occurring in October, 2004.

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

               Holder or Noteholder: The Person in whose name a Class A Note or
Class B Note is registered on the Note Register.

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

               Indenture: This Indenture as amended and supplemented from time
to time.

               Indenture Trustee: Harris Trust and Savings Bank, an Illinois
banking corporation, not in its individual capacity but as indenture trustee
under this Indenture, or any successor indenture trustee under this Indenture.

               Independent: When used with respect to any specified Person, that
the person (a) is in fact independent of the Trust, any other obligor upon the
Notes, the Seller and any

                                      -4-
<PAGE>   10

Affiliate of any of the foregoing persons, (b) does not have any direct
financial interest or any material in direct financial interest in the Trust,
any such other obligor, the Seller or any Affiliate of any of the foregoing
Persons and (c) is not connected with the Trust, any such other obligor, the
Seller or any Affiliate of any of the foregoing Persons as an officer, employee,
promoter, underwriter, trustee, partner, director or Person performing similar
functions.

               Independent Certificate: A certificate or opinion to be delivered
to the Trust Collateral Agent and the Indenture Trustee under the circumstances
described in, and otherwise complying with, the applicable requirements of
Section 11.1 hereof, prepared by an Independent appraiser or other expert
appointed pursuant to a Trust Order and approved by the Trust Collateral Agent
in the exercise of reasonable care, and such opinion or certificate shall state
that the signer has read the definition of "Independent" in this Indenture and
that the signer is Independent within the meaning thereof.

               Insurance Agreement Indenture Cross Default: As defined in the
Insurance Agreement.

               Insurer Trust Secured Obligations: All amounts and obligations
which the Trust or the Seller may at any time owe to or on behalf of the Insurer
under this Indenture, the Insurance Agreement or any other Transaction Document.

               Interest Rates: The Class A Notes will bear interest at the rate
of 7.26% per annum (the "Class A Interest Rate"), computed on the basis of a
360-day year consisting of twelve 30-day months. The Class B Notes will bear
interest at the rate of 11.13% per annum (the "Class B Interest Rate"), computed
on the basis of a 360-day year consisting of twelve 30-day months.

               Internal Revenue Code: The Internal Revenue Code of 1986, as
amended from time to time, and Treasury Regulations promulgated thereunder.

               Notes: The Class A Notes and the Class B Notes.

               Note Paying Agent: The Indenture Trustee or any other Person that
meets the eligibility standards for the Indenture Trustee specified in Section
6.11 and is authorized by the Trust, with the prior written consent of the
Insurer, to make payments to and distributions from the Collection Account and
the Note Distribution Account, including payment of principal of or interest on
the Notes on behalf of the Trust.

               Note Register and Note Registrar: As defined in Section 2.4
hereof.

               Officer's Certificate: A certificate signed by any Authorized
Officer of the Trust and delivered to the Indenture Trustee. Unless otherwise
specified, any reference in this Indenture to an Officer's Certificate shall be
to an Officer's Certificate of any Authorized Officer of the Trust. Each
certificate with respect to compliance with a condition or covenant provided for
in this Agreement shall include (1) a statement that the Authorized Officer
signing the certificate has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements contained in such certificate are based; (3) a statement
that in the opinion of such person, he has made such examination or

                                      -5-
<PAGE>   11
investigation as is necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied with; and (4) a
statement as to whether or not, in the opinion of such person, such condition or
covenant has been complied with.

               Opinion of Counsel: One or more opinions of counsel who may,
except as otherwise expressly provided in this Indenture, be employees of or
counsel to the Trust, addressed to the Insurer and satisfactory to the Insurer,
and which shall comply with any applicable requirements of Section 11.1.

               Outstanding: As of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:

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

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

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

provided, however, that Class A Notes which have been paid with proceeds of the
Class A Note Policy shall continue to remain Outstanding for purposes of this
Indenture until the Insurer has been paid as subrogee hereunder or reimbursed
pursuant to the Insurance Agreement as evidenced by a written notice from the
Insurer delivered to the Indenture Trustee, and the Insurer shall be deemed to
be the Holder thereof to the extent of any payments thereon made by the Insurer;
provided, further, that in determining whether the Holders of the requisite
Outstanding Amount of the Notes have given any request, demand, authorization,
direction, notice, consent or waiver hereunder or under any Transaction
Document, Notes owned by the Trust, any other obligor upon the Notes, the Seller
or any Affiliate of any of the foregoing Persons shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the Indenture Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes that a Responsible Officer of
the Indenture Trustee either actually knows to be so owned or has received
written notice thereof shall be so disregarded. Notes so owned that have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Indenture Trustee the pledgees right so to act with
respect to such Notes and that the pledgee is not the Trust, any other obligor
upon the Notes, the Seller or any Affiliate of any of the foregoing Persons.

               Outstanding Amount: The aggregate principal amount of all Notes
Outstanding at the date of determination.

               Predecessor Note: With respect to any particular Class A Note or
Class B Note, every previous Note evidencing all or a portion of the same debt
as that evidenced by such

                                       -6-

<PAGE>   12

particular Note; and, for the purpose of this definition, any Notes
authenticated and delivered under Section 2.5 in lieu of mutilated, lost,
destroyed or stolen Notes shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen note.

               Preference Claim: As defined in Section 5.19(b) hereof.

               Proceeding: Any suit in equity, action at law or other judicial
or administrative proceeding.

               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 and acceptable
to the Controlling Party.

               Rating Agency Condition: With respect to any action, that each
Rating Agency shall have been given 10 days' (or such shorter period as shall be
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified each of the Insurer 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. Upon receipt of such notice by the
Indenture Trustee, the Indenture Trustee shall promptly forward such notice to
the Seller, the Servicer, each Noteholder, the Owner Trustee and the Trust.

               Record Date: With respect to a Distribution Date or Redemption
Date, the close of business on the Business Day immediately preceding such
Distribution Date or Redemption Date.

               Redemption Date: In the case of a redemption of the Notes
pursuant to Section 10.1(a) or a payment to Noteholders pursuant to Section
10.1(b), the Distribution Date specified by the Servicer or the Trust pursuant
to Section 10.1(a) or (b) as applicable.

               Redemption Price: (a) In the case of a redemption of the Notes
pursuant to Section 10.1(a), an amount equal to the unpaid principal amount of
the then outstanding principal amount of each class of Notes being redeemed plus
accrued and unpaid interest thereon to but excluding the Redemption Date.

               Responsible Officer: With respect to the Indenture Trustee, the
Trust Collateral Agent or the Owner Trustee (as defined in the Trust Agreement),
any officer within the Corporate Trust Office of the Indenture Trustee or the
Owner Trustee, as the case may be, including any Managing Director, Vice
President, Assistant Vice President, Assistant Treasurer, Assistant Secretary or
any other officer of the Indenture Trustee or the Owner Trustee, as the case may
be, customarily performing functions similar to those performed by any of the
above designated officers, and also, with respect to a particular matter, any
other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.

               Sale and Servicing Agreement: The Sale and Servicing Agreement
dated as of September 1, 1999, among National Financial Auto Funding Trust, as
Seller, National Auto Finance Company, Inc., as Servicer, the Trust and the
Trust Collateral Agent, as the same may

                                      -7-
<PAGE>   13

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

               Scheduled Payments: As defined in the Class A Note Policy.

               Service Contract: With respect to a Financed Vehicle, the
agreement, if any, financed under the related Receivable that provides for the
repair of such Financed Vehicle.

               State: Any one of the 50 states of the United States of America
or the District of Columbia.

               Transaction Documents: As defined in the Insurance Agreement.

               Termination Date: The latest of (i) the expiration of the Class A
Note Policy and the return of the Class A Note Policy to the Insurer for
cancellation, (ii) the date on which the Insurer shall have received payment and
performance of all Insurer Trust Secured Obligations, and (iii) the date on
which the Indenture Trustee shall have received payment and performance of all
Trustee Trust Secured Obligations.

               Trust: The party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.

               Trust Collateral Agent: Initially, Harris Trust and Savings Bank,
in its capacity as trust collateral agent on behalf of the Trust Secured
Parties, including its successors in interest, until and unless a successor
Person shall have become the Trust Collateral Agent pursuant to Section 6.17
hereof, and thereafter "Trust Collateral Agent" shall mean such successor
Person.

               Trust Order and Trust Request: A written order or request signed
in the name of the Trust by any one of its Authorized Officers and delivered to
the Indenture Trustee.

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

               Trust Secured Obligations: The Insurer Trust Secured Obligations
and the Trustee Trust Secured Obligations.

               Trust Secured Parties: Each of the Indenture Trustee and the
Noteholders in respect of the Trustee Trust Secured Obligations and the Insurer
in respect of the Insurer Trust Secured Obligations.

               Trustee Trust Secured Obligations: All amounts and obligations
which the Trust may at any time owe to or on behalf of the Indenture Trustee for
the benefit of the Noteholders under this Indenture or the Notes.

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

                                       -8-
<PAGE>   14

               Section 1.2 Rules of Construction. Unless the context otherwise
requires:

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

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

               (iii) "or" is not exclusive;

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

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

               Section 1.3 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 the Noteholder 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 National Financial Auto Funding Trust or any Affiliate thereof shall be
deemed not to be Outstanding; provided, however, that, solely for the purpose of
determining whether the Indenture Trustee or the Trust Collateral Agent is
entitled to rely upon any such action or consent, only Notes which the Owner
Trustee, the Indenture Trustee or the Trust Collateral Agent, respectively,
knows to be so owned shall be so disregarded.

               Section 1.4 Material Adverse Effect. Whenever a determination is
to be made under this Agreement as to whether a given event, action, course of
conduct or set of facts or circumstances could or would have a material adverse
effect on the Noteholders (or any similar or analogous determination), such
determination shall be made without taking into account the funds available from
claims under the Class A Note Policy.

                                   ARTICLE II

                                    THE NOTES

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

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

                                       -9-
<PAGE>   15

               Each Class A Note or Class B Note shall be dated the date of its
authentication. The terms of the Notes set forth in Exhibit A and Exhibit B are
part of the terms of this Indenture.

               Section 2.2 Execution, Authentication and Delivery. The Notes
shall be executed on behalf of the Trust by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be original or
facsimile.

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

               The Indenture Trustee shall upon receipt of the Class A Note
Policy and Trust Order for authentication and delivery, authenticate and deliver
the Class A Notes for original issue in an aggregate principal amount of
$48,000,000 and the Class B Notes for original issue in an aggregate principal
amount of $3,000,000. The Notes outstanding at any time may not exceed such
amount except as provided in Section 2.5.

               Each Class A Note and Class B Note shall be dated the date of its
authentication. The Notes shall be issuable as registered Notes in the minimum
denomination of $100,000 and in integral multiples of $1,000 in excess thereof.

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

               Section 2.3 Temporary Notes. Pending the preparation of Notes,
the Trust may execute, and upon receipt of a Trust Order the Indenture Trustee
shall authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, of the tenor of the Notes in
lieu of which they are issued and with such variations not inconsistent with the
terms of this Indenture as the officers executing such Notes may determine, as
evidenced by their execution of such Notes.

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

                                      -10-
<PAGE>   16

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

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

                  Upon surrender for registration or transfer of any Class A
Note or Class B Note at the office or agency of the Trust to be maintained as
provided in Section 3.2, and if the requirements of Section 8-401(1) of the UCC
are met, the Trust shall execute or cause the Indenture Trustee to authenticate
one or more new Notes, in any authorized denominations and for the same
aggregate principal amount. A Noteholder may also obtain from the Indenture
Trustee, in the name of the designated transferee or transferees, one or more
new Notes in any authorized denominations and for the same aggregate principal
amount. Such requirements shall not be deemed to create a duty in the Indenture
Trustee to monitor the compliance by the Trust with Section 8-401 of the UCC.

                  As a condition to the registration of any transfer of a Class
B Note, the prospective transferee of such a Class B Note shall represent to the
Indenture Trustee and the Note Registrar the following:

                  (i) It has neither acquired nor will it transfer the Class B
          Note or cause the Class B Note to be marketed on or through an
          "established securities market" within the meaning of Section
          7704(b)(1) of the Code, including, without limitation, an
          over-the-counter-market or an interdealer quotation system that
          regularly disseminates firm buy or sell quotations;

                  (ii) It either (A) is not, and will not become, a partnership,
          S corporation or grantor trust for U.S. federal income tax purposes,
          or (B) is such an entity, but none of the direct or indirect
          beneficial owners of any of the interests in such transferee have
          allowed or caused, or will allow or cause, fifty percent (50%) or more
          of the value of such interests to be attributable to such transferee's
          ownership of the Class B Note; and

                  (iii) It understands that tax counsel to the Trust has
          provided an opinion substantially to the effect that the Trust is not
          a publicly traded partnership taxable as a

                                      -11-
<PAGE>   17

          corporation for U.S. federal income tax purposes and that the validity
          of such opinion is dependent in part on the accuracy of the
          representations in paragraphs (i) and (ii) above.

                  At the option of the Holder, Notes may be exchanged for other
Notes in any authorized denominations and for the same aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, and if the requirements of
Section 8-401(1) of the UCC are met, the Trust shall execute and upon its
request the Indenture Trustee shall authenticate the Notes which the Noteholder
making the exchange is entitled to receive. Such requirements shall not be
deemed to create a duty in the Indenture Trustee to monitor the compliance by
the Trust with Section 8-40 1 of the UCC.

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

                  Every Class A Note or Class B Note presented or surrendered
for registration of transfer or exchange shall be (i) duly endorsed by, or be
accompanied by a written instrument of transfer in the form attached to
Exhibit A or Exhibit B, as applicable, duly executed by the Holder thereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar which requirements include membership or participation in
Securities Transfer Agents Medallion Program ("Stamp") or such other "signature
guarantee program" as may be determined by the Note Registrar in addition to, or
in substitution for, Stamp, all in accordance with the Exchange Act, and (ii)
accompanied by an investor letter substantially in the form of Annex C hereto.

                  The Class B Notes may not be transferred, directly or
indirectly, to any Person that is (i) an employee benefit plan (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), which is subject to the provisions of Title I of ERISA, (ii) a plan
described in section 4975(e)(1) of the Internal Revenue Code of 1986, as
amended, or (iii) an entity whose underlying assets are deemed to be assets of a
plan described in (i) or (ii) above by reason of such plan's investment in the
entity (any such entity described in clauses (i) through (iii), a "Benefit
Plan"). The Class A Notes may not be transferred to a Benefit Plan unless the
acquisition and holding of the Notes by such Benefit Plan is covered by a
Department of Labor Prohibited Transactions Class Exemption ("PTCE") or an
individual exemption or statutory exemption from ERISA's prohibited transaction
provisions. Prior to acquiring a Class A Note or Class B Note, the Holder
thereof shall be required to represent and warrant that either it is not a
Benefit Plan or, in the case of a Class A Note only, its acquisition and holding
of the Class A Note is not a prohibited transaction or covered by a PTCE or an
individual or statutory exemption.

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

                                      -12-
<PAGE>   18

                  Notwithstanding, the preceding provisions of this section, the
Trust shall not be required to make, and the Note Registrar shall not register,
transfers or exchanges of Notes selected for redemption for a period of 15 days
preceding the Distribution Date.

                  Section 2.5 Mutilated, Destroyed, Lost or Stolen Notes. If (i)
any mutilated Class A Note or Class B Note is surrendered to the Indenture
Trustee, or the Indenture Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Class A Note or Class B Note, and (ii) there
is delivered to the Indenture Trustee and the Insurer (unless an Insurer Default
shall have occurred and be continuing) such security or indemnity as may be
required by it to hold the Trust, the Indenture Trustee and the Insurer (with
respect to the Class A Notes) harmless (which requirement in the case of an
institutional investor having a claims paying ability or credit rating of
investment grade or better shall be satisfied by an unsecured agreement to
indemnify), then, in the absence of notice to the Trust, the Class A Note or
Class B Note Registrar or the Indenture Trustee that such Class A Note or Class
B Note has been acquired by a bona fide purchaser, and provided that the
requirements of Section 8-405 of the UCC are met, the Trust shall execute and
upon its request the Indenture Trustee shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen Class A
Note or Class B Note, a replacement Class A Note or Class B Note, as applicable
(such requirement shall not be deemed to create a duty in the Indenture Trustee
to monitor the compliance by the Trust with Section 8-405); provided, however,
that if any such destroyed, lost or stolen Class A Note or Class B Note, but not
a mutilated Class A Note or Class B Note, shall have become or within seven days
shall be due and payable, or shall have been called for redemption, the Trust
may, instead of issuing a replacement Class A Note or Class B Note, direct the
Indenture Trustee, in writing, to pay such destroyed, lost or stolen Class A
Note or Class B Note when so due or payable or upon the Redemption Date without
surrender thereof. If, after the delivery of such replacement Class A Note or
Class B Note or payment of a destroyed, lost or stolen Class A Note or Class B
Note pursuant to the proviso to the preceding sentence, a bona fide purchaser of
the original Class A Note or Class B Note in lieu of which such replacement
Class A Note or Class B Note was issued presents for payment such original Class
A Note or Class B Note, the Trust, the Indenture Trustee and the Insurer shall
be entitled to recover such replacement Class A Note or Class B Note (or such
payment) from the Person to whom it was delivered or any Person taking such
replacement Class A Note or Class B Note from such Person to whom such
replacement Class A Note or Class B Note was delivered or any assignee of such
Person, except a bona fide purchaser, and shall be entitled to recover upon the
security or indemnity provided therefor to the extent of any loss, damage, cost
or expense incurred by the Trust or the Indenture Trustee in connection
therewith.

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

                  Every replacement Class A Note or Class B Note issued pursuant
to this Section in replacement of any mutilated, destroyed, lost or stolen Class
A Note or Class B Note shall constitute an original additional contractual
obligation of the Trust, whether or not the mutilated, destroyed, lost or stolen
Class A Note or Class B Note shall be at any time enforceable by

                                      -13-
<PAGE>   19

anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Class A Note or Class B Notes duly issued
hereunder.

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

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

                  Section 2.7 Payment of Principal and Interest; Defaulted
Interest. (a) The Notes shall accrue interest as provided in the Forms of Notes
set forth in Exhibit A, Exhibit B and Section 3.1 hereof, and such interest
shall be payable on each Distribution Date as specified therein. Any installment
of interest or principal, if any, payable on any Class A Note or Class B Note
which is punctually paid or duly provided for by the Trust on the applicable
Distribution Date shall be paid to the Person in whose name such Class A Note or
Class B Note (or one or more Predecessor Notes) is registered on the Record
Date, by wire transfer in immediately available funds to the account designated
by the applicable Noteholder.

                  (b) The principal of the Notes shall be payable in
installments on each Distribution Date as provided in the Forms of Notes set
forth in Exhibit A, Exhibit B and Section 3.1 hereof. Notwithstanding the
foregoing, and subject to Section 5.4, the entire unpaid principal amount of the
Notes shall be due and payable, if not previously paid, on the date on which an
Event of Default shall have occurred and be continuing and the Controlling Party
or the Indenture Trustee has declared the Notes to be immediately due and
payable in the manner provided in Section 5.2 hereof. Upon written notice from
the Trust, the Indenture Trustee shall notify the Person in whose name a Class A
Note or Class B Note is registered at the close of business on the Record Date
preceding the Distribution Date on which the Trust expects that the final
installment of principal of and interest on such Class A Note or Class B Note
will be paid. Such notice shall be mailed or transmitted by facsimile prior to
such final Distribution Date and shall specify that presentation and surrender
of such Class A Note or Class B Note shall be made within 30 days of such final
payment and shall specify the place where such Class A Note or Class B Note may
be presented and surrendered following payment of such installment. Notices in
connection with redemptions of Notes shall be mailed to Noteholders as provided
in Section 10.2.

                  (c) If the Trust defaults in a payment of interest on the
Notes, the Trust shall pay defaulted interest (plus interest on such defaulted
interest to the extent lawful) at the applicable Interest Rate to the extent
lawful. The Trust may pay such defaulted interest to the Persons who are
Noteholders on a subsequent special record date, which date shall be at least
five Busin~ss Days prior to the payment date. The Trust shall fix or cause to be
fixed any such

                                      -14-
<PAGE>   20

special record date and payment date, and, at least 15 days before any such
special record date, the Trust shall mail to each Noteholder and the Indenture
Trustee a notice that states the special record date, the payment date and the
amount of defaulted interest to be paid.

                  (d) Promptly following the date on which all principal of and
interest on the Class A Notes has been paid in full and the Class A Notes have
been surrendered to the Indenture Trustee, the Indenture Trustee shall, upon
written notice from the Servicer of the amounts, if any, that the Insurer has
paid in respect of the Class A Notes under the Class A Note Policy or otherwise
which has not been reimbursed to it, deliver such surrendered Class A Notes to
the Insurer to the extent not previously canceled or destroyed.

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

                  Section 2.9 Release of Collateral. The Trust Collateral Agent
shall, on or after the Termination Date, release any remaining portion of the
Trust Property from the lien created by this Indenture and deposit in the
Collection Account any funds then on deposit in any other Trust Account. The
Trust Collateral Agent shall release property from the lien created by this
Indenture pursuant to this Section 2.9 only upon receipt of a Trust Request by
it and the Indenture Trustee accompanied by an Officer's Certificate and an
Opinion of Counsel and with the prior written consent of the Controlling Party.

                                   ARTICLE III

                                    COVENANTS

                  Section 3.1 Payment of Principal and Interest. The Trust will
duly and punctually pay the principal of and interest on the Notes in accordance
with the terms of the Notes and this Indenture. Without limiting the foregoing,
the Trust will cause to be distributed all amounts on deposit in the Class A
Note Distribution Account and Class B Note Distribution Account on a
Distribution Date deposited therein pursuant to the Sale and Servicing Agreement
for the benefit of the Noteholders. Amounts properly withheld under the Code by
any Person from a payment to any Noteholder of interest and/or principal shall
be considered as having been paid by the Trust to such Noteholder for all
purposes of this Indenture.

                                      -15-
<PAGE>   21

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

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

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

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

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

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

                  (iv) immediately resign as a Note Paying Agent and forthwith
          pay to the Indenture Trustee all sums held by it in trust for the
          payment of Notes if at any time it ceases to meet the standards
          required to be met by a Note Paying Agent at the time of its
          appointment; and

                  (v) comply with all requirements of the Code with respect to
          the withholding from any payments made by it on any Notes of any
          applicable withholding taxes imposed

                                      -16-
<PAGE>   22

          thereon and with respect to any applicable reporting requirements in
          connection therewith.

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

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

                  Section 3.4 Existence. Except as otherwise permitted by the
provisions of Section 3.10, the Trust will keep in full effect its existence,
rights and franchises as a business trust under the laws of the State of
Delaware (unless it becomes, or any successor Trust hereunder is or becomes,
organized under the laws of any other state or of the United States of America,
in which case the Trust will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Collateral and each other
instrument or agreement included in the Trust Property.

                                      -17-
<PAGE>   23

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

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

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

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

                  (iv) enforce any of the Collateral;

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

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

                  The Trust hereby designates the Trust Collateral Agent as its
agent and attorney-in-fact to execute any financing statement, continuation
statement or other instrument required by the Trust Collateral Agent pursuant to
this Section; provided that, such designation shall not be deemed to create a
duty in the Indenture Trustee or the Trust Collateral Agent to monitor the
compliance of the Trust with respect to its duties under this Section 3.5 or the
adequacy of any financing statement, continuation statement or other instrument
prepared by the Trust.

                  Section 3.6 Opinions as to Trust Property. (a) On the Closing
Date, the Trust shall furnish to the Noteholders, the Indenture Trustee, the
Trust Collateral Agent and the Insurer an Opinion of Counsel either stating
that, in the opinion of such counsel, such action has been taken with respect to
the recording and filing of this Indenture, any indentures supplemental hereto,
and any other requisite documents, and with respect to the execution and filing
of any financing statements and continuation statements, as are necessary to
perfect and make effective the first priority lien and security interest in
favor of the Trust Collateral Agent, for the benefit of the Trust Secured
Parties, created by this Indenture and reciting the details of such action, or
stating that, in the opinion of such counsel, no such action is necessary to
make such lien and security interest effective.

                  (b) Within 90 days after the beginning of each calendar year,
beginning with the first calendar year beginning after the Closing Date, the
Trust shall furnish to the Indenture Trustee, the Noteholders, the Trust
Collateral Agent and the Insurer, an Opinion of Counsel

                                      -18-
<PAGE>   24

either stating that, in the opinion of such counsel, such action has been taken
with respect to the recording, filing, re-recording and refiling of this
Indenture, any indentures supplemental hereto and any other requisite documents
and with respect to the execution and filing of any financing statements and
continuation statements as are necessary to maintain the lien and security
interest created by this Indenture and reciting the details of such action or
stating that in the opinion of such counsel no such action is necessary to
maintain such lien and security interest. Such Opinion of Counsel shall also
describe the recording, filing, re-recording and refiling of this Indenture, any
indentures supplemental hereto and any other requisite documents and the
execution and filing of any financing statements and continuation statements
that will, in the opinion of such counsel, be required to maintain the lien and
security interest of this Indenture.

                  Section 3.7 Performance of Obligations; Servicing of
Receivables. (a) The Trust will not take any action and will use its best
efforts not to permit any action to be taken by others that would release any
Person from any of such Person's covenants or obligations under any instrument
or agreement included in the Trust Property or that would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any such instrument or agreement, except as
ordered by any bankruptcy or other court or as expressly provided in this
Indenture, the Transaction Documents or such other instrument or agreement.

                  (b) The Trust may contract with other Persons acceptable to
the Controlling Party to assist it in performing its duties under this
Indenture, and any performance of such duties by a Person identified to the
Indenture Trustee and the Controlling Party in an Officer's Certificate of the
Trust shall be deemed to be action taken by the Trust. Initially, the Trust has
contracted with the Servicer to assist the Trust in performing its duties under
this Indenture.

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

                  (d) If a Responsible Officer of the Owner Trustee shall have
actual knowledge of the occurrence of a Servicer Termination Event under the
Sale and Servicing Agreement, the Trust shall promptly notify the Noteholders,
the Indenture Trustee, the Trust Collateral Agent, the Insurer and the Rating
Agencies thereof in accordance with Section 11.4, and shall specify in such
notice, the action, if any, the Trust is taking in respect of such default. If a
Servicer Termination Event shall arise from the failure of the Servicer to
perform any of its duties or obligations under the Sale and Servicing Agreement
with respect to the Receivables, the Trust shall take all reasonable steps
available to it to remedy such failure.

                  (e) The Trust agrees that it will not waive timely performance
or observance by the Servicer, the Backup Servicer or the Seller of their
respective duties under the Transaction

                                      -19-
<PAGE>   25

Documents (x) without the prior consent of the Controlling Party or (y) if the
effect thereof would adversely affect the Holders of any Notes or the Insurer.

                  Section 3.8 Negative Covenants. So long as any Notes are
Outstanding, the Trust shall not:

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

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

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

                  Section 3.9 Annual Statement as to Compliance. The Trust will
deliver to the Indenture Trustee, the Insurer and the Noteholders, within 90
days after the end of each fiscal year of the Trust (commencing with the fiscal
year ended December 31, 1999), an Officer's Certificate stating, as to the
Authorized Officer signing such Officer's Certificate, that

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

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

                                      -20-
<PAGE>   26

                  Section 3.10 Trust May Not Consolidate. (a) The Trust shall
not consolidate or merge with or into any other Person.

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

                  Section 3.11 [Reserved].

                  Section 3.12 No Other Business. The Trust shall not engage in
any business other than financing, purchasing, owning, selling and managing the
Receivables in the manner contemplated by this Indenture and the Transaction
Documents and activities incidental thereto.

                  Section 3.13 No Borrowing. The Trust shall not issue, incur,
assume, guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for (i) the Notes, (ii) obligations owing from time to time
to the Insurer under the Insurance Agreement and (iii) any other Indebtedness
permitted by or arising under the Transaction Documents. The proceeds of the
Notes shall be used exclusively to fund the Trust's purchase of the Receivables
and the other assets specified in the Sale and Servicing Agreement, to fund the
Series 1999-1 Spread Account and to pay the Trust's organizational,
transactional and start-up expenses.

                  Section 3.14 Servicer's Obligations. The Trust shall cause the
Servicer to comply with Sections 4.11, 4.12 and 4.13 of the Sale and Servicing
Agreement.

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

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

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

                  Section 3.18 Restricted Payments. The Trust shall not,
directly or indirectly, (i) pay any dividend or make any distribution (by
reduction of capital or otherwise), whether in cash, property, securities or a
combination thereof, to the Owner Trustee or any owner of a beneficial interest
in the Trust (except as permitted by any Transaction Document) or otherwise with
respect to any ownership or equity interest or security in or of the Trust or to
the Servicer, (ii) redeem, purchase, retire or otherwise acquire for value any
such ownership or equity interest or security or (iii) set aside or otherwise
segregate any amounts for any such purpose; provided, however, that the Trust
may make, or cause to be made, distributions to the Servicer, the Owner

                                      -21-
<PAGE>   27

Trustee, the Indenture Trustee and the Certificateholders as permitted by, and
to the extent funds are available for such purpose under, the Sale and Servicing
Agreement or Trust Agreement. The Trust will not, directly or indirectly, make
payments to or distributions from the Collection Account except in accordance
with this Indenture and the Transaction Documents.

                  Section 3.19 Notice of Events of Default. Upon a Responsible
Officer of the Owner Trustee having actual knowledge thereof, the Trust agrees
to give the Indenture Trustee, the Noteholders, the Insurer and the Rating
Agencies prompt written notice of each Event of Default hereunder and each
default on the part of the Servicer or the Seller of its obligations under the
Sale and Servicing Agreement.

                  Section 3.20 Further Instruments and Acts. Upon request of the
Indenture Trustee acting at the direction of the Controlling Class or the
Insurer, the Trust will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.

                  Section 3.21 Amendments of Sale and Servicing Agreement and
Trust Agreement. The Trust shall not agree to any amendment to Section 13.1 of
the Sale and Servicing Agreement or Section 13.1 of the Trust Agreement to
eliminate the requirements thereunder that the Indenture Trustee, the Insurer or
the Holders of the Notes consent to amendments thereto as provided therein.

                  Section 3.22 Income Tax Characterization. The Trust, the
Indenture Trustee, the Trust Collateral Agent and each Noteholder intend and
agree to treat, and to take no action inconsistent with the treatment of, the
Notes as indebtedness for purposes of federal, state, local and foreign income
and franchise taxes and any other tax imposed on or measured by net income. Each
Noteholder, by acceptance of its Note, agrees to be bound by the provisions of
the Section 3.22. Furthermore, subject to the following paragraph, the Trust,
the Indenture Trustee, the Trust Collateral Agent and each Noteholder agree and
intend to treat the Trust for income and franchise tax purposes as a security
device only (or alternatively, if such characterization is not respected for any
applicable income or franchise tax purposes, as a non-entity disregarded as an
entity separate from its owner for such income or franchise tax purposes under
Treasury Regulations Section 301.7701-3(b)(ii) or any similar provisions of
applicable law).

                  Notwithstanding the above, in the event that any Class of
Notes is deemed for any applicable income or franchise tax purposes to represent
an equity interest in the Trust, it is the intent and agreement of the parties
hereto that the Trust shall be treated for such income or franchise tax purposes
as a partnership among the Holders of such Notes and the Certificateholder. In
the event such a partnership is deemed to exist, any interest accrued on the
Notes in accordance with the terms thereof shall be treated as guaranteed
payments as defined in Code Section 707(c) and the partnership's taxable income
or loss (net of such guaranteed payments) shall be allocated solely to the
Certificateholder. If such treatment is not respected, then the net income of
the Trust for any month as determined for federal income tax purposes (and each
item of income, gain, loss and deduction entering into the computation thereof)
shall be allocated in such manner as to cause to the greatest extent possible
the Certificateholder and each Noteholder to recognize net taxable income or
loss at such time, and in such amounts and with such character, as each such
person would have recognized such income or loss if such

                                      -22-
<PAGE>   28

Notes had been respected as indebtedness and had not been recharacterized as an
equity interest in the Trust.

                  Section 3.23 Year 2000. Any reprogramming required to permit
the proper functioning, in and following the year 2000, of (i) the computer
systems used to conduct, operate and manage the business, assets and operations
of the Trust and (ii) equipment containing embedded microchips (including
systems and equipment supplied by others or with which systems used by, or on
behalf of, the Trust interface) and the testing of all such systems and
equipment, as so reprogrammed, has been completed as of the date hereof. The
cost to the Trust of such reprogramming and testing and of the reasonably
foreseeable consequences of year 2000 to the Trust (including, without
limitation, reprogramming errors and the failure of others' systems or
equipment) will not result in a Default or have a material adverse effect upon
the business, assets, operations, prospects or condition, financial or
otherwise, of the Trust. Except for such of the reprogramming referred to in the
preceding sentence as may be necessary, the computer and management information
systems used to conduct, operate and manage the business, assets and operations
of the Trust are and, with ordinary course upgrading and maintenance, will
continue, until the satisfaction and discharge of this Indenture under Section
4.1 hereof, to be, sufficient to permit the Trust to conduct its business
without having a material adverse effect upon the business, assets, operations,
prospects or condition, financial or otherwise, of the Trust.

                                   ARTICLE IV

                           SATISFACTION AND DISCHARGE

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

                          (A)       either

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

                                      -23-
<PAGE>   29

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

                                        (i)   have become due and payable,

                                        (ii)  will become due and payable on the
          Final Scheduled Distribution Date and the Class A Note Policy has
          expired in accordance with its terms and been returned to the Insurer
          for cancellation, or

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

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

                  (C) the Trust has delivered to the Indenture Trustee, the
Noteholders, the Trust Collateral Agent and the Insurer an Officer's Certificate
and an Opinion of Counsel each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with. Upon such satisfaction and discharge, the Indenture Trustee
shall give prompt written notice thereof to each Rating Agency.

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

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

                                      -24-
<PAGE>   30

                                    ARTICLE V

                                    REMEDIES

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

                  (i)   default in the payment of any interest on any Note when
          the same becomes due and payable, and such default shall continue for
          a period of two Business Days (solely for purposes of this clause, a
          payment on the Notes funded by the Insurer or the Collateral Agent
          pursuant to the Spread Account Agreement shall be deemed to be a
          payment made by the Trust);

                  (ii)  default in the payment of the principal of or any
          installment of the principal of any Notes when the same becomes due
          and payable and such default shall continue for a period of two
          Business Days (solely for purposes of this clause, a payment on the
          Notes funded by the Insurer or the Collateral Agent pursuant to the
          Spread Account Agreement, shall be deemed to be a payment made by the
          Trust) (A) for each Distribution Date other than the Final Scheduled
          Distribution Date, to the extent that the Available Amount in
          accordance with the priorities set forth in Section 5.7(a) of the Sale
          and Servicing Agreement are collected but not distributed, and (B) as
          to the Final Scheduled Distribution Date, irrespective of whether or
          not the Available Amount under Section 5.7(a) of the Sale and
          Servicing Agreement is sufficient therefore;

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

                  (iv)  default in the observance or performance of any covenant
          or agreement of the Trust made in this Indenture (other than a
          covenant or agreement, a default in the observance or performance of
          which is elsewhere in this Section specifically dealt with) or in any
          certificate or other writing delivered in connection herewith, or any
          representation or warranty of the Trust made in this Indenture or in
          any certificate or other writing delivered pursuant hereto proving to
          have been incorrect in any material respect as of the time when the
          same shall have been made, and such default shall continue or not be
          cured, or the circumstance or condition in respect of which such
          misrepresentation or warranty was incorrect shall not have been
          eliminated or otherwise cured, for a period of 30 days after the
          earlier to occur of (x) the date upon which written, telecopied or
          telephonic (confirmed promptly in writing) notice of such failure
          shall have

                                      -25-
<PAGE>   31

          been given to the Trust by the Insurer or any Noteholder or (y) the
          date any officer of the Trust has actual knowledge of such failure;

                  (v)   the filing of an involuntary petition or an involuntary
          proceeding against the Trust under the Federal bankruptcy, insolvency
          or other similar law now or hereafter in effect, or appointing a
          receiver, liquidator, assignee, custodian, trustee, sequestrator or
          other similar official of the Trust or for any substantial part of the
          Collateral, or ordering the winding-up or liquidation of the Trust's
          affairs, and such petition or proceeding shall remain unstayed and in
          effect for a period of 60 consecutive days, or an order or decree for
          relief against the Trust shall be entered in any such proceeding;

                 (vi)   the commencement by the Trust of a voluntary case under
          any applicable Federal or state bankruptcy, insolvency or other
          similar law now or hereafter in effect, or the consent by the Trust to
          the entry of an order for relief in an involuntary case under any such
          law, or the consent by the Trust to the appointment or taking
          possession by a receiver, liquidator, assignee, custodian, trustee,
          sequestrator or similar official of the Trust or for any substantial
          part of the Collateral, or the making by the Trust of any general
          assignment for the benefit of creditors, or the failure by the Trust
          generally to pay its debts as such debts become due, or the taking of
          action by the Trust in furtherance of any of the foregoing;

                 (vii)  an Event of Default or equivalent event (as defined in
          the particular transaction documents) under (a) any bond transaction,
          credit agreement, or any other agreement for which obligations in the
          aggregate exceed $1,000,000 to which NAFI or any affiliate (including,
          but not limited to, Funding Trust I, Funding Trust II or National Auto
          Receivables Master Trust) is a party, or (b) any bond transactions,
          credit agreement, or any other similar agreement between NAFI or its
          affiliates and First Union National Bank;

                 (viii) termination of the Custodian or the Back-up Servicer
          without immediate replacement by a party acceptable to the Controlling
          Party; or

                 (ix)   occurrence of any servicer termination event under any
          bond transaction, credit agreement or similar agreement to which NAFI
          or any Seller is a party.

                  (x)   so long as the Class A Notes shall no longer be
          outstanding, all amounts owing to the Insurer have been paid to it and
          the term of the Class A Note Policy shall have expired, as of any
          Reporting Date, (i) the Average Delinquency Ratio shall have been
          equal to or greater than 12.00%, (ii) the Average Default Rate is
          equal to or greater than 25.00% or (iii) the Average Net Loss Rate is
          equal to or greater than 13.00%.

                  The Trust shall deliver to each Noteholder, the Indenture
Trustee, the Owner Trustee, the Insurer and each Rating Agency, within five days
after the occurrence thereof, written notice in the form of an Officer's
Certificate of any event which with the giving of notice and the lapse of time
would become an Event of Default, its status and what action the Trust is taking
or proposes to take with respect thereto.

                                      -26-
<PAGE>   32

                  Section 5.2 Rights Upon Event of Default. (a) If an Event of
Default, other than an Event of Default as described in Section 5.1(v) or (vi),
shall have occurred and be continuing, the Controlling Party, in its sole
discretion, may declare all the Notes to be immediately due and payable at par,
by a notice in writing to the Indenture Trustee and the Noteholders, setting
forth the Event or Events of Default, and, upon any such declaration, the unpaid
principal amount of such Notes, together with accrued and unpaid interest
thereon through the date of acceleration, shall become immediately due and
payable. If an Event of Default, as described in Section 5.1(v) or (vi), shall
have occurred and be continuing, the Indenture Trustee shall declare all the
Notes to be immediately due and payable at par, and, upon any such declaration,
the unpaid principal amount of such Notes, together with accrued and unpaid
interest thereon through the date of acceleration, shall become immediately due
and payable. If an Event of Default shall have occurred and be continuing, the
Controlling Party may exercise any of the remedies specified in Section 5.4(a).
In the event of any acceleration of any Class A Notes by operation of this
Section 5.2, the Indenture Trustee shall continue to be entitled to make claims
under the Class A Note Policy pursuant to the Sale and Servicing Agreement for
Scheduled Payments on the Class A Notes. Payments under the Class A Note Policy
following acceleration of any Notes shall be applied by the Indenture Trustee:

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

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

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

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

                  (i) the Trust has paid or deposited with the Indenture Trustee
         a sum sufficient to pay;

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

                                      -27-
<PAGE>   33

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

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

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

                  Section 5.3 Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee. (a) The Trust covenants that if (i) a default
occurs in the payment of any interest on any Note when the same becomes due and
payable (solely for purposes of this clause, a payment on the Class A Notes
funded by the Insurer pursuant to the Class A Note Policy or the Collateral
Agent pursuant to the Spread Account shall be deemed to be payment made by the
Trust), and such default continues for a period of two Business Days, or (ii) a
default occurs in the payment of the principal of or any installment of the
principal of any Note when the same becomes due and payable (solely for purposes
of this clause, a payment on the Class A Notes funded by the Insurer pursuant to
the Class A Note Policy or the Collateral Agent pursuant to the Spread Account
shall be deemed to be payment made by the Trust), and such default continues for
a period of two Business Days, the Trust will, upon demand of the Indenture
Trustee, pay to it, for the benefit of the Holders of the Notes, the whole
amount then due and payable on such Notes for principal and interest, with
interest upon the overdue principal, and, to the extent payment at such rate of
interest shall be legally enforceable, upon overdue installments of interest, at
the applicable Interest Rate and in addition thereto such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee and its agents and counsel.

                  (b) Each Trust Secured Party hereby irrevocably and
unconditionally appoints the Controlling Party as the true and lawful
attorney-in-fact of such Trust Secured Party for so long as such Trust Secured
Party is not the Controlling Party, with full power of substitution, to execute,
acknowledge and deliver any notice, document, certificate, paper, pleading or
instrument and to do in the name of the Controlling Party as well as in the
name, place and stead of such Trust Secured Party such acts, things and deeds
for or on behalf of and in the name of such Trust Secured Party under this
Indenture (including specifically under Section 5.4) and under the Transaction
Documents which such Trust Secured Party could or might do or which may be
necessary, desirable or convenient in such Controlling Party's sole discretion
to effect the purposes contemplated hereunder and under the Transaction
Documents and, without limitation, following the occurrence of an Event of
Default, exercise full right, power and authority to take, or defer from taking,
any and all acts with respect to the administration, maintenance or disposition
of the Trust Property.

                  (c) If an Event of Default occurs and is continuing, the
Indenture Trustee may in its discretion but with the prior written consent of
the Controlling Party and shall, at the direction of the Controlling Party,
proceed to protect and enforce its rights and the rights of the Noteholders and
the Insurer by such appropriate Proceedings as the Indenture Trustee or the

                                      -28-
<PAGE>   34

Controlling Party shall deem most effective to protect and enforce any such
rights, whether for the specific enforcement of any covenant or agreement in
this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy or legal or equitable right vested in the
Indenture Trustee by this Indenture or by law.

                  (d) In case there shall be pending, relative to the Trust or
any other obligor upon the Notes or any Person having or claiming an ownership
interest in the Trust Property, proceedings under Title 11 of the United States
Code or any other applicable Federal or state bankruptcy, insolvency or other
similar law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Trust or its property or such other
obligor or Person, or in case of any other comparable judicial proceedings
relative to the Trust or other obligor upon the Notes, or to the creditors or
property of the Trust or such other obligor, the Indenture Trustee, irrespective
of whether the principal of any Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Indenture Trustee shall have made any demand pursuant to the provisions of this
Section, shall be entitled and empowered, by intervention in such proceedings or
otherwise:

                  (i) to file and prove a claim or claims for the whole amount
         of principal and interest owing and unpaid in respect of the Notes and
         to file such other papers or documents as may be necessary or advisable
         in order to have the claims of the Indenture Trustee (including any
         claim for reasonable compensation to the Indenture Trustee and each
         predecessor Indenture Trustee, and their respective agents, attorneys
         and counsel, and for reimbursement of all expenses and liabilities
         incurred, and all advances made, by the Indenture Trustee and each
         predecessor Indenture Trustee, except as a result of negligence, bad
         faith or willful misconduct) and of the Noteholders allowed in such
         proceedings;

                  (ii) unless prohibited by applicable law and regulations, to
         vote on behalf of the Holders of Notes in any election of a trustee, a
         standby trustee or person performing similar functions in any such
         proceedings;

                  (iii) to collect and receive any monies or other property
         payable or deliverable on any such claims and to distribute all amounts
         received with respect to the claims of the Noteholders and of the
         Indenture Trustee on their behalf in accordance with the priorities as
         set forth in Section 5.7(a) of the Sale and Servicing Agreement after
         the application of such amounts to the costs of collections incurred by
         the Indenture Trustee; and

                  (iv) to file such proofs of claim and other papers or
         documents as may be necessary or advisable in order to have the claims
         of the Indenture Trustee or the Holders of Notes allowed in any
         judicial proceedings relative to the Trust, its creditors and its
         property;

and any trustee, receiver, liquidator, custodian or other similar official in
any such proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover

                                      -29-
<PAGE>   35

reasonable compensation to the Indenture Trustee, each predecessor Indenture
Trustee and their respective agents, attorneys and counsel, and all other
expenses and liabilities incurred, and all advances made, by the Indenture
Trustee and each predecessor Indenture Trustee except as a result of negligence
or bad faith.

                  (e) Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or vote for or accept or adopt on
behalf of any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar person.

                  (f) All rights of action and of asserting claims under this
Indenture, the Spread Account Agreement or under any of the Notes, may be
enforced by the Indenture Trustee without the possession of any of the Notes or
the production thereof in any trial or other proceedings relative thereto, and
any such action or proceedings instituted by the Indenture Trustee shall be
brought in its own name as trustee of an express trust, and any recovery of
judgment, subject to the payment of the expenses, disbursements and compensation
of the Indenture Trustee, each predecessor Indenture Trustee and their
respective agents and attorneys, shall be for the ratable benefit of the Holders
of the Notes and paid in accordance with the priorities as set forth in Section
5.7(a) of the Sale and Servicing Agreement or Section 5.6 hereof, whichever is
applicable.

                  (g) In any proceedings brought by the Indenture Trustee (and
also any proceedings involving the interpretation of any provision of this
Indenture or the Spread Account Agreement), the Indenture Trustee shall be held
to represent all the Holders of the Notes, and it shall not be necessary to make
any Noteholder a party to any such proceedings.

                  Section 5.4 Remedies. (a) If an Event of Default shall have
occurred and be continuing, the Controlling Party may do one or more of the
following (subject to Section 5.5):

                  (i) institute Proceedings in its own name and as trustee of an
         express trust for the collection of all amounts then payable on the
         Notes or under this Indenture with respect thereto, whether by
         declaration or otherwise, enforce any judgment obtained, and collect
         from the Trust and any other obligor upon such Notes monies adjudged
         due;

                  (ii) institute Proceedings from time to time for the complete
         or partial foreclosure of this Indenture with respect to the Trust
         Property;

                  (iii) exercise any remedies of a secured party under the UCC
         and take any other appropriate action to protect and enforce the rights
         and remedies of the Trust Secured Parties; and

                  (iv) direct the Trust Collateral Agent in writing to sell the
          Trust Property or any portion thereof or rights or interest therein,
          at one or more public or private sales called and conducted in any
          manner permitted by law; provided, however, that

                                      -30-

<PAGE>   36

                           (A) if the Insurer is the Controlling Party, the
Insurer may not sell or otherwise liquidate the Trust Property following an
Insurance Agreement Indenture Cross Default unless

                                    (I) such Insurance Agreement Indenture Cross
         Default is pursuant to Section 5.01(a), (e), (i), (l), (m), (o), (p)
         or (q) of the Insurance Agreement, or

                                    (II) the proceeds of such sale or
         liquidation distributable to the Noteholders are sufficient to
         discharge in full all amounts then due and unpaid upon such Notes for
         principal and interest; or

                           (B) if the Controlling Class is the Controlling
Party, the Indenture Trustee may not sell or otherwise liquidate the Trust
Property following an Event of Default unless

                                    (I) such Event of Default is of the type
         described in Section 5.1(i) or (ii), or

                                    (II) either

                                             (x) the Holders of 100% of the
                  Outstanding Amount of the Notes consent thereto,

                                             (y) the proceeds of such sale or
                  liquidation distributable to the Noteholders are sufficient to
                  discharge in full all amounts then due and unpaid upon such
                  Notes for principal and interest, or

                                             (z) the Indenture Trustee
                  determines that the Trust Property will not continue to
                  provide sufficient funds for the payment of principal of and
                  interest on the Notes as they would have become due if the
                  Notes had not been declared due and payable, and the Indenture
                  Trustee provides prior written notice to the Rating Agencies
                  and obtains the consent of Holders of 66-2/3% of the
                  Outstanding Amount of the Notes.

                  In determining such sufficiency or insufficiency with respect
to clause (y) and (z), the Indenture Trustee may, but need not, obtain and rely
conclusively upon an opinion of an Independent investment banking or accounting
firm of national reputation as to the feasibility of such proposed action and as
to the sufficiency of the Trust Property for such purpose.

                  Section 5.5 Optional Preservation of the Receivables. If the
Controlling Class is the Controlling Party and if the Notes have been declared
to be due and payable under Section 5.2 following an Event of Default and such
declaration and its consequences have not been rescinded and annulled, the
Controlling Class may, but need not, elect to direct the Trust Collateral Agent
to maintain possession of the Trust Property. It is the desire of the parties
hereto and the Noteholders that there be at all times sufficient funds for the
payment of principal of and interest on the Notes, and the Indenture Trustee
shall take such desire into account when determining whether or not to direct
the Trust Collateral Agent to maintain possession of the Trust Property. In
determining whether to direct the Trust Collateral Agent to maintain

                                      -31-
<PAGE>   37

possession of the Trust Property, the Indenture Trustee may, but need not,
obtain and rely conclusively upon an opinion of an Independent investment
banking or accounting firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Trust Property for such purpose
which opinion shall be at the expense of the Trust.

                  Section 5.6 Priorities. (a) Following (1) the acceleration of
the Notes pursuant to Section 5.2 or (2) if an Insurer Default shall have
occurred and be continuing, the occurrence of an Event of Default pursuant to
Section 5.1(i), 5.1(ii), 5.1(iii), 5.1(v) or 5.1(vi) of the Indenture or (3) the
receipt of Insolvency Proceeds pursuant to Section 11.1(b) of the Sale and
Servicing Agreement, the Available Amount, in addition to any amounts in
respective of any money or property collected pursuant to Section 5.4 of the
Indenture and any such Insolvency Proceeds, shall be applied by the Trust
Collateral Agent on the related Distribution Date in the following order of
priority:

                  FIRST: amounts due and owing and required to be distributed to
                  the Servicer, the Owner Trustee, the Indenture Trustee, the
                  Collateral Agent, the Trust Collateral Agent and the
                  Custodian, respectively, pursuant to priorities (i) and (ii)
                  of Section 5.7(a) of the Sale and Servicing Agreement and to
                  the Indenture Trustee and Trust Collateral Agent pursuant to
                  Section 6.7 hereof, and not previously distributed or paid by
                  the Servicer or otherwise, in the order of such priorities and
                  without preference or priority of any kind within such
                  priorities;

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

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

                  FOURTH: to Class A Noteholders for amounts due and unpaid on
                  the Class A Notes for principal, ratably, without preference
                  or priority of any kind, according to the amounts due and
                  payable on the Class A Notes for principal;

                  FIFTH: to the Insurer, to the extent of any amounts owing to
                  the Insurer under the Insurance Agreement and not paid;

                  SIXTH: to Class B Noteholders for amounts due and unpaid on
                  the Class B Notes for principal, ratably, without preference
                  or priority of any kind, according to the amounts due and
                  payable on the Class B Notes for principal; and

                                      -32-
<PAGE>   38

                  SEVENTH: to the Collateral Agent to be applied as provided in
                  the Spread Account Agreement.

                  (b) The Indenture Trustee may fix a record date and payment
date for any payment to Noteholders pursuant to this Section. At least 15 days
before such record date the Trust shall mail to each Noteholder and the
Indenture Trustee a notice that states the record date, the payment date and the
amount to be paid.

                  Section 5.7 Limitation of Suits. No Holder of any Notes shall
have any right to institute any proceeding, judicial or otherwise, with respect
to this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:

                  (i) such Holder has previously given written notice to the
         Indenture Trustee of a continuing Event of Default;

                  (ii) the Holders of not less than 25% of the Outstanding
         Amount of the Controlling Class have made written request to the
         Indenture Trustee to institute such proceeding in respect of such Event
         of Default in its own name as Indenture Trustee hereunder;

                  (iii) such Holder or Holders have offered to the Indenture
         Trustee indemnity reasonably satisfactory to it (which requirement in
         the case of an institutional investor having a claims paying ability or
         credit rating of investment grade or better shall be satisfied by an
         unsecured agreement to indemnify) against the costs, expenses
         (including legal fees and expenses) and liabilities to be incurred in
         complying with such request;

                  (iv) the Indenture Trustee for 60 days after its receipt of
         such notice, request and offer of indemnity has failed to institute
         such proceedings;

                  (v) no direction inconsistent with such written request has
         been given to the Indenture Trustee during such 60-day period by the
         Holders of a majority of the Outstanding Amount of the Controlling
         Class; and

                  (vi) an Insurer Default shall have occurred and be continuing;

it being understood and intended that no Holders of Notes shall have any right
in any manner whatsoever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other Holders of
Notes or to obtain or to seek to obtain priority or preference over any other
Holders or to enforce any right under this Indenture, except in the manner
herein provided.

                  In the event the Indenture Trustee shall receive conflicting
or inconsistent requests and indemnity from two or more groups of Holders of
Notes, each representing less than a majority of the Outstanding Amount of the
Controlling Class, the Indenture Trustee in its sole discretion may determine
what action, if any, shall be taken, notwithstanding any other provisions of
this Indenture.

                                      -33-
<PAGE>   39

                  Section 5.8 Unconditional Rights of Noteholders To Receive
Principal and Interest. Notwithstanding any other provisions in this Indenture,
the Holder of any Notes shall have the right, which is absolute and
unconditional, to receive payment of the principal of and interest, if any, on
such Class A Note or Class B Note on or after the respective due dates thereof
expressed in such Note or in this Indenture (or, in the case of redemption, on
or after the Redemption Date) and to institute suit for the enforcement of any
such payment, and such right shall not be impaired without the consent of such
Holder. Any such suit shall not be instituted by the Holders of the Class B
Notes until the Class A Notes shall have been indefeasibly paid in full.

                  Section 5.9 Restoration of Rights and Remedies. If the
Indenture Trustee, the Controlling Party or any Noteholder has instituted any
proceeding to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, then and in every
such case the Trust, the Indenture Trustee and the Noteholders shall, subject to
any determination in such Proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Indenture Trustee, the Controlling Party and the Noteholders shall continue as
though no such proceeding had been instituted.

                  Section 5.10 Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Controlling Party or to the
Noteholders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.

                  Section 5.11 Delay or Omission Not a Waiver. No delay or
omission of the Indenture Trustee or the Controlling Party to exercise any right
or remedy accruing upon any Default or Event of Default shall impair any such
right or remedy or constitute a waiver of any such Default or Event of Default
or an acquiescence therein. Every right and remedy given by this Article V or by
law to the Indenture Trustee or the Controlling Party may be exercised from time
to time, and as often as may be deemed expedient, by the Indenture Trustee or
the Controlling Party.

                  Section 5.12 Control by Noteholders. If a Controlling Class is
the Controlling Party, the Holders of a majority of the Outstanding Amount of
such Class of Notes shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee with
respect to the Notes or exercising any trust or power conferred on the Indenture
Trustee or the Controlling Party; provided that

                  (i) such direction shall not be in conflict with any rule of
         law or with this Indenture;

                  (ii) subject to the express terms of Section 5.4, any
         direction to the Indenture Trustee to sell or liquidate the Trust
         Property shall be by the Holders of Notes representing not less than
         100% of the Outstanding Amount of the Notes;

                                      -34-
<PAGE>   40

                  (iii) such Class of Noteholders shall provide indemnity
         satisfactory to the Indenture Trustee (which requirement in the case of
         an institutional investor having a claims paying ability or credit
         rating of investment grade or better shall be satisfied by an unsecured
         agreement to indemnify) against any and all loss, liability or expense
         incurred by it in connection with its performance of its duties under
         this Section 5.12;

                  (iv) if the conditions set forth in Section 5.5 have been
         satisfied and the Indenture Trustee elects to retain the Trust Property
         pursuant to such Section, then any direction to the Indenture Trustee
         by Holders of Notes representing less than 100% of the Outstanding
         Amount of the Notes to sell or liquidate the Trust Property shall be of
         no force and effect; and

                  (v) the Indenture Trustee may take any other action deemed
         proper by the Indenture Trustee that is not inconsistent with such
         direction.

                  Section 5.13 Waiver of Past Defaults. Prior to the declaration
of the acceleration of the maturity of the Notes as provided in Section 5.4, the
Controlling Party may waive any past Default or Event of Default and its
consequences except a Default (a) in payment of principal of or interest on any
of the Notes or (b) in respect of a covenant or provision hereof which cannot be
modified or amended without the consent of the Holder of each Class A Note or
Class B Note. In the case of any such waiver, the Trust, the Insurer, the
Indenture Trustee and the Holders of the Notes shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any subsequent or other Default or impair any right consequent thereto.

                  Upon any such waiver, such Default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have occurred,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto.

                  Section 5.14 Undertaking for Costs. All parties to this
Indenture agree, and each Holder of any Notes by such Holder's acceptance
thereof shall be deemed to have agreed, that any court may in its discretion
require, in any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Indenture Trustee for any action taken,
suffered or omitted by it as Indenture Trustee, the filing by any party litigant
in such suit of an undertaking to pay the costs of such suit, and that such
court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section shall not apply to (a) any suit instituted by
the Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of any Class of the Notes or (c) any suit instituted by any
Noteholder for the enforcement of the payment of principal of or interest on any
Note on or after the respective due dates expressed in such Notes and in this
Indenture (or, in the case of redemption, on or after the Redemption Date).

                                      -35-
<PAGE>   41

                  Section 5.15 Waiver of Stay or Extension Laws. The Trust
covenants (to the extent that it may lawfully do so) that it will not at anytime
insist upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Trust (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.

                  Section 5.16 Action on Notes. The Indenture Trustee's right to
seek and recover judgment on the Notes or under this Indenture shall not be
affected by the seeking, obtaining or application of any other relief under or
with respect to this Indenture. Neither the lien of this Indenture nor any
rights or remedies of the Indenture Trustee, the Insurer or the Noteholders
shall be impaired by the recovery of any judgment by the Indenture Trustee
against the Trust or by the levy of any execution under such judgment upon any
portion of the Trust Property or upon any of the assets of the Trust.

                  Section 5.17 Performance and Enforcement of Certain
Obligations. (a) Promptly following a request from the Indenture Trustee or the
Controlling Party to do so and at the Servicer's expense, the Trust agrees to
take all such lawful action as the Indenture Trustee or the Controlling Party
may request to compel or secure the performance and observance by the Seller and
the Servicer, as applicable, of each of their obligations to the Trust under or
in connection with the Sale and Servicing Agreement in accordance with the terms
thereof, and to exercise any and all rights, remedies, powers and privileges
lawfully available to the Trust under or in connection with the Sale and
Servicing Agreement to the extent and in the manner directed by the Indenture
Trustee or the Controlling Party, including the transmission of notices of
default on the part of the Seller or the Servicer thereunder and the institution
of legal or administrative actions or proceedings to compel or secure
performance by the Seller or the Servicer of each of their obligations under the
Sale and Servicing Agreement.

                  (b) (i) If the Controlling Class is the Controlling Party and
if an Event of Default has occurred and is continuing, the Indenture Trustee
may, and, at the written direction of the Holders of 66-2/3% of the Outstanding
Amount of each Class of the Notes shall, and (ii) if the Insurer is the
Controlling Party, the Indenture Trustee shall, at the written direction of the
Insurer, exercise all rights, remedies, powers, privileges and claims of the
Trust against the Seller or the Servicer under or in connection with the Sale
and Servicing Agreement, including the right or power to take any action to
compel or secure performance or observance by the Seller or the Servicer of each
of their obligations to the Trust thereunder and to give any consent, request,
notice, direction, approval, extension or waiver under the Sale and Servicing
Agreement, and any right of the Trust to take such action shall be suspended;

                  Section 5.18 Subrogation. The Indenture Trustee shall (i)
receive as attorney-in-fact of each Class A Noteholder any Class A Note Policy
Claim Amount from the Insurer and (ii) deposit the same in the Class A Note
Distribution Account for distribution to Class A Noteholders. Any and all Class
A Note Policy Claim Amounts disbursed by the Indenture Trustee from claims made
under the Class A Note Policy shall not be considered payment by the Trust or
from the Series 1999-1 Spread Account with respect to such Class A Notes, and
shall

                                      -36-
<PAGE>   42

not discharge the obligations of the Trust with respect thereto. The Insurer
shall, to the extent it makes any payment with respect to the Class A Notes,
become subrogated to the rights of the recipient of such payments to the extent
of such payments. Subject to and conditioned upon any payment with respect to
the Class A Notes by or on behalf of the Insurer, the Indenture Trustee shall
assign to the Insurer all rights to the payment of interest or principal with
respect to the Class A Notes which are then due for payment to the extent of all
payments made by the Insurer, and the Insurer may exercise any option, vote
right, power or the like with respect to the Class A Notes to the extent that it
has made payment pursuant to the Class A Note Policy and has not been
reimbursed. To evidence such subrogation, the Note Registrar shall note the
Insurer's rights as subrogee upon the register of Noteholders upon receipt from
the Insurer of proof of payment by the Insurer of any Class A Noteholders'
Interest Distributable Amount or Class A Noteholders' Principal Distributable
Amount. The foregoing subrogation shall in all cases be subject to the rights of
the Noteholders to receive all Scheduled Payments in respect of the Class A
Notes.

                  Section 5.19 Preference Claims. (a) In the event that the
Indenture Trustee has received a certified copy of an order of the appropriate
court that any Class A Scheduled Payment paid on a Class A Note has been avoided
in whole or in part as a preference payment under applicable bankruptcy law, the
Indenture Trustee shall so notify the Insurer, shall comply with the provisions
of the Class A Note Policy to obtain payment by the Insurer of such avoided
payment, and shall, at the time it provides notice to the Insurer, notify
Holders of the Class A Notes by mail that, in the event that any Class A
Noteholder's payment is so recoverable, such Class A Noteholder will be entitled
to payment pursuant to the terms of the Class A Note Policy. The Indenture
Trustee shall furnish to the Insurer at its written request, the requested
records it holds in its possession evidencing the payments of principal of and
interest on Class A Notes, if any, which have been made by the Indenture Trustee
and subsequently recovered from Class A Noteholders, and the dates on which such
payments were made. Pursuant to the terms of the Class A Note Policy, the
Insurer will make such payment on behalf of the Class A Noteholder to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy named in
the Order (as defined in the Class A Note Policy) and not to the Indenture
Trustee or any Class A Noteholder directly (unless a Class A Noteholder has
previously paid such payment to the receiver, conservator, debtor-in-possession
or trustee in bankruptcy, in which case the Insurer will make such payment to
the Indenture Trustee for distribution to such Class A Noteholder upon proof of
such payment reasonably satisfactory to the Insurer).

                  (b) The Indenture Trustee shall promptly notify the Insurer of
any proceeding or the institution of any action (of which the Indenture Trustee
has actual knowledge) seeking the avoidance as a preferential transfer under
applicable bankruptcy, insolvency, receivership, rehabilitation or similar law
(a "Preference Claim") of any distribution made with respect to the Class A
Notes. Each Class A Noteholder, by its purchase of Class A Notes, and the
Indenture Trustee hereby agree that so long as an Insurer Default shall not have
occurred and be continuing, the Insurer may at any time during the continuation
of any proceeding relating to a Preference Claim direct all matters relating to
such Preference Claim including, without limitation, (i) the direction of any
appeal of any order relating to any Preference Claim and (ii) the posting of any
surety, supersedeas or performance bond pending any such appeal at the expense
of the Insurer, but subject to reimbursement as provided in the Insurance
Agreement. In addition, and without limitation of the foregoing, as set forth in
Section 5.18, the Insurer shall be

                                      -37-
<PAGE>   43

subrogated to, and each Noteholder and the Indenture Trustee hereby delegate and
assign, to the fullest extent permitted by law, the rights of the Indenture
Trustee and each Class A Noteholder in the conduct of any proceeding with
respect to a Preference Claim, including, without limitation, all rights of any
party to an adversary proceeding action with respect to any court order issued
in connection with any such Preference Claim.

                  Section 5.20 Optional Purchase of Class A Notes. Upon the
occurrence of an Event of Default, the Class B Noteholders representing more
than fifty percent (50%) of the outstanding principal balance of all Class B
Notes outstanding on such date may (but shall not be obligated to) purchase all
(but not less than all) of all Class A Notes then outstanding, for an amount
equal to the sum of (i) the then unpaid balance of all Class A Notes, (ii)
interest at the interest rate or rates in effect at that time on the amounts set
forth in clause (i) and all other unpaid obligations of the Issuer under the
Transaction Documents for all such Class A Notes. The Trustee shall, promptly
upon receipt of such amount, distribute such amount to the Holders of the Class
A Notes and to the other Persons identified by the Controlling Party as entitled
to such amounts.

                                   ARTICLE VI

              THE INDENTURE TRUSTEE AND THE TRUST COLLATERAL AGENT

                  Section 6.1 Duties of Indenture Trustee. (a) If an Event of
Default has occurred and is continuing, of which a Responsible Officer of the
Indenture Trustee and the Trust Collateral Agent, as the case may be, has actual
knowledge, then the Indenture Trustee or the Trust Collateral Agent, as the case
may be, shall exercise the rights and powers vested in it by this Indenture and
the Transaction Documents and use the same degree of care and skill in its
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs.

                  (b) Except during the continuance of an above-mentioned Event
of Default:

                  (i) each of the Indenture Trustee and the Trust Collateral
         Agent undertakes to perform such duties and only such duties as are
         specifically set forth in this Indenture and no implied covenants or
         obligations shall be read into this Indenture against the Indenture
         Trustee and the Trust Collateral Agent, respectively; and

                  (ii) in the absence of bad faith on its part, each of the
         Indenture Trustee and the Trust Collateral Agent may conclusively rely,
         as to the truth of the statements and the correctness of the opinions
         expressed therein, upon certificates or opinions furnished to the
         Indenture Trustee or the Trust Collateral Agent, as the case may be and
         conforming to the requirements of this Indenture; provided however, the
         Indenture Trustee and the Trust Collateral Agent shall examine the
         certificates and opinions to determine whether or not they conform on
         their face to the requirements of this Indenture.

                  (c) Each of the Indenture Trustee and the Trust Collateral
Agent may not be relieved from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:

                                      -38-
<PAGE>   44

                  (i) this paragraph does not limit the effect of paragraph (b)
         of this Section;

                  (ii) each of the Indenture Trustee and the Trust Collateral
         Agent shall not be liable for any error of judgment made in good faith
         by a Responsible Officer unless it is proved that the Indenture Trustee
         or the Trust Collateral Agent was negligent in ascertaining the
         pertinent facts; and

                  (iii) each of the Indenture Trustee and the Trust Collateral
         Agent shall not be liable with respect to any action it takes or omits
         to take in good faith in accordance with a direction received by it
         pursuant to Section 5.12.

                  (d) The Indenture Trustee and the Trust Collateral Agent shall
not be liable for interest on any money received by it except as the Indenture
Trustee may agree in writing with the Trust.

                  (e) Money held in trust by the Indenture Trustee or the Trust
Collateral Agent need not be segregated from other funds except to the extent
required by law or the terms of this Indenture or the Sale and Servicing
Agreement.

                  (f) No provision of this Indenture shall require the Indenture
Trustee or the Trust Collateral Agent to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers, if it shall have
reasonable grounds to believe that repayment of such funds or indemnity
reasonably satisfactory to it (which requirement in the case of an institutional
investor having a claims paying ability or credit rating of investment grade or
better shall be satisfied by an unsecured agreement to indemnify) against such
risk or liability is not reasonably assured to it.

                  (g) Every provision of this Indenture relating to the conduct
affecting the liability of or affording protection to the Indenture Trustee or
the Trust Collateral Agent shall be subject to the provisions of this Section.

                  (h) The Indenture Trustee or the Trust Collateral Agent shall,
upon two Business Days' prior written notice to the Indenture Trustee or the
Trust Collateral Agent, as the case may be, permit any representative of the
Insurer or any Noteholder holding at least 5% of any Class of Notes outstanding,
during the Indenture Trustee's or the Trust Collateral Agent, as the case may
be, normal business hours, to examine all books of account, records, reports and
other papers of the Indenture Trustee or the Trust Collateral Agent, as the case
may be, relating to the Notes, to make copies and extracts therefrom and to
discuss the Indenture Trustee's or the Trust Collateral Agent's affairs and
actions, as such affairs and actions relate to the Indenture Trustee's or the
Trust Collateral Agent's duties with respect to the Notes, with the Indenture
Trustee's or the Trust Collateral Agent's officers and employees responsible for
carrying out the Indenture Trustee's or the Trust Collateral Agent's duties with
respect to the Notes at the sole cost and expense of the Trust.

                  (i) The Indenture Trustee shall, and hereby agrees that it
will, hold the Class A Note Policy in trust, and will hold any proceeds of any
claim on the Class A Note Policy in trust solely for the use and benefit of the
Class A Noteholders.

                                      -39-
<PAGE>   45
                  (j) Without limiting the generality of this Section 6.1, the
Indenture Trustee shall have no duty (i) to see to any recording, filing or
depositing of this Indenture or any agreement referred to herein or any
financing statement evidencing a security interest in the Financed Vehicles, or
to see to the maintenance of any such recording or filing or depositing or to
any recording, refiling or redepositing of any thereof, (ii) to see to any
insurance of the Financed Vehicles or Obligors or to effect or maintain any such
insurance, (iii) to see to the payment or discharge of any tax, assessment or
other governmental charge or any Lien or encumbrance of any kind owing with
respect to, assessed or levied against any part of the Trust, (iv) to confirm or
verify the contents of any reports or certificates delivered to the Indenture
Trustee pursuant to this Indenture or the Sale and Servicing Agreement believed
by the Indenture Trustee to be genuine and to have been signed or presented by
the proper party or parties, or (v) to inspect the Financed Vehicles at any time
or ascertain or inquire as to the performance of observance of any of the
Trust's, the Seller's or the Servicer's representations, warranties or covenants
or the Servicer's duties and obligations as Servicer and as custodian of the
Receivable Files under the Sale and Servicing Agreement.

                  (k) In no event shall Harris Trust and Savings Bank, in any of
its capacities hereunder, be deemed to have assumed any duties of the Owner
Trustee under the Delaware Business Trust Statute, common law, or the Trust
Agreement.

                  (l) The Indenture Trustee shall not (i) take any action that,
to the actual knowledge of the Indenture Trustee, would result in the Trust's
becoming taxable as a corporation or a publicly-traded partnership for Federal
income tax purposes, or (ii) in accordance with clause (i) hereof (without
limitation), participate in the establishment of a market or the inclusion of
the Trust's interests thereon, within the meaning of Treasury Regulation Section
1.7704-1(d)(1).

                  Section 6.2 Rights of Indenture Trustee and the Trust
Collateral Agent. (a) The Indenture Trustee and the Trust Collateral Agent may
rely conclusively on any document believed by it to be genuine and to have been
signed or presented by the proper person. The Indenture Trustee and the Trust
Collateral Agent need not investigate any fact or matter stated in the document.

                  (b) Before the Indenture Trustee or the Trust Collateral Agent
acts or refrains from acting, it may require an Officer's Certificate or an
Opinion of Counsel. The Indenture Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such Officer's Certificate
or Opinion of Counsel.

                  (c) The Indenture Trustee or the Trust Collateral Agent may
execute any of the trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents or attorneys or a custodian or nominee,
and the Indenture Trustee or the Trust Collateral Agent shall not be responsible
for any misconduct or negligence on the part of, or for the supervision of,
NAFI, including in its capacity as Servicer, or any other such agent, attorney,
custodian or nominee appointed with due care by it hereunder.

                  (d) The Indenture Trustee or the Trust Collateral Agent shall
not be liable for any action it takes or omits to take in good faith which it
believes to be authorized or within its

                                      -40-
<PAGE>   46

rights or powers; provided, however, that the Indenture Trustee's or the Trust
Collateral Agent's conduct does not constitute willful misconduct, negligence or
bad faith.

                  (e) The Indenture Trustee and the Trust Collateral Agent may
consult with counsel, and the advice or opinion of counsel with respect to legal
matters relating to this Indenture and the Notes shall be full and complete
authorization and protection from liability in respect to any action taken,
omitted or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.

                  (f) The Indenture Trustee and the Trust Collateral Agent shall
be under no obligation to institute, conduct, defend any litigation or take any
action under this Indenture or in relation to this Indenture, at the request,
order or direction of any of the Holders of Notes or the Insurer, pursuant to
the provisions of this Indenture, unless such Holders of Notes or the Insurer
shall have offered to the Indenture Trustee and the Trust Collateral Agent
reasonable security or indemnity (which requirement in the case of an
institutional investor having a claims paying ability or credit rating of
investment grade or better shall be satisfied by an unsecured agreement to
indemnify) against the costs, expenses and liabilities that may be incurred
therein or thereby; provided, however that the Indenture Trustee and the Trust
Collateral Agent shall, upon the occurrence of an Event of Default (that has not
been cured), exercise the rights and powers vested in it by this Indenture and
the Transaction Documents and use the same degree of care and skill in its
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs.

                  (g) The Indenture Trustee and the Trust Collateral Agent shall
not be bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document, unless
requested in writing to do so by the Insurer (so long as no Insurer Default
shall have occurred and be continuing) or, if an Insurer Default shall have
occurred and be continuing, by the Holders of Notes evidencing not less than 25%
of the Outstanding Amount of either Class thereof; provided, however, that if
the payment within a reasonable time to the Indenture Trustee and the Trust
Collateral Agent of the costs, expenses or liabilities likely to be incurred by
it in the making of such investigation is, in the opinion of the Indenture
Trustee or the Trust Collateral Agent, not reasonably assured to the Indenture
Trustee or the Trust Collateral Agent by the security afforded to it by the
terms of this Indenture or the Sale and Servicing Agreement, the Indenture
Trustee or the Trust Collateral Agent may require indemnity reasonably
satisfactory to it against such cost, expense (including legal fees and
expenses) or liability as a condition to such proceeding; the reasonable expense
of every such examination shall be paid by the Person making such request, or,
if paid by the Indenture Trustee or the Trust Collateral Agent, shall be
reimbursed by the Person making such request upon demand.

                  Section 6.3 Individual Rights of Indenture Trustee. The
Indenture Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Trust or its Affiliates with
the same rights it would have if it were not Indenture Trustee. Any Note Paying
Agent, Note Registrar, co-registrar or co-paying agent may do the same with like
rights. However, the Indenture Trustee must comply with Sections 6.11 and 6.12.

                                      -41-
<PAGE>   47

                  Section 6.4 Indenture Trustee's Disclaimer. Each of the
Indenture Trustee and the Trust Collateral Agent shall not be responsible for
and makes no representation as to the validity or adequacy of this Indenture,
the Trust Property or the Notes, it shall not be accountable for the Trust's use
of the proceeds from the Notes, and it shall not be responsible for any
statement of the Trust in the Indenture or in any document issued in connection
with the sale of the Notes or in the Notes other than the Indenture Trustee's
certificate of authentication.

                  Section 6.5 Notice of Defaults. If an Event of Default occurs
and is continuing and if it is either actually known by, or written notice of
the existence thereof has been delivered to, a Responsible Officer of the
Indenture Trustee, the Indenture Trustee shall mail to each Noteholder notice of
the Default within five days after such knowledge or notice occurs.

                  Section 6.6 Reports by Indenture Trustee to Holders. The
Servicer shall on behalf of the Trust deliver to each Noteholder such
information as may be reasonably required to enable such Holder to prepare its
Federal and state income tax returns required by law.

                  Section 6.7 Compensation and Indemnity. (a) Pursuant to
Section 5.7(a) of the Sale and Servicing Agreement and subject to Section 6.18
herein, the Trust shall, or shall cause the Servicer to, pay to the Indenture
Trustee and the Trust Collateral Agent from time to time compensation for its
services. The Indenture Trustee's and the Trust Collateral Agent's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Trust shall or shall cause the Servicer to reimburse the Indenture
Trustee and the Trust Collateral Agent for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Indenture Trustee's
and the Trust Collateral Agent's agents, counsel, accountants and experts. The
Trust shall or shall cause the Servicer to indemnify the Indenture Trustee, the
Trust Collateral Agent and their respective officers, directors, employees and
agents against any and all loss, liability or expense (including attorneys' fees
and expenses) incurred by each of them in connection with the acceptance or the
administration of this trust and the performance of its duties hereunder. The
Indenture Trustee or the Trust Collateral Agent shall notify the Trust and the
Servicer promptly of any claim for which it may seek indemnity. Failure by the
Indenture Trustee or the Trust Collateral Agent to so notify the Trust and the
Servicer shall not relieve the Trust of its obligations hereunder or the
Servicer of its obligations under Article XII of the Sale and Servicing
Agreement. The Trust shall or shall cause the Servicer to defend the claim, the
Indenture Trustee or the Trust Collateral Agent may have separate counsel and
the Trust shall or shall cause the Servicer to pay the fees and expenses of such
counsel. Neither the Trust nor the Servicer need reimburse any expense or
indemnify against any loss, liability or expense incurred by the Indenture
Trustee or the Trust Collateral Agent through the Indenture Trustee's or the
Trust Collateral Agent's own willful misconduct, negligence or bad faith.

                  (b) The Trust's payment obligations to the Indenture Trustee
pursuant to this Section shall survive the discharge of this Indenture or the
earlier resignation or removal of the Indenture Trustee or the Trust Collateral
Agent. When the Indenture Trustee incurs expenses after the occurrence of a
Default specified in Section 5.1(iv) or (v) with respect to the Trust, the
expenses are intended to constitute expenses of administration under Title 11 of
the United States Code or any other applicable Federal or state bankruptcy,
insolvency or similar law.

                                      -42-
<PAGE>   48

Notwithstanding anything else set forth in this Indenture or the Transaction
Documents, the Indenture Trustee agrees that the obligations of the Trust (but
not the Servicer) to the Indenture Trustee hereunder and under the Transaction
Documents shall be recourse to the Trust Property only and specifically shall
not be recourse to the assets of the Trust or any Noteholder. In addition, the
Indenture Trustee agrees that its recourse to the Trust, the Trust Property, the
Seller and amounts held pursuant of the Spread Account Agreement shall be
limited to the right to receive the distributions referred to in Section 5.7(a)
of the Sale and Servicing Agreement or Section 3.03 of the Spread Account
Agreement.

                  Section 6.8 Replacement of Indenture Trustee. The Indenture
Trustee may resign at any time by so notifying the Noteholders, the Trust and
the Insurer with 60 days prior written notice. The Trust may and, at the request
of the Controlling Party shall, remove the Indenture Trustee, if:

                  (i) the Indenture Trustee fails to comply with Section 6.11;

                  (ii) a court having jurisdiction in the premises in respect of
         the Indenture Trustee in an involuntary case or proceeding under
         federal or state banking or bankruptcy laws, as now or hereafter
         constituted, or any other applicable federal or state bankruptcy,
         insolvency or other similar law, shall have entered a decree or order
         granting relief or appointing a receiver, liquidator, assignee,
         custodian, trustee, conservator, sequestrator (or similar official) for
         the Indenture Trustee or for any substantial part of the Indenture
         Trustee's property, or ordering the winding-up or liquidation of the
         Indenture Trustee's affairs;

                  (iii) an involuntary case under the federal bankruptcy laws,
         as now or hereafter in effect, or another present or future federal or
         state bankruptcy, insolvency or similar law is commenced with respect
         to the Indenture Trustee and such case is not dismissed within 60 days;

                  (iv) the Indenture Trustee commences a voluntary case under
         any federal or state banking or bankruptcy laws, as now or hereafter
         constituted, or any other applicable federal or state bankruptcy,
         insolvency or other similar law, or consents to the appointment of or
         taking possession by a receiver, liquidator, assignee, custodian,
         trustee, conservator, sequestrator (or other similar official) for the
         Indenture Trustee or for any substantial part of the Indenture
         Trustee's property, or makes any assignment for the benefit of
         creditors or fails generally to pay its debts as such debts become due
         or takes any corporate action in furtherance of any of the foregoing;

                  (v) the Indenture Trustee otherwise becomes incapable of
         acting; or

                  (vi) the rating assigned to the long-term unsecured debt
         obligations of the Indenture Trustee by the Rating Agencies shall be
         lowered below the rating of "BBB", "Baa3" or equivalent rating or be
         withdrawn by either of the Rating Agencies.

                  If the Indenture Trustee resigns or is removed or if a vacancy
exists in the office of the Indenture Trustee for any reason (the Indenture
Trustee in such event being referred to herein as the retiring Indenture
Trustee), the Trust shall promptly appoint a successor Indenture

                                      -43-
<PAGE>   49
Trustee acceptable to the Controlling Party. If the Trust fails to appoint such
a successor Indenture Trustee, the Controlling Party may appoint a successor
Indenture Trustee.

                  A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee, the Controlling
Party and to the Trust. Thereupon the resignation or removal of the retiring
Indenture Trustee shall become effective, and the successor Indenture Trustee
shall have all the rights, powers and duties of the retiring Indenture Trustee
under this Indenture subject to satisfaction of the Rating Agency Condition. The
successor Indenture Trustee shall mail a notice of its succession to
Noteholders. The retiring Indenture Trustee shall promptly transfer all property
held by it as Indenture Trustee to the successor Indenture Trustee.

                  If a successor Indenture Trustee does not take office within
120 days after the retiring Indenture Trustee resigns or is removed, the
retiring Indenture Trustee, the Trust or the Holders of a majority in
Outstanding Amount of either Class of Notes may petition any court of competent
jurisdiction for the appointment of a successor Indenture Trustee.

                  If the Indenture Trustee fails to comply with Section 6.11,
any Noteholder may petition any court of competent jurisdiction for the removal
of the Indenture Trustee and the appointment of a successor Indenture Trustee.

                  Any resignation or removal of the Indenture Trustee and
appointment of a successor Indenture Trustee pursuant to any of the provisions
of this Section shall not become effective until acceptance of appointment by
the successor Indenture Trustee pursuant to Section 6.8 and payment of all fees
and expenses owed to the outgoing Indenture Trustee.

                  Notwithstanding the replacement of the Indenture Trustee
pursuant to this Section, the Trust's and the Servicer's obligations under
Section 6.7 shall continue for the benefit of the retiring Indenture Trustee.

                  Section 6.9 Successor Indenture Trustee by Merger. If the
Indenture Trustee consolidates with, merges or converts into, or transfers all
or substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Indenture Trustee.

                  In case at the time such successor or successors by merger,
conversion or consolidation to the Indenture Trustee shall succeed to the trusts
created by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the certificate
of authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.

                  Section 6.10 Appointment of Co-Indenture Trustee or Separate
Indenture Trustee. (a) Notwithstanding any other provisions of this Indenture,
at any time, for the purpose of meeting any legal requirement of any
jurisdiction in which any part of the Trust may

                                      -44-

<PAGE>   50

at the time be located, the Indenture Trustee with the prior written consent of
the Controlling Party shall have the power and may execute and deliver all
instruments to appoint one or more Persons to act as a co-trustee or
co-trustees, or separate trustee or separate trustees, of all or any part of the
Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Noteholders, such title to the Trust, or any part hereof, and,
subject to the other provisions of this Section, such powers, duties,
obligations, rights and trust as the Indenture Trustee may consider necessary or
desirable. No co-trustee or separate trustee hereunder shall be required to meet
the terms of eligibility as a successor trustee under Section 6.11 and no notice
to Noteholders of the appointment of any co-trustee or separate trustee shall be
required under Section 6.8 hereof.

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

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

                  (ii) no trustee hereunder shall be personally liable by reason
         of any act or omission of any other trustee hereunder, including acts
         or omissions of predecessor or successor trustees; and

                  (iii) the Indenture Trustee may at any time accept the
         resignation of or remove any separate trustee or co-trustee.

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

                  (d) Any separate trustee or co-trustee may at any time
constitute the Indenture Trustee, its agent or attorney-in-fact with full power
and authority, to the extent not prohibited by law, to do any lawful act under
or in respect of this Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, dissolve, become insolvent, become incapable of
acting, resign or be removed, all of its estates, properties, rights, remedies
and trusts shall invest

                                      -45-
<PAGE>   51

in and be exercised by the Indenture Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.

                  Section 6.11 Eligibility; Disqualification. The Indenture
Trustee shall have a combined capital and surplus of at least $100,000,000 as
set forth in its most recent published annual report of condition and it shall
have a long term debt rating of A or better by the Rating Agencies. The
Indenture Trustee shall provide copies of such reports to the Insurer and each
Noteholder upon request.

                  Section 6.12 [Reserved].

                  Section 6.13 Appointment and Powers. Subject to the terms and
conditions hereof, each of the Trust Secured Parties hereby appoints Harris
Trust and Savings Bank as the Trust Collateral Agent with respect to the
Collateral, and Harris Trust and Savings Bank hereby accepts such appointment
and agrees to act as Trust Collateral Agent with respect to the Collateral for
the Trust Secured Parties, to maintain custody and possession of such Collateral
(except as otherwise provided hereunder) and to perform the other duties of the
Trust Collateral Agent in accordance with the provisions of this Indenture and
the other Transaction Documents. Each Trust Secured Party hereby authorizes the
Trust Collateral Agent to take such action on its behalf, and to exercise such
rights, remedies, powers and privileges hereunder, as the Controlling Party may
direct and as are specifically authorized to be exercised by the Trust
Collateral Agent by the terms hereof, together with such actions, rights,
remedies, powers and privileges as are reasonably incidental thereto. The Trust
Collateral Agent shall act upon and in compliance with the written instructions
of the Controlling Party delivered pursuant to this Indenture promptly following
receipt of such written instructions; provided that the Trust Collateral Agent
shall not act in accordance with any instructions (i) which are not authorized
by, or in violation of the provisions of, this Indenture or (ii) for which the
Trust Collateral Agent has not received reasonable indemnity. Receipt of such
instructions shall not be a condition to the exercise by the Trust Collateral
Agent of its express duties hereunder, except where this Indenture provides that
the Trust Collateral Agent is permitted to act only following and in accordance
with such instructions.

                  Section 6.14 Performance of Duties. The Trust Collateral Agent
shall have no duties or responsibilities except those expressly set forth in
this Indenture and the other Transaction Documents to which the Trust Collateral
Agent is a party or as directed by the Controlling Party in accordance with this
Indenture. The Trust Collateral Agent shall not be required to take any
discretionary actions hereunder except at the written direction and with
indemnification from the Controlling Party. The Trust Collateral Agent shall,
and hereby agrees that it will, perform all of the duties and obligations
required of it under the Sale and Servicing Agreement.

                  Section 6.15 Limitation on Liability. Neither the Trust
Collateral Agent nor any of its directors, officers, employees and agents shall
be liable for any action taken or omitted to be taken by it or them hereunder,
or in connection herewith, except that the Trust Collateral Agent shall be
liable for its negligence, bad faith or willful misconduct; nor shall the Trust
Collateral Agent be responsible for the validity, effectiveness, value,
sufficiency or enforceability against the Trust of this Indenture or any of the
Collateral (or any part thereof).

                                      -46-
<PAGE>   52

Notwithstanding any term or provision of this Indenture, the Trust Collateral
Agent shall incur no liability to the Trust or the Trust Secured Parties for any
action taken or omitted by the Trust Collateral Agent in connection with the
Collateral, except for the negligence, bad faith or willful misconduct on the
part of the Trust Collateral Agent, and, further, shall incur no liability to
the Trust Secured Parties except for negligence, bad faith or willful misconduct
in carrying out its duties to the Trust Secured Parties. Subject to Section
6.16, the Trust Collateral Agent shall be protected and shall incur no liability
to any such party in conclusively relying upon the accuracy, acting in reliance
upon the contents, and assuming the genuineness of any notice, demand,
certificate, signature, instrument or other document reasonably believed by the
Trust Collateral Agent to be genuine and to have been duly executed by the
appropriate signatory, and (absent actual knowledge to the contrary) the Trust
Collateral Agent shall not be required to make any independent investigation
with respect thereto. The Trust Collateral Agent shall at all times be free
independently to establish to its reasonable satisfaction, but shall have no
duty to independently verify, the existence or nonexistence of facts that are a
condition to the exercise or enforcement of any right or remedy hereunder or
under any of the Transaction Documents. The Trust Collateral Agent may consult
with counsel, and shall not be liable for any action taken or omitted to be
taken by it hereunder in good faith and in accordance with the advice of such
counsel. The Trust Collateral Agent shall not be under any obligation to
exercise any of the remedial rights, obligations or powers vested in it by this
Indenture or to follow any direction from the Controlling Party unless it shall
have received security or indemnity satisfactory to the Trust Collateral Agent
against the costs, expenses and liabilities which might be incurred by it.

                  Section 6.16 Reliance Upon Documents. In the absence of
negligence, bad faith or willful misconduct on its part, the Trust Collateral
Agent shall be entitled to rely conclusively on any communication, instrument,
paper or other document reasonably believed by it to be genuine and correct and
to have been signed or sent by the proper Person or Persons and shall have no
liability in acting, or omitting to act, where such action or omission to act is
in reasonable reliance upon any statement or opinion contained in any such
document or instrument.

                  Section 6.17 Successor Trust Collateral Agent. (a) Merger. Any
Person into which the Trust Collateral Agent may be converted or merged, or with
which it may be consolidated, or to which it may sell or transfer its trust
business and assets as a whole or substantially as a whole, or any Person
resulting from any such conversion, merger, consolidation, sale or transfer to
which the Trust Collateral Agent is a party, shall (provided it is otherwise
qualified to serve as the Trust Collateral Agent hereunder) be and become a
successor Trust Collateral Agent hereunder and be vested with all of the title
to and interest in the Collateral and all of the trusts, powers, discretions,
immunities, privileges and other matters as was its predecessor without the
execution or filing of any instrument or any further act, deed or conveyance on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding, except to the extent, if any, that any such action is necessary
to perfect, or continue the perfection of, the security interest of the Trust
Secured Parties in the Collateral; provided that any such successor shall also
be the successor Indenture Trustee under Section 6.9.

                  (b) Resignation. The Trust Collateral Agent and any successor
Trust Collateral Agent may resign at any time by giving the Trust, the
Noteholders and the Insurer 60

                                      -47-
<PAGE>   53

days prior written notice; provided that the Trust Collateral Agent shall not so
resign unless it shall also resign as Indenture Trustee hereunder.

                  (c) Removal. The Trust Collateral Agent may be removed by the
Controlling Party at any time (and should be removed at any time that the
Indenture Trustee has been removed), with or without cause, by an instrument or
concurrent instruments in writing delivered to the Trust Collateral Agent, the
other Trust Secured Parties and the Trust. A temporary successor may be removed
at any time to allow a successor Trust Collateral Agent to be appointed pursuant
to subsection (d) below. Any removal pursuant to the provisions of this
subsection (c) shall take effect only upon the date which is the latest of (i)
the effective date of the appointment of a successor Trust Collateral Agent and
the acceptance in writing by such successor Trust Collateral Agent of such
appointment and of its obligation to perform its duties hereunder in accordance
with the provisions hereof, and (ii) receipt by the Controlling Party of an
Opinion of Counsel to the effect described in Section 3.6.

                  (d) Acceptance by Successor. The Controlling Party shall have
the sole right to appoint each successor Trust Collateral Agent. Every temporary
or permanent successor Trust Collateral Agent appointed hereunder shall execute,
acknowledge and deliver to its predecessor and to the Indenture Trustee, each
Trust Secured Party and the Trust an instrument in writing accepting such
appointment hereunder and the relevant predecessor shall execute, acknowledge
and deliver such other documents and instruments as will effectuate the delivery
of all Collateral to the successor Trust Collateral Agent, whereupon such
successor, without any further act, deed or conveyance, shall become fully
vested with all the estates, properties, rights, powers, duties and obligations
of its predecessor. Such predecessor shall, nevertheless, on the written request
of either Trust Secured Party or the Trust, execute and deliver an instrument
transferring to such successor all the estates, properties, rights and powers of
such predecessor hereunder. In the event that any instrument in writing from the
Trust or a Trust Secured Party is reasonably required by a successor Trust
Collateral Agent to more fully and certainly vest in such successor the estates,
properties, rights, powers, duties and obligations vested or intended to be
vested hereunder in the Trust Collateral Agent, any and all such written
instruments shall, at the request of the temporary or permanent successor Trust
Collateral Agent, be forthwith executed, acknowledged and delivered by the
Indenture Trustee or the Trust, as the case may be. The designation of any
successor Trust Collateral Agent and the instrument or instruments removing any
Trust Collateral Agent and appointing a successor hereunder, together with all
other instruments provided for herein, shall be maintained with the records
relating to the Collateral and, to the extent required by applicable law, filed
or recorded by the successor Trust Collateral Agent in each place where such
filing or recording is necessary to effect the transfer of the Collateral to the
successor Trust Collateral Agent or to protect or continue the perfection of the
security interests granted hereunder.

                  Section 6.18 Compensation. The Trust Collateral Agent shall
not be entitled to any compensation for the performance of its duties hereunder
other than the compensation it is entitled to receive in its capacity as
Indenture Trustee. Upon termination of the Indenture Trustee the Trust
Collateral Agent's duties hereunder shall also terminate.

                                      -48-
<PAGE>   54

                  Section 6.19 Representations and Warranties of the Indenture
Trustee and the Trust Collateral Agent. Each of the Trust Collateral Agent and
the Indenture Trustee represents and warrants to the Trust and to each Trust
Secured Party as follows:

                  (a) Due Organization. Each of the Indenture Trustee and the
Trust Collateral Agent is an Illinois banking corporation, duly organized,
validly existing and in good standing under the laws of Illinois and is duly
authorized and licensed under applicable law to conduct its business as
presently conducted.

                  (b) Corporate Power. Each of the Indenture Trustee and the
Trust Collateral Agent has all requisite right, power and authority to execute
and deliver this Indenture and to perform all of its duties as the Indenture
Trustee or Trust Collateral Agent, as the case may be, hereunder.

                  (c) Due Authorization. The execution and delivery by the Trust
Collateral Agent and the Indenture Trustee of this Indenture and the other
Transaction Documents to which it is a party, and the performance by the Trust
Collateral Agent and the Indenture Trustee of its duties hereunder and
thereunder, have been duly authorized by all necessary corporate proceedings,
are required for the valid execution and delivery by the Trust Collateral Agent
or the Indenture Trustee, or the performance by the Trust Collateral Agent or
the Indenture Trustee, of this Indenture and such other Transaction Documents.

                  (d) Valid and Binding Indenture. Each of the Indenture Trustee
and the Trust Collateral Agent has duly executed and delivered this Indenture
and each other Transaction Document to which it is a party, and each of this
Indenture and each such other Transaction Document constitutes the legal, valid
and binding obligation of the Indenture Trustee and the Trust Collateral Agent,
enforceable against the Indenture Trustee and the Trust Collateral Agent in
accordance with its terms, except as (i) such enforceability may be limited by
bankruptcy, insolvency, reorganization and similar laws relating to or affecting
the enforcement of creditors' rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.

                  Section 6.20 Waiver of Setoffs. The Indenture Trustee and the
Trust Collateral Agent hereby expressly waives any and all rights of setoff that
the Indenture Trustee or the Trust Collateral Agent may otherwise at any time
have under applicable law with respect to any Trust Account and agrees that
amounts in the Trust Accounts shall at all times be held and applied solely in
accordance with the provisions hereof.

                  Section 6.21 Control by the Controlling Party. The Indenture
Trustee and the Trust Collateral Agent shall comply with notices and
instructions given by the Trust only if accompanied by the written consent of
the Controlling Party, except that if any Event of Default shall have occurred
and be continuing, the Indenture Trustee and the Trust Collateral Agent shall
act upon and comply with notices and instructions given by the Controlling Party
alone in the place and stead of the Trust.

                                      -49-
<PAGE>   55
                                   ARTICLE VII

                         NOTEHOLDERS' LISTS AND REPORTS

                  Section 7.1 Trust To Furnish To Indenture Trustee Names and
Addresses of Noteholders. The Trust will furnish or cause to be furnished to the
Indenture Trustee (a) not more than five days after the earlier of (i) each
Record Date and (ii) three months after the last Record Date, a list, in such
form as the Indenture Trustee may reasonably require, of the names and addresses
of the Holders as of such Record Date, (b) at such other times as the Indenture
Trustee may request in writing, within 10 days after receipt by the Trust of any
such request, a list of similar form and content as of a date not more than 10
days prior to the time such list is furnished; provided, however, that so long
as the Indenture Trustee is the Note Registrar, no such list shall be required
to be furnished. The Indenture Trustee or, if the Indenture Trustee is not the
Note Registrar, the Trust shall furnish to the Insurer and each Noteholder in
writing upon their written request and at such other times as the Insurer or
such Noteholder may request a copy of the list.

                  Section 7.2 Preservation of Information; Communications to
Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Holders contained in
the most recent list furnished to the Indenture Trustee as provided in Section
7.1 and the names and addresses of Holders received by the Indenture Trustee in
its capacity as Note Registrar. The Indenture Trustee may destroy any list
furnished to it as provided in such Section 7.1 upon receipt of a new list so
furnished.

                  Section 7.3 Reports

                  (a) [Reserved].

                  (b) Unless the Trust otherwise determines, the fiscal year of
the Trust shall end on December 31 of each year.

                                  ARTICLE VIII

                      ACCOUNTS, DISBURSEMENTS AND RELEASES

                  Section 8.1 Collection of Money. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable, by the Trust Collateral Agent pursuant to this Indenture and the
Sale and Servicing Agreement. The Indenture Trustee shall apply all such money
received by it, or cause the Trust Collateral Agent to apply all money received
by it as provided in this Indenture and the Sale and Servicing Agreement. Except
as otherwise expressly provided in this Indenture or in the Sale and Servicing
Agreement, if any default occurs in the making of any payment or performance
under any agreement or instrument that is part of the Trust Property, the
Indenture Trustee may take such action as may be appropriate to enforce such
payment or performance, including the institution and prosecution of appropriate
proceedings.

                                      -50-
<PAGE>   56

Any such action shall be without prejudice to any right to claim a Default or
Event of Default under this Indenture and any right to proceed thereafter as
provided in Article V.

                  Section 8.2 Release of Collateral. (a) Subject to the payment
of its fees and expenses pursuant to Section 6.7, the Trust Collateral Agent
may, and when required by the Trust and the provisions of this Indenture shall,
execute instruments to release property from the lien of this Indenture, in a
manner and under circumstances that are not inconsistent with the provisions of
this Indenture. No party relying upon an instrument executed by the Trust
Collateral Agent as provided in this Article VIII shall be bound to ascertain
the Trust Collateral Agent's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any monies.

                  (b) The Trust Collateral Agent shall, at such time as there
are no Notes outstanding, the Insurer has been paid all amounts due to it
hereunder and under the Insurance Agreement, the Class A Note Policy has expired
in accordance with its terms and all sums due the Indenture Trustee pursuant to
Section 6.7 have been paid, release any remaining portion of the Trust Property
that secured the Notes from the lien of this Indenture and release to the Trust
or any other Person entitled thereto any funds then on deposit in the Accounts.
The Indenture Trustee shall release property from the lien of this Indenture
pursuant to this Section 8.2(b) only upon receipt of a Trust Request accompanied
by an Officer's Certificate and an Opinion of Counsel and the prior written
consent of the Controlling Party.

                  Section 8.3 Opinion of Counsel. The Trust Collateral Agent
shall receive at least seven days' notice when requested by the Trust to take
any action pursuant to Section 8.2(a), accompanied by copies of any instruments
involved, and the Indenture Trustee shall also require as a condition to such
action, an Opinion of Counsel in form and substance satisfactory to each of the
Controlling Party and the Indenture Trustee, stating the legal effect of any
such action, outlining the steps required to complete the same, and concluding
that all conditions precedent to the taking of such action have been complied
with and such action will not materially and adversely impair the security for
the Notes or the rights of the Noteholders in contravention of the provisions of
this Indenture; provided, however, that such Opinion of Counsel shall not be
required to express an opinion as to the fair value of the Trust Property.
Counsel rendering any such opinion may rely, without independent investigation,
on the accuracy and validity of any certificate or other instrument delivered to
the Indenture Trustee in connection with any such action.

                                   ARTICLE IX

                             SUPPLEMENTAL INDENTURES

                  Section 9.1 Supplemental Indentures. (a) Without the consent
of the Noteholders, the Trust and the Indenture Trustee, when authorized by a
Trust Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the Indenture Trustee,
to cure any ambiguity, to correct or supplement any provisions in this
Agreement, to comply with any changes in the Code, or to make any other
provisions with respect to matters or questions arising under this Indenture
which shall not be inconsistent with the provisions herein; provided, however,
that such action shall not adversely

                                      -51-
<PAGE>   57

affect in any material respect the interests of any Noteholder or the Insurer.
Notwithstanding anything to the contrary, the Trust and the Indenture Trustee
may not enter into one or more indentures supplemental hereto under this
subsection (a) without the consent of the Class B Noteholder, for so long as
First Union National Bank or an affiliate thereof is a Class B Noteholder.

                  (b) The Trust and the Indenture Trustee, when authorized by a
Trust Order, also may, with prior notice to the Rating Agencies, with the prior
written consent of the Insurer (unless an Insurer Default shall have occurred
and be continuing) and with the consent of the Holders of not less than a
majority of the Outstanding Amount of each Class of the Notes, by Act of such
Holders delivered to the Trust and the Indenture Trustee, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that, subject to the express
rights of the Insurer under the Transaction Documents, no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Note
affected thereby:

                  (i) change the date of payment of any installment of principal
         of or interest on any Note, or reduce the principal amount thereof, the
         interest rate thereon or the Redemption Price with respect thereto,
         change the provision of this Indenture relating to the application of
         collections on, or the proceeds of the sale of, the Trust Property to
         payment of principal of or interest on the Notes, or change any place
         of payment where, or the coin or currency in which, any Notes or the
         interest thereon is payable;

                  (ii) impair the right to institute suit for the enforcement of
         the provisions of this Indenture requiring the application of funds
         available therefor, as provided in Article V, to the payment of any
         such amount due on the Notes on or after the respective due dates
         thereof (or, in the case of redemption, on or after the Redemption
         Date);

                  (iii) reduce the percentage of the Outstanding Amount of the
         Notes, the consent of the Holders of which is required for any such
         supplemental indenture, or the consent of the Holders of which is
         required for any waiver of compliance with certain provisions of this
         Indenture or certain defaults hereunder and their consequences provided
         for in this Indenture;

                  (iv) modify or alter the provisions of the proviso to the
         definition of the term "Outstanding";

                  (v) reduce the percentage of the Outstanding Amount of the
         Notes required to direct the Indenture Trustee to direct the Trust to
         sell or liquidate the Trust Property pursuant to Section 5.4;

                  (vi) modify any provision of this Section except to increase
         any percentage specified herein or to provide that certain additional
         provisions of this Indenture or the Transaction Documents cannot be
         modified or waived without the consent of the Holder of each
         Outstanding Note affected thereby;

                                      -52-
<PAGE>   58

                 (vii) modify any of the provisions of this Indenture in such
         manner as to affect the calculation of the amount of any payment of
         interest or principal due on any Notes on any Distribution Date
         (including the calculation of any of the individual components of such
         calculation) or to affect the rights of the Holders of Notes to the
         benefit of any provisions for the mandatory redemption of the Notes
         contained herein;

                 (viii) permit the creation of any lien with respect to any part
         of the Trust Property or, except as otherwise permitted or contemplated
         herein or in any of the Transaction Documents, terminate the lien of
         this Indenture on any property at any time subject hereto or deprive
         the Holder of any Notes of the security provided by the lien of this
         Indenture; or

                 (ix) result in the Trust becoming subject to tax as a
         corporation.

                  The Indenture Trustee may determine whether or not any Notes
would be adversely affected by any supplemental indenture upon receipt of an
Opinion of Counsel of a nationally recognized law firm to that effect and any
such determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.

                  Section 9.2 Execution of Supplemental Indentures. In
executing, or permitting the additional trusts created by, any supplemental
indenture permitted by this Article IX or the modifications thereby of the
trusts created by this Indenture, the Indenture Trustee shall be entitled to
receive, and subject to Sections 6.1 and 6.2, shall be fully protected in
relying upon, an Opinion of Counsel of a nationally recognized law firm (and, if
requested, an Officer's Certificate) stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The
Indenture Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Indenture Trustee's own rights, duties,
liabilities or immunities under this Indenture or otherwise. Notwithstanding
anything to the contrary, ten Business Days prior to the execution of any
supplemental indenture or consent pursuant to Section 9.1 hereof, the Indenture
Trustee shall furnish copies of such supplemental indenture or written
notification of such consent to each Noteholder and the Rating Agencies.

                  Section 9.3 Effect of Supplemental Indenture. Upon the
execution of any supplemental indenture pursuant to the provisions hereof, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith with respect to the Notes affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Trust and the Holders of the Notes
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.

                  Section 9.4 Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article IX may, and if required by the Indenture
Trustee shall, bear a notation in form approved by the Indenture Trustee as to
any matter provided for in such supplemental indenture. If the

                                      -53-
<PAGE>   59

Trust or the Indenture Trustee shall so determine, new Notes so modified as to
conform, in the opinion of the Indenture Trustee and the Trust, to any such
supplemental indenture may be prepared and executed by the Trust and
authenticated and delivered by the Indenture Trustee in exchange for Outstanding
Notes.

                                    ARTICLE X

                               REDEMPTION OF NOTES

                  Section 10.1 Redemption. (a) The Notes are subject to
redemption in whole, but not in part, at the direction of the Seller pursuant to
Section 11.1(a) of the Sale and Servicing Agreement, on any Distribution Date on
which the Servicer or Seller exercises its option to purchase the Trust Property
pursuant to said Section 11.1(a), for a purchase price equal to the Redemption
Price. The Servicer or the Trust shall furnish the Noteholders, the Insurer and
each Rating Agency notice of such redemption. If the Notes are to be redeemed
pursuant to this Section 10.1(a), the Servicer or the Trust shall furnish notice
of such election to the Indenture Trustee not later than 35 days prior to the
Redemption Date and the Trust shall deposit with the Indenture Trustee in the
Class A Note Distribution Account and the Class B Note Distribution Account the
Redemption Price of the Notes within five Business Days prior to the Redemption
Date whereupon all such Notes shall be due and payable on the Redemption Date
upon the furnishing of a notice complying with Section 10.2.

                  (b) In the event that the assets of the Trust are sold
pursuant to Section 9.2 of the Trust Agreement, all amounts on deposit in the
Class A Note Distribution Account and the Class B Note Distribution Account
shall be paid to the applicable Class of Noteholders up to the Outstanding
Amount of the related Class of Notes and all accrued and unpaid interest
thereon. If amounts are to be paid to Noteholders pursuant to this Section
10.1(b), the Servicer or the Trust shall, to the extent practicable, furnish
written notice of such event to the Indenture Trustee not later than 45 days
prior to the Redemption Date whereupon all such amounts shall be payable on the
Redemption Date.

                  Section 10.2 Form of Redemption Notice. (a) Notice of
redemption supplied to the Indenture Trustee by the Servicer under Section
10.1(a) shall be given by the Indenture Trustee by facsimile or by first-class
mail, postage prepaid, transmitted or mailed prior to the applicable Redemption
Date to each Holder of Notes or record, as of the close of business on the date
which is 5 days prior to the applicable Redemption Date, at such Holder's
address appearing in the Note Register.

                  All notices of redemption shall state:

                  (i) the Redemption Date;

                  (ii) the Redemption Price;

                  (iii) that the Record Date otherwise applicable to such
         Redemption Date is not applicable and that such Notes are to be
         surrendered within 30 days following payment of

                                      -54-
<PAGE>   60

         the Redemption Price (which shall be the office or agency of the Trust
         to be maintained as provided in Section 3.2); and

                 (iv) that interest on the Notes shall cease to accrue on the
         Redemption Date. Notice of redemption of the Notes shall be given by
         the Indenture Trustee in the name and at the expense of the Trust.
         Failure to give notice of redemption, or any defect therein, to any
         Holder of any Note shall not impair or affect the validity of the
         redemption of any other Note.

                  (b) Prior notice of redemption under Section 10.1(b) is not
required to be given to Noteholders.

                  Section 10.3 Notes Payable on Redemption Date. The Notes to be
redeemed shall, following notice of redemption as required by Section 10.2 (in
the case of redemption pursuant to Section 10.1(a) or (b)), on the Redemption
Date become due and payable at the Redemption Price and (unless the Trust shall
default in the payment of the Redemption Price) no interest shall accrue on the
Redemption Price for any period after the date to which accrued interest is
calculated for purposes of calculating the Redemption Price.

                                   ARTICLE XI

                                  MISCELLANEOUS

                  Section 11.1 Compliance Certificates and Opinions, etc. (a)
Upon any application or request by the Trust to the Indenture Trustee or the
Trust Collateral Agent to take any action under any provision of this Indenture,
the Trust shall furnish to the Indenture Trustee or the Trust Collateral Agent,
as the case may be, and to the Noteholders and the Insurer (i) an Officer's
Certificate stating that all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with and (ii) an
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with.

                  Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:

                  (i) a statement that each signatory of such certificate or
         opinion has read or has caused to be read such covenant or condition
         and the definitions herein relating thereto;

                  (ii) a brief statement as to the nature and scope of the
         examination or investigation upon which the statements or opinions
         contained in such certificate or opinion are based;

                 (iii) a statement that, in the opinion of each such signatory,
         such signatory has made such examination or investigation as is
         necessary to enable such signatory to express an informed opinion as to
         whether or not such covenant or condition has been complied with; and

                                      -55-
<PAGE>   61

                 (iv) a statement as to whether, in the opinion of each such
         signatory such condition or covenant has been complied with.

Notwithstanding Section 2.9 or any other provision of this Section, the Trust
may (A) collect, liquidate, sell or otherwise dispose of Receivables as and to
the extent permitted or required by the Transaction Documents and (B) make cash
payments out of the Trust Accounts as and to the extent permitted or required by
the Transaction Documents.

                  Section 11.2 Form of Documents Delivered to Indenture Trustee.
In any case where several matters are required to be certified by, or covered by
an opinion of, any specified Person, it is not necessary that all such matters
be certified by, or covered by the opinion of, only one such Person, or that
they be so certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more other
such Persons as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.

                  Any certificate or opinion of an Authorized Officer of the
Trust may be based, insofar as it relates to legal matters, upon a certificate
or opinion of, or representations by, counsel, unless such officer knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his or her certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Servicer, the Seller or the Trust, stating that the information with respect
to such factual matters is in the possession of the Servicer, the Seller or the
Trust, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.

                  Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.

                  Whenever in this Indenture, in connection with any application
or certificate or report to the Indenture Trustee, it is provided that the Trust
shall deliver any document as a condition of the granting of such application,
or as evidence of the Trust's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Trust to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to conclusively rely upon the
truth and accuracy of any statement or opinion contained in any such document as
provided in Article VI.

                  Section 11.3 Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents duly appointed in writing; and

                                      -56-
<PAGE>   62

except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Indenture
Trustee, and, where it is hereby expressly required, to the Trust. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.1) conclusive in favor of
the Indenture Trustee and the Trust, if made in the manner provided in this
Section.

                  (b) The fact and date of the execution by any person of any
such instrument or writing may be proved in any customary manner of the
Indenture Trustee.

                  (c) The ownership of Notes shall be proved by the Note
Register.

                  (d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Notes shall bind the Holder
of all Notes issued upon the registration thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Trust in reliance thereon, whether or not notation of
such action is made upon such Notes.

                  Section 11.4 Notices, etc. to Indenture Trustee, Trust and
Rating Agencies. Any request, demand, authorization, direction, notice, consent,
waiver or Act of Noteholders or other documents provided or permitted by this
Indenture to be made upon, given or furnished to or filed with:

                  (a) The Indenture Trustee by any Noteholder or by the Trust
shall be sufficient for every purpose hereunder if personally delivered,
delivered by overnight courier or mailed first-class and shall be deemed to have
been duly given upon receipt to the Indenture Trustee at its Corporate Trust
Office; or

                  (b) The Trust by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if personally delivered,
delivered by facsimile or overnight courier or mailed first class, and shall
deemed to have been duly given upon receipt to the Trust addressed to: National
Auto Finance 1999-1 Trust, in care of Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, DE 19890-0001 Attention: Corporate
Trust Administration, or at any other address previously furnished in writing to
the Indenture Trustee by Trust. The Trust shall promptly transmit any notice
received by it from the Noteholders to the Indenture Trustee.

                  (c) The Insurer by the Trust or the Indenture Trustee shall be
sufficient for any purpose hereunder if in writing and mailed by first-class
mail personally delivered or telexed or telecopied to the recipient as follows:

         To the Insurer:      Financial Security Assurance Inc.
                              350 Park Avenue
                              New York, NY 10022
                              Attention: Transaction Oversight
                              Re: National Auto Finance 1999-1 Trust, Automobile

                                      -57-
<PAGE>   63

                              Receivables-Backed Notes, Class A
                              Telex No.:       (212) 688-3101
                              Confirmation:    (212) 826-3518
                              Telecopy Nos.:   (212) 339-3518 or (212) 339-3529

(In each case in which notice or other communication to the Insurer refers to an
Event of Default, a claim on the Class A Note Policy or with respect to which
failure on the part of the Insurer to respond shall be deemed to constitute
consent or acceptance, then a copy of such notice or other communication should
also be sent to the attention of the General Counsel and the Head--Financial
Guaranty Group "URGENT MATERIAL ENCLOSED.")

                  Notices required to be given to the Rating Agencies by the
Trust, the Indenture Trustee or the Owner Trustee shall be in writing,
personally delivered, delivered by overnight courier or first class or via
facsimile to (i) in the case of Moody's, at the following address: Moody's
Investors Service, Inc., Attn: ABS Monitoring Department, 99 Church Street, New
York, New York 10004, Fax No: (212) 553-0355 and (ii) in the case of S&P, at the
following address: Standard & Poor's Ratings Group, 25 Broadway (15th Floor),
New York, New York 10004, Attention: Asset Backed Surveillance Department, Fax
No: (212) 412-0224; or as to each of the foregoing, at such other address as
shall be designated by written notice to the other parties.

                  Section 11.5 Notices to Noteholders; Waiver. Where this
Indenture provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if by facsimile
followed by notice in writing and mailed, first-class, postage prepaid to each
Noteholder affected by such event, at his address as it appears on the Note
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Noteholders is given by mail, neither the failure to mail such notice nor any
defect in any notice so mailed to any particular Noteholder shall affect the
sufficiency of such notice with respect to other Noteholders, and any notice
that is mailed in the manner herein provided shall conclusively be presumed to
have been duly given.

                  Where this Indenture provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.

                  In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it shall be
impractical to mail notice of any event to Noteholders when such notice is
required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice as shall be satisfactory to the Indenture Trustee
shall be deemed to be a sufficient giving of such notice.

                  Where this Indenture provides for notice to the Rating
Agencies, failure to give such notice shall not affect any other rights or
obligations created hereunder, and shall not under any circumstance constitute a
Default or Event of Default.

                                      -58-
<PAGE>   64

                  Section 11.6 Alternate Payment and Notice Provisions.
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Trust may enter into any agreement with any Holder of Notes
providing for a method of payment, or notice by the Indenture Trustee or any
Note Paying Agent to such Holder, that is different from the methods provided
for in this Indenture for such payments or notices, provided that such methods
are reasonable and consented to by the Indenture Trustee (which consent shall
not be unreasonably withheld). The Trust will furnish to the Indenture Trustee a
copy of each such agreement and the Indenture Trustee will cause payments to be
made and notices to be given in accordance with such agreements.

                  Section 11.7 Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.

                  Section 11.8 Successors and Assigns. All covenants and
agreements in this Indenture and the Notes by the Trust shall bind its
successors and assigns, whether so expressed or not. All agreements of the
Indenture Trustee in this Indenture shall bind its successors. All agreements of
the Trust Collateral Agent in this Indenture shall bind its successors.

                  Section 11.9 Separability. In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality, and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

                  Section 11.10 Benefits of Indenture. The Insurer and its
successors and assigns shall be a third-party beneficiary to the provisions of
this Indenture, and the Insurer shall be entitled to rely upon and directly to
enforce such provisions of this Indenture so long as no Insurer Default shall
have occurred and be continuing. Nothing in this Indenture or in the Notes,
express or implied, shall give to any Person, other than the parties hereto and
their successors hereunder, and the Noteholders, and any other party secured
hereunder, and any other person with an ownership interest in any part of the
Trust Property, any benefit or any legal or equitable right, remedy or claim
under this Indenture. The Insurer may disclaim any of its rights and powers
under this Indenture (in which case the Indenture Trustee may exercise such
right or power hereunder), but not its duties and obligations under the Class A
Note Policy, upon delivery of a written notice to the Indenture Trustee.

                  Section 11.11 Rule 144A Information. Upon the request of any
Holder, the Trust shall promptly furnish to such Holder or to a prospective
purchaser of a Note designated by such Holder, as the case may be, the
information in its possession or control required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act of 1933, as amended ("Rule 144A
Information") in order to permit compliance by such Holder with Rule 144A in
connection with the resale of such Note by such Holder; provided, however, that
the Trust shall not be required to furnish Rule 144A Information in connection
with any request made on or after the date that is three years from the later of
(i) the date such Note (or any predecessor Note) was acquired from the Trust or
(ii) the date such Note (or any predecessor Note) was last acquired from an
"affiliate" of the Trust within the meaning of Rule 144A.

                                      -59-
<PAGE>   65

                  Section 11.12 Legal Holidays. In any case where the date on
which any payment is due shall not be a Business Day, then (notwithstanding any
other provision of the Notes or this Indenture) payment need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the date an which nominally due, and no interest shall
accrue for the period from and after any such nominal date.

                  Section 11.13 GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

                  Section 11.14 Counterparts. This Indenture may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.

                  Section 11.15 Recording of Indenture. If this Indenture is
subject to recording in any appropriate public recording offices, such recording
is to be effected by the Trust and at its expense accompanied by an Opinion of
Counsel (which may be counsel to the Trust or any other counsel reasonably
acceptable to the Indenture Trustee and the Insurer) to the effect that such
recording is necessary either for the protection of the Noteholders or any other
person secured hereunder or for the enforcement of any right or remedy granted
to the Indenture Trustee or the Trust Collateral Agent under this Indenture or
the Collateral Agent under the Spread Account Agreement.

                  Section 11.16 Trust Obligation. No recourse may be taken,
directly or indirectly, with respect to the obligations of the Trust, the
Seller, the Servicer, the Owner Trustee, the Trust Collateral Agent or the
Indenture Trustee on the Notes or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Seller, the Servicer, the Trust Collateral Agent, the Indenture Trustee or the
Owner Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Trust or (iii) any partner, owner, beneficiary, agent, officer,
director, employee or agent of the Seller, the Servicer, the Trust Collateral
Agent, the Indenture Trustee or the Owner Trustee in its individual capacity,
any holder of a beneficial interest in the Trust, the Seller, the Trust
Collateral Agent, the Servicer, the Owner Trustee or the Indenture Trustee or of
any successor or assign of the Seller, the Servicer, the Trust Collateral Agent,
the Indenture Trustee or the Owner Trustee in its individual capacity, except as
any such Person may have expressly agreed (it being understood that the
Indenture Trustee, the Trust Collateral Agent and the Owner Trustee have no such
obligations in their individual capacity) and except that any such owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity. For all purposes of this
Indenture, in the performance of any duties or obligations of the Trust
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Articles VI, VII and VIII of the Trust
Agreement.

                  Section 11.17 No Petition. The Indenture Trustee and the Trust
Collateral Agent, by entering into this Indenture, and each Noteholder, by
accepting a Class A Note or Class B

                                      -60-
<PAGE>   66

Note, hereby covenant and agree that they will not at any time institute against
the Seller, or the Trust, or join in any institution against the Seller, or the
Trust of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, this Indenture or any of the Transaction Documents.

                  Section 11.18 Inspection. The Trust agrees that, on reasonable
prior notice, it will permit any representative of the Indenture Trustee, any
Noteholder holding at least 5% of any Class of Notes outstanding or the Insurer,
during the Trust's normal business hours, to examine all the books of account,
records, reports, and other papers of the Trust, to make copies and extracts
therefrom, to cause such books to be audited by independent certified public
accountants, and to discuss the Trust's affairs, finances and accounts with the
Trust's officers, employees, and independent certified public accountants, all
at such reasonable times and as often as may be reasonably requested. The
Indenture Trustee shall and shall cause its representatives to hold in
confidence all such information except to the extent disclosure may be required
by law (and all reasonable applications for confidential treatment are
unavailing) and except to the extent that the Indenture Trustee may reasonably
determine that such disclosure is consistent with its obligations hereunder.

                  Section 11.19 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 undertaking by the
Trust under this Agreement or any related documents.

                  Section 11.20 Use of Proceeds. The net proceeds to be received
by the Trust from the sale of the Class A Notes and the Class B Notes shall be
applied (i) to the purchase of the Receivables from the Seller, and (ii) to make
the initial deposit to the Spread Account.

                                      -61-
<PAGE>   67

                  IN WITNESS WHEREOF, the Trust, the Indenture Trustee and the
Trust Collateral Agent have caused this Indenture to be duly executed by their
respective officers, hereunto duly authorized, all as of the day and year first
above written.

                                   NATIONAL AUTO FINANCE 1999-1 TRUST

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

                                   By:  /s/ DENISE M. GERAN
                                      ------------------------------------------
                                      Name: Denise M. Geran
                                      Title: Senior Financial Services Officer

Date:

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

                                   By:   /s/ KEITH RICHARDSON
                                      ------------------------------------------
                                      Name:  Keith Richardson
                                      Title: Assistant Vice President

Date:
<PAGE>   68

                                    EXHIBIT A

                              FORM OF CLASS A NOTE

THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE REOFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH
REGISTRATION AND IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES LAWS. EACH
PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE IS
RELYING ON THE EXEMPTION FROM SUCH REGISTRATION PROVIDED BY RULE 144A UNDER THE
SECURITIES ACT. THE TRUST HAS NOT BEEN REGISTERED UNDER THE INVESTMENT COMPANY
ACT OF 1940 (THE "INVESTMENT COMPANY ACT") AND THIS NOTE IS NOT TRANSFERABLE
EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS DESCRIBED IN THE INDENTURE.

REGISTERED $ [_____________]

No. A-1

                       SEE REVERSE FOR CERTAIN DEFINITIONS

                              CUSIP NO.____________

                  THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT
ANYTIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.

                  NATIONAL AUTO FINANCE 1999-1 TRUST

                  [___]% AUTOMOBILE RECEIVABLES-BACKED NOTES, CLASS A SERIES
1999-1

                  National Auto Finance 1999-1 Trust, a business trust organized
and existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to [___________ ], or
registered assigns, the principal sum of [___________] DOLLARS ($[__________]),
such amount payable on each Distribution Date in an amount equal to the
aggregate amount, if any, payable from the Class A Note Distribution Account in
respect of principal on the Class A Notes pursuant to Section 3.1 of the
Indenture; provided, however, that the entire unpaid principal amount of this
Note shall be due and payable on the October 4, 2004 Distribution Date (the
"Final Scheduled Distribution Date"). The Issuer will pay interest on this Note
at the rate per annum shown above (the "Class A Interest Rate") on each
Distribution Date until the principal of this Note is paid or made available for
payment, on the principal amount of this Note outstanding on the preceding
Distribution Date (after giving effect to all payments of principal made on the
preceding Distribution Date). Interest on this Note will accrue for each

                                      A-1
<PAGE>   69

Distribution Date from the most recent Distribution Date on which interest has
been paid, to, but excluding such Distribution Date or, if no interest has yet
been paid, from [___________], 1999. Interest will be computed on the basis of a
360-day year consisting of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.

                  The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note.

                  The Class A Notes are entitled to the benefits of a financial
guaranty insurance policy (the "Class A Note Policy") issued by Financial
Security Assurance Inc. (the "Insurer"), pursuant to which the Insurer has
unconditionally guaranteed the Scheduled Payments (as defined in the Class A
Note Policy) with respect to the Class A Notes.

                  The Issuer and the Holder (by acceptance of this Note) intend
and agree, and the Issuer hereby instructs the Indenture Trustee, to treat and
to take no action inconsistent with the treatment of, this Note as indebtedness
for purposes of federal, state, local and foreign income and franchise taxes and
any other tax imposed on or measured by net income.

                  It is the agreement and intent of the Issuer and the Holder
(by acceptance of this Note) that, for federal, state, local and foreign income
and franchise tax purposes, the Issuer will be treated as a security device
only, or alternatively, if such characterization is not respected for any
applicable income or franchise tax purposes, the Issuer shall be treated for
such income or franchise tax purposes as a non-entity disregarded as an entity
separate from its owner under Treasury Regulations Section 301.7701-3(b)(ii) or
any similar provisions of applicable law; provided, however, that if any Class
of Notes is treated as an equity interest in the Issuer for any applicable
income or franchise tax purposes, it is the intention and agreement of the
Issuer and the Holder (by acceptance of the Note) that, the Issuer will be
treated as a partnership for such income or franchise tax purposes and the
Certificateholder and the Noteholders whose Class of Notes is treated as an
equity interest shall be treated as partners in such partnership and the
Certificate and such Notes shall be treated as partnership interests in such
partnership. The Issuer and the Holder (by acceptance of this Note) intend and
agree, and the Issuer hereby instructs the Indenture Trustee, to treat and to
take no action inconsistent with the treatment of the Issuer, the Certificate
and the Notes for purposes of federal, state, local and foreign income and
franchise taxes and any other tax imposed on or measured by net income, in the
manner set forth above.

                  Each Noteholder by acceptance of this Note covenants and
agrees that no recourse may be taken, directly or indirectly, with respect to
the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Seller, the Servicer, the Indenture
Trustee, the Trust Collateral Agent or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
owner, beneficiary, agent, officer, director or employee of the Seller, the
Servicer, the Indenture Trustee, the Trust Collateral Agent or the

                                      A-2
<PAGE>   70

Owner Trustee in its individual capacity, any holder of a beneficial interest in
the Issuer, the Seller, the Servicer, the Trust Collateral Agent, the Owner
Trustee or the Indenture Trustee or of any successor or assign of the Seller,
the Servicer, the Indenture Trustee, the Trust Collateral Agent or the Owner
Trustee in its individual capacity, except as any such Person may have expressly
agreed (it being understood that the Indenture Trustee, the Trust Collateral
Agent and the Owner Trustee have no such obligations in their individual
capacity) and except that any such owner or beneficiary shall be fully liable,
to the extent provided by applicable law, for any unpaid consideration for
stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity.

                  Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Note.

                  Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any benefit under the Indenture referred to
on the reverse hereof, or be valid or obligatory for any purpose.

                                      A-3
<PAGE>   71

                  IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer as of the date
set forth below.

                               NATIONAL AUTO FINANCE 1999-1 TRUST

                               By:  WILMINGTON TRUST COMPANY,
                                    not in its individual capacity but solely as
                                    Owner Trustee under the Trust Agreement

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

Date:

<PAGE>   72

                     TRUSTEE'S CERTIFICATE OF AUTHENTICATION

                  This is one of the Class A Notes designated above and referred
to in the within-mentioned Indenture.

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

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

Date:

<PAGE>   73

                                 REVERSE OF NOTE

                  This Note is a duly authorized Note of the Issuer, designated
as its [______]% Automobile Receivables-Backed Notes, Class A Series 1999-1 (the
"Class A Notes", and together with the [____________]% Automobile
Receivables-Backed Notes, Class B Series 1999-1, collectively the "Notes"),
issued under an Indenture dated as of September 1, 1999 (such Indenture, as
supplemented or amended, is herein called the "Indenture"), between the Issuer
and Harris Trust and Savings Bank, as Indenture trustee (the "Indenture
Trustee", which term includes any successor Indenture Trustee under the
Indenture, and the "Trust Collateral Agent", which term includes any successor
Trust Collateral Agent under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee, the Trust Collateral Agent and the Holders of the Notes. The Notes are
subject to all terms of the Indenture. All terms used in this Note that are
defined in the Indenture, as so supplemented or amended, or the Sale and
Servicing Agreement, as supplemented or amended, shall have the meanings
assigned to them in or pursuant to the Indenture, as so supplemented or amended,
or the Sale and Servicing Agreement, as so supplemented or amended.

                  The Class A Notes are and will be equally and ratably secured
by the collateral pledged as security therefor as provided in the Indenture. The
Class A Notes shall be senior in right of payment to the Class B Notes to the
extent provided in the Indenture and the Sale and Servicing Agreement.

                  Principal of the Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
twenty-first day of each month, or, if any such date is not a Business Day, the
next succeeding Business Day, commencing September 21, 1999.

                  As described above, the entire unpaid principal amount of this
Note shall be due and payable on the earlier of the Final Scheduled Distribution
Date and the Redemption Date, if any, pursuant to Section 10.1(a) or 10.1(b) of
the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount
of the Notes shall be due and payable, if not previously paid, on the date on
which an Event of Default shall have occurred and be continuing and the
Controlling Party or the Indenture Trustee has declared the Notes to be
immediately due and payable in the manner provided in Section 5.2 of the
Indenture. All principal payments on the Notes shall be made pro rata to the
Noteholders entitled thereto.

                  Payments of interest on this Note due and payable on each
Distribution Date, together with the installment of principal, if any, shall be
made by wire transfer in immediately available funds to the account designated
by such Noteholder, as of the applicable Record Date. Any reduction in the
principal amount of this Note (or any one or more Predecessor Notes) effected by
any payments made on any Distribution Date shall be binding upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If
funds are expected to be available, as provided in the Indenture, for payment in
full of the then remaining unpaid principal amount of this Note on a
Distribution Date, then the Indenture Trustee, in the name of and on

                                       1
<PAGE>   74

behalf of the Issuer, will notify the Person who was the Holder hereof as of the
Record Date preceding such Distribution Date by notice mailed prior to such
Distribution Date. Presentation and surrender of this Note at the Indenture
Trustee's principal Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in The City of New York
shall be made within 30 days of such final distribution.

                  The Issuer shall pay interest on overdue installments of
interest at the Interest Rate to the extent lawful.

                  As provided in the Indenture, the Notes may be redeemed
pursuant to Section 10.1(a) of the Indenture, in whole, but not in part, at the
option of the Seller or the Servicer (with the consent of the Controlling Party
under certain circumstances), on any Distribution Date on or after the date on
which the Pool Balance is less than or equal to 10% of the Original Pool
Balance.

                  As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be registered on
the Note Register upon surrender of this Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, (i)
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his
attorney duly authorized in writing, with such signature guaranteed by an
"eligible guarantor institution" meeting the requirements of the Note Registrar
which requirements include membership or participation in Securities Transfer
Agents Medallion Program ("Stamp") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, Stamp, all in accordance with the Exchange Act, and (ii) accompanied by an
investor letter in the form of Exhibit C to the Indenture, and thereupon one or
more new Notes of authorized denominations and in the same aggregate principal
amount will be issued to the designated transferee or transferees. No service
charge will be charged for any registration of transfer or exchange of this
Note, but the transferor may be required to pay a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any such
registration of transfer or exchange.

                  Each Noteholder, by acceptance of this Note, covenants and
agrees that no recourse may be taken, directly or indirectly, with respect to
the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Seller, the Servicer, the Indenture
Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a
beneficial interest in the Issuer or (iii) any owner, beneficiary, agent,
officer, director or employee of the Seller, the Servicer, the Indenture Trustee
or the Owner Trustee in its individual capacity, any holder of a beneficial
interest in the Issuer, the Seller, the Servicer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Seller, the Servicer, the
Indenture Trustee or the Owner Trustee in its individual capacity, except as any
such Person may have expressly agreed (it being understood that the Indenture
Trustee and the Owner Trustee have no such obligations in their individual
capacity) and except that any such owner or beneficiary shall be fully liable,
to the extent provided by applicable law, for any unpaid consideration for
stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity.

                                       2
<PAGE>   75

                  Each Noteholder, by acceptance of a Note, covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will not at
any time institute against the Depositor, or the Issuer or join in any
institution against the Depositor, or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings, under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Transaction Documents.

                  Prior to the due presentment for registration of transfer of
this Note, the Issuer, the Indenture Trustee and the Insurer and any agent of
the Issuer, the Indenture Trustee or the Insurer may treat the Person in whose
name this Note (as of the day of determination or as of such other date as may
be specified in the Indenture) is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Issuer, the
Indenture Trustee nor any such agent shall be affected by notice to the
contrary.

                  The Indenture permits the amendment thereof and the
modification of the rights and obligations of the Issuer and the rights of the
Holders of the Notes under the Indenture at any time by the Issuer with the
prior written consent of the Insurer and of the Holders of Notes representing a
majority of the Outstanding Amount of each Class of all Notes at the time
Outstanding. The Indenture also permits the amendment thereof and the
modification of certain terms thereof in certain limited circumstances without
the consent of the Class A Noteholders. The Indenture also contains provisions
permitting the Holders of Notes representing a majority of the Outstanding
Amount of each Class of all Notes at the time Outstanding, on behalf of the
Holders of all the Notes, during the continuance of an Insurer Default only, to
waive compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Note (or any one of more Predecessor
Notes) shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Notes issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note. The Indenture also permits the
Indenture Trustee to amend or waive certain terms and conditions set forth in
the Indenture without the consent of Holders of the Notes issued thereunder.

                  The term "Issuer" as used in this Note includes any successor
to the Issuer under the Indenture.

                  The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.

                  This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.

                  No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or currency herein
prescribed.

                                       3
<PAGE>   76

                  Anything herein to the contrary notwithstanding, except as
expressly provided in the Indenture or the Transaction Documents, neither
Wilmington Trust Company in its individual capacity, any owner of a beneficial
interest in the Issuer, nor any of their respective beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on, or performance of, or omission to perform, any of
the covenants, obligations or indemnifications contained in this Note or the
Indenture, it being expressly understood that said covenants, obligations and
indemnifications have been made by the Issuer for the sole purposes of binding
the interests of the Issuer in the assets of the Issuer. The Holder of this Note
by the acceptance hereof agrees that except as expressly provided in the
Indenture or the Transaction Documents, in the case of an Event of Default under
the Indenture, the Holder shall have no claim against any of the foregoing for
any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.

                                       4
<PAGE>   77

                                   ASSIGNMENT

                  Social Security or taxpayer I.D. or other identifying number
of assignee

                  FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _____________________ (name and address of assignee) the within
Note and all rights thereunder, and hereby irrevocably constitutes and appoints,
attorney, to transfer said Note on the books kept for registration thereof, with
full power of substitution in the premises.

Dated:                                                                         *
      -------------                          ----------------------------------
                                             Signature Guaranteed:

-----------

* NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.

                                       1
<PAGE>   78

                                    EXHIBIT B

                              FORM OF CLASS B NOTE

THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE REOFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH
REGISTRATION AND IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES LAWS. EACH
PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE IS
RELYING ON THE EXEMPTION FROM SUCH REGISTRATION PROVIDED BY RULE 144A UNDER THE
SECURITIES ACT. THE TRUST HAS NOT BEEN REGISTERED UNDER THE INVESTMENT COMPANY
ACT OF 1940 (THE "INVESTMENT COMPANY ACT") AND THIS NOTE IS NOT TRANSFERABLE
EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS DESCRIBED IN THE INDENTURE.

REGISTERED $[______________________]

No. B-1

                       SEE REVERSE FOR CERTAIN DEFINITIONS

                                CUSIP NO.________

                  THIS NOTE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
NOTES AS DESCRIBED IN THE INDENTURE REFERRED TO HEREIN.

                  THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT
ANYTIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.

                  NATIONAL AUTO FINANCE 1999-1 TRUST

                  [___]% AUTOMOBILE RECEIVABLES-BACKED NOTES, CLASS B SERIES
1999-1

                  National Auto Finance 1999-1 Trust, a business trust organized
and existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to [______], or registered
assigns, the principal sum of [_______] DOLLARS ($ [___________]), such amount
payable on each Distribution Date in an amount equal to the aggregate amount, if
any, payable from the Class B Note Distribution Account in respect of principal
on the Class B Notes pursuant to Section 3.1 of the Indenture and Section 5.7 of
the Sale and Servicing Agreement; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the [October __], 2004
Distribution Date (the "Final Scheduled Distribution Date"). The Issuer will pay
interest on this Note at the rate per annum

                                      B-1
<PAGE>   79

shown above (the "Class B Interest Rate") on each Distribution Date until the
principal of this Note is paid or made available for payment, on the principal
amount of this Note outstanding on the preceding Distribution Date (after giving
effect to all payments of principal made on the preceding Distribution Date).
Interest on this Note will accrue for each Distribution Date from the most
recent Distribution Date on which interest has been paid, to, but excluding such
Distribution Date or, if no interest has yet been paid, from [______], 1999.
Interest will be computed on the basis of a 360-day year consisting of twelve
30-day months. Such principal of and interest on this Note shall be paid in the
manner specified on the reverse hereof.

                  The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note.

                  The Issuer and the Holder (by acceptance of this Note) intend
and agree, and the Issuer hereby instructs the Indenture Trustee, to treat and
to take no action inconsistent with the treatment of, this Note as indebtedness
for purposes of federal, state, local and foreign income or franchise taxes and
any other tax imposed on or measured by net income.

                  It is the agreement and intent of the Issuer and the Holder
(by acceptance of this Note) that, for federal, state, local and foreign income
and franchise tax purposes, the Issuer will be treated as a security device
only, or alternatively, if such characterization is not respected for any
applicable income or franchise tax purposes, the Issuer shall be treated for
such income or franchise tax purposes as a non-entity disregarded as an entity
separate from its owner under Treasury Regulations Section 301.7701-3(b)(ii) or
any similar provisions of applicable law; provided, however, that if any Class
of Notes is treated as an equity interest in the Issuer for any applicable
income or franchise tax purposes, it is the intention and agreement of the
Issuer and the Holder (by acceptance of the Note) that, the Issuer will be
treated as a partnership for such income or franchise tax purposes and the
Certificateholder and the Noteholders whose Class of Notes is treated as an
equity interest shall be treated as partners in such partnership and the
Certificate and such Notes shall be treated as partnership interests in such
partnership. The Issuer and the Holder (by acceptance of this Note) intend and
agree, and the Issuer hereby instructs the Indenture Trustee, to treat and to
take no action inconsistent with the treatment of the Issuer, the Certificate
and the Notes for purposes of federal, state, local and foreign income and
franchise taxes and any other tax imposed on or measured by net income, in the
manner set forth above.

                  Each Noteholder, by acceptance of a Note covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder (i) has
neither acquired nor will it transfer the Note or cause the Note to be marketed
on or through an "established securities market" within the meaning of Section
7704(b)(1) of the Code, including, without limitation, an
over-the-counter-market or an interdealer quotation system that regularly
disseminates firm buy or sell quotations; (ii) either (A) is not, and will not
become, a partnership, S corporation or grantor trust for U.S. federal income
tax purposes, or (B) is such an entity, but none of the direct or indirect
beneficial owners of any of the interests in such transferee have allowed or
caused, or will or cause, fifty percent (50%) or more of the value of such
interests to be attributable to such

                                      B-2
<PAGE>   80

transferee's ownership of the Note; and (iii) understands that tax counsel to
the Trust has provided an opinion substantially to the effect that the Trust
will not be a publicly traded partnership taxable as a corporation for U.S.
federal income tax purposes and that the validity of such opinion is dependent
in part on the accuracy of the representations in paragraphs (i) and (ii) above.

                  Each Noteholder, by acceptance of this Note, covenants and
agrees that no recourse may be taken, directly or indirectly, with respect to
the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Seller, the Servicer, the Indenture
Trustee, the Trust Collateral Agent or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
owner, beneficiary, agent, officer, director or employee of the Seller, the
Servicer, the Indenture Trustee, the Trust Collateral Agent or the Owner Trustee
in its individual capacity, any holder of a beneficial interest in the Issuer,
the Seller, the Servicer, the Trust Collateral Agent, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Seller, the Servicer, the
Indenture Trustee, the Trust Collateral Agent or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee, the Trust Collateral Agent and the
Owner Trustee have no such obligations in their individual capacity) and except
that any such owner or beneficiary shall be fully liable, to the extent provided
by applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity.

                  Each Noteholder, by acceptance of this Note, specifically
acknowledges that it has no right to or interest in any monies at any time held
pursuant to the Spread Account Agreement prior to the release of such monies
pursuant to Section 5.7 of the Sale and Servicing Agreement, such monies being
held in trust for the benefit of the Class A Noteholders and the Insurer.

                  Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Note.

                  Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any benefit under the Indenture referred to
on the reverse hereof, or be valid or obligatory for any purpose.

                                      B-3
<PAGE>   81

                  IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer as of the date
set forth below.

                               NATIONAL AUTO FINANCE 1999-1 TRUST

                               By:  WILMINGTON TRUST COMPANY,
                                    not in its individual capacity but solely as
                                    Owner Trustee under the Trust Agreement

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

Date:

<PAGE>   82

                     TRUSTEE'S CERTIFICATE OF AUTHENTICATION

                  This is one of the Notes designated above and referred to in
the within-mentioned Indenture.

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

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

Date:
<PAGE>   83
                                 REVERSE OF NOTE

                  This Note is a duly authorized Note of the Issuer, designated
as its [__]% Automobile Receivables-Backed Notes, Class B Series 1999-1 (the
"Class B Notes", together with the [__]% Automobile Receivables-Backed Notes,
Class A Series 1999-1, collectively the "Notes"), issued under an Indenture
dated as of September 1, 1999 (such Indenture, as supplemented or amended, is
herein called the "Indenture"), between the Issuer and Harris Trust and Savings
Bank, as Indenture trustee (the "Indenture Trustee", which term includes any
successor Indenture Trustee under the Indenture, and the "Trust Collateral
Agent", which term includes any successor Trust Collateral Agent under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Indenture Trustee, the Trust Collateral Agent and
the Holders of the Notes. The Notes are subject to all terms of the Indenture.
All terms used in this Note that are defined in the Indenture, as so
supplemented or amended, or the Sale and Servicing Agreement, as supplemented or
amended, shall have the meanings assigned to them in or pursuant to the
Indenture, as so supplemented or amended, or the Sale and Servicing Agreement,
as so supplemented or amended.

                  The Class B Notes are and will be equally and ratably secured
by the collateral pledged as security therefor as provided in the Indenture. The
Class B Notes shall be subordinated in right of payment to the Class A Notes as
described in the Indenture and will not be entitled to the benefits of the Class
A Note Policy.

                  Principal of the Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
twenty-first day of each month, or, if any such date is not a Business Day, the
next succeeding Business Day, commencing September 21, 1999.

                  As described above, the entire unpaid principal amount of this
Note shall be due and payable on the earlier of the Final Scheduled Distribution
Date and the Redemption Date, if any, pursuant to Section 10.1(a) or 10.1(b) of
the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount
of the Notes shall be due and payable, if not previously paid, on the date on
which an Event of Default shall have occurred and be continuing and the
Controlling Party or the Indenture Trustee has declared the Notes to be
immediately due and payable in the manner provided in Section 5.2 of the
Indenture. All principal payments on the Notes shall be made pro rata to the
Noteholders entitled thereto.

                  Payments of interest on this Note due and payable on each
Distribution Date, together with the installment of principal, if any, shall be
made by wire transfer in immediately available funds to the account designated
by such Noteholder, as of the applicable Record Date. Any reduction in the
principal amount of this Note (or any one or more Predecessor Notes) effected by
any payments made on any Distribution Date shall be binding upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If
funds are expected to be available, as provided in the Indenture, for payment in
full of the then remaining unpaid principal amount of this Note on a
Distribution Date, then the Indenture Trustee, in the name of and on

                                        1
<PAGE>   84

behalf of the Issuer, will notify the Person who was the Holder hereof as of the
Record Date preceding such Distribution Date by notice mailed prior to such
Distribution Date. Presentation and surrender of this Note at the Indenture
Trustee's principal Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in The City of New York
shall be made within 30 days of such final distribution.

                  The Issuer shall pay interest on overdue installments of
interest at the Interest Rate to the extent lawful.

                  As provided in the Indenture, the Notes may be redeemed
pursuant to Section 10.1(a) of the Indenture, in whole, but not in part, at the
option of the Seller or the Servicer (with the consent of the Controlling Party
under certain circumstances), on any Distribution Date on or after the date on
which the Pool Balance is less than or equal to 10% of the Original Pool
Balance.

                  As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be registered on
the Note Register upon surrender of this Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, (i)
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his
attorney duly authorized in writing, with such signature guaranteed by an
"eligible guarantor institution" meeting the requirements of the Note Registrar
which requirements include membership or participation in Securities Transfer
Agents Medallion Program ("Stamp") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, Stamp, all in accordance with the Exchange Act, and (ii) accompanied by an
investor letter in the form of Exhibit D to the Indenture, and thereupon one or
more new Notes of authorized denominations and in the same aggregate principal
amount will be issued to the designated transferee or transferees. No service
charge will be charged for any registration of transfer or exchange of this
Note, but the transferor may be required to pay a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any such
registration of transfer or exchange.

                  Each Noteholder, by acceptance of a Note, covenants and agrees
that no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Seller, the Servicer, the Indenture
Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a
beneficial interest in the Issuer or (iii) any owner, beneficiary, agent,
officer, director or employee of the Seller, the Servicer, the Indenture Trustee
or the Owner Trustee in its individual capacity, any holder of a beneficial
interest in the Issuer, the Seller, the Servicer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Seller, the Servicer, the
Indenture Trustee or the Owner Trustee in its individual capacity, except as any
such Person may have expressly agreed (it being understood that the Indenture
Trustee and the Owner Trustee have no such obligations in their individual
capacity) and except that any such owner or beneficiary shall be fully liable,
to the extent provided by applicable law, for any unpaid consideration for
stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity.

                                        2
<PAGE>   85

                  Each Noteholder, by acceptance of a Note, covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will not at
any time institute against the Depositor, or the Issuer or join in any
institution against the Depositor, or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings, under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Transaction Documents.

                  Prior to the due presentment for registration of transfer of
this Note, the Issuer, the Indenture Trustee and the Insurer and any agent of
the Issuer, the Indenture Trustee or the Insurer may treat the Person in whose
name this Note (as of the day of determination or as of such other date as may
be specified in the Indenture) is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Issuer, the
Indenture Trustee nor any such agent shall be affected by notice to the
contrary.

                  The Indenture permits the amendment thereof and the
modification of the rights and obligations of the Issuer and the rights of the
Holders of the Notes under the Indenture at any time by the Issuer with the
prior written consent of the Insurer and of the Holders of Notes representing a
majority of the Outstanding Amount of each Class of all Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing a majority of the Outstanding Amount of each Class of all
Notes at the time Outstanding, on behalf of the Holders of all the Notes, during
the continuance of an Insurer Default only, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one of more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Notes
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made upon this Note.
The Indenture also permits the Indenture Trustee to amend or waive certain terms
and conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.

                  The term "Issuer" as used in this Note includes any successor
to the Issuer under the Indenture.

                  The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.

                  This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.

                  No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or currency herein
prescribed.

                                        3
<PAGE>   86

                  Anything herein to the contrary notwithstanding, except as
expressly provided in the Indenture or the Transaction Documents, neither
Wilmington Trust Company in its individual capacity, any owner of a beneficial
interest in the Issuer, nor any of their respective beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on, or performance of, or omission to perform, any of
the covenants, obligations or indemnifications contained in this Note or the
Indenture, it being expressly understood that said covenants, obligations and
indemnifications have been made by the Issuer for the sole purposes of binding
the interests of the Issuer in the assets of the Issuer. The Holder of this Note
by the acceptance hereof agrees that except as expressly provided in the
Indenture or the Transaction Documents, in the case of an Event of Default under
the Indenture, the Holder shall have no claim against any of the foregoing for
any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.

                                        4
<PAGE>   87

                                   ASSIGNMENT

                  Social Security or taxpayer I.D. or other identifying number
of assignee

                  FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ______________________________ the within Note and all rights
               (name and address of assignee)

thereunder, and hereby irrevocably constitutes and appoints, attorney, to
transfer said Note on the books kept for registration thereof, with full power
of substitution in the premises.

Dated:                                                                        *
      --------------                                   -----------------------

----------

* NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.

                                        1
<PAGE>   88

                                                                       EXHIBIT C

National Financial Auto Funding Trust
    as Transferor
[               ]
 ---------------
[               ]
 ---------------

 Harris Trust and Savings Bank,
    as Indenture Trustee
[               ]
 ---------------
[               ]
 ---------------

          Re:     Class A, Automobile Receivables-Backed Notes of National Auto
                  Finance 1999-1 Trust

 Dear Sirs:

                  In connection with our purchase of Notes of the
above-captioned series we represent and agree as follows:

                  1. We have been furnished, and have received and reviewed, a
copy of the Offering Memorandum dated September [      ,] 1999 and the Indenture
Agreement (the "Indenture") dated September 1, 1999, between National Auto
Finance 1999-1 Trust (the "Trust") and Harris Trust and Savings Bank, as
indenture trustee (the "Indenture Trustee"), which sets forth the terms of the
Notes and have made such investigation as we deem necessary to evaluate the
merits and risks involved in an investment in the Notes. The Purchaser certifies
that it has received from the Issuer the information that satisfies the
requirements of paragraph (d)(4) of Rule 144A (the "Rule 144A Information").

                  2. We expressly understand and acknowledge that the Notes have
not been registered under the Securities Act of 1933, as amended (the "Act") or
any state securities laws and, accordingly, that the Notes may not be reoffered,
sold or otherwise pledged, hypothecated or transferred unless so registered or
an applicable exemption from the registration requirements of the Act is
available.

                  3. We qualify as a "qualified institutional buyer" (a
"Qualified Institutional Buyer") within the meaning of Rule 144A of the Act.

                  4. We, by reason of our business and financial experience,
have such knowledge, sophistication, and experience in business and financial
matters that we are capable of evaluating the merits and risks of the
prospective investment in the Notes and we are able to bear the economic risk of
such investment, including the total loss thereof.

<PAGE>   89

                  5. We are purchasing the Notes for our own account for
investment purposes, and not with a view to distribution.

                  6. We represent and warrant that (at least one of the
following must apply):

                     (a) we are not and are not acquiring Notes on behalf of or
                         with the assets of an employee benefit plan (as defined
                         in Section 3(3) of ERISA, as amended) or other
                         arrangement subject to Title I of ERISA or Section 4975
                         of the Code (a "Plan") or an entity whose underlying
                         assets are deemed for purposes of ERISA or Section 4975
                         of the Code to include plan assets by reason of
                         investments in the entity by such a Plan; or

                     (b) we are, or are acquiring Notes with the assets of, an
                         "Investment Fund" (within the meaning of Section V(b)
                         of PTE 84-14) managed by a "Qualified Professional
                         Asset Manager" (within the meaning of Section V(a) of
                         Prohibited Transaction Exemption ("PTE") 84-14) which
                         has made or properly authorized the decision for such
                         Fund to purchase Notes under circumstances such that
                         PTE 84-14 is and will be at all times applicable to the
                         purchase and holding of such Notes; or

                     (c) we are, or are acquiring Notes with the assets of, a
                         Plan managed by an "In-House Asset Manager" (within the
                         meaning of Section IV(a) of PTE 96-23) which has made
                         or properly authorized the decision for such Plan to
                         purchase Notes under circumstances such that PTE
                         96-23 is and will be at all times applicable to the
                         purchase and holding of such Notes~ or

                     (d) we are an insurance company pooled separate account
                         purchasing Notes pursuant to Section I of PTE 90-1 or
                         a bank collective investment fund purchasing pursuant
                         to Section I of PTE 9 1-38, and we are purchasing the
                         Notes under circumstances such that either PTE 90-1
                         or PTE 92-38 is and will be at all times applicable
                         to the purchase and holding of such Notes); or

                     (e) we are an insurance company purchasing Notes with funds
                         of an "insurance company general account" (as such term
                         is defined in Section V(e) of PTE 95-60) and the
                         conditions of Section I of PTE 95-60 are and at all
                         times will be satisfied.

                  7. The Notes were not offered or sold to us by any form of
general solicitation or advertising, including but not limited to:

                     (a) any advertisement, article, notice or other
                         communication published in any newspaper, magazine or
                         similar media or broadcast over television or radio; or

                                       -2-
<PAGE>   90

                     (b) any seminar or meeting whose attendees were invited by
                         any general solicitation or general advertising.

                  8. Prior to the sale we were given the opportunity (i) to ask
questions of, and receive answers from the Transferor concerning the terms and
conditions of the offering and (ii) to obtain any additional information
requested concerning the Indenture, the Note Policy or the Notes, to the extent
the Transferor possessed such information or could acquire it without
unreasonable effort or expense.

                  9. If we are acquiring any Notes on behalf of more than one
beneficial owner, we confirm (i) on behalf of each such beneficial owner each of
the matters set forth in the foregoing subparagraphs (1) through (8) and (ii)
that each such beneficial owner will own not less than an Authorized
Denomination of Notes.

                  10. We agree that we will sell, transfer or otherwise dispose
of Notes held by us from time to time only when permitted in the Indenture to a
person we reasonably believe is a Qualified Institutional Buyer in reliance upon
Rule 144A under the Act. We agree to comply with any other transfer
restrictions, or other related procedures described in the Indenture and that
the Purchaser or transferee of such Notes will execute and deliver to you an
Investment Representation Letter to substantially the same effect as this letter
prior to the consummation of such sale, pledge or transfer.

                  11. Our taxpayer identification number is ___________________

                  12. Our wire instructions are as follows: ____________________

                  13. The undersigned hereby certifies that the undersigned is a
duly authorized officer of the Purchaser. The Purchaser hereby certifies that
the purchaser is duly authorized to purchase the Notes, and its purchase of
investments having the characteristics of the Notes is authorized under, and not
directly or indirectly in contravention of, any law, charter, trust instrument
or other operative document, investment guidelines or list of permissible or
impermissible investments that is applicable to the Purchaser.

                  Capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Indenture.

 Date:
                                            (Name of Purchaser)
                                            By: _______________________________
                                            Printed Name:______________________
                                            Title:_____________________________
                                            Mailing Address of Purchaser:

                                       -3-
<PAGE>   91

                                                                       EXHIBIT D

National Financial Auto Funding Trust
    as Transferor
[               ]
 ---------------
[               ]
 ---------------

Harris Trust and Savings Bank,
    as Indenture Trustee
[               ]
 ---------------
[               ]
 ---------------

          Re:     Class B, Automobile Receivables-Backed Notes of National Auto
                  Finance 1999-1 Trust

Dear Sirs:

                  In connection with our purchase of Notes of the
above-captioned series we represent and agree as follows:

                  1. We have been furnished, and have received and reviewed, a
copy of the Offering Memorandum dated September [__], 1999 and the Indenture
Agreement (the "Indenture") dated September 1, 1999, between National Auto
Finance 1999-1 Trust (the "Trust") and Harris Trust and Savings Bank, as
indenture trustee (the "Indenture Trustee"), which sets forth the terms of the
Notes and have made such investigation as we deem necessary to evaluate the
merits and risks involved in an investment in the Notes. The Purchaser certifies
that it has received from the Issuer the information that satisfies the
requirements of paragraph (d)(4) of Rule 144A (the "Rule 144A Information").

                  2. We expressly understand and acknowledge that the Notes have
not been registered under the Securities Act of 1933, as amended (the "Act") or
any state securities laws and, accordingly, that the Notes may not be reoffered,
sold or otherwise pledged, hypothecated or transferred unless so registered or
an applicable exemption from the registration requirements of the Act is
available.

                  3. We qualify as a "qualified institutional buyer" (a
"Qualified Institutional Buyer") within the meaning of Rule 144A of the Act.

                  4. We, by reason of our business and financial experience,
have such knowledge, sophistication, and experience in business and financial
matters that we are

<PAGE>   92
capable of evaluating the merits and risks of the prospective investment in the
Notes and we are able to bear the economic risk of such investment, including
the total loss thereof.

                  5. We are purchasing the Notes for our own account for
investment purposes, and not with a view to distribution.

                  6. We represent and warrant that we are not and are not
acquiring Notes with the assets of (1) an "employee benefit plan" (within the
meaning of Section 3(3) of ERISA, as amended), or a "plan" (within the meaning
of Section 4975(e)(1) of the Code), (2) an entity the underlying assets of which
include plan assets by reason of investment in the entity (within the meaning of
U.S. Department of Labor Regulation Section 2510.3-101) by such an "employee
benefit plan or "plan" or (3) a "governmental plan" (within the meaning of
Section 3(32) of ERISA). We further represent and covenant that throughout the
period we hold the Notes, the foregoing representation shall be true.

                  7. The Notes were not offered or sold to us by any form of
general solicitation or advertising, including but not limited to:

                     (a) any advertisement, article, notice or other
                         communication published in any newspaper, magazine or
                         similar media or broadcast over television or radio; or

                     (b) any seminar or meeting whose attendees were invited by
                         any general solicitation or general advertising.

                  8. Prior to the sale we were given the opportunity (i) to ask
questions of, and receive answers from the Transferor concerning the terms and
conditions of the offering and (ii) to obtain any additional information
requested concerning the Indenture, the Note Policy or the Notes, to the extent
the Transferor possessed such information or could acquire it without
unreasonable effort or expense.

                  9. If we are acquiring any Notes on behalf of more than one
beneficial owner, we confirm (i) on behalf of each such beneficial owner each of
the matters set forth in the foregoing subparagraphs (1) through (8) and (ii)
that each such beneficial owner will own not less than an Authorized
Denomination of Notes.

                  10. We agree that we will sell, transfer or otherwise dispose
of Notes held by us from time to time only when permitted in the Indenture to a
person we reasonably believe is a Qualified Institutional Buyer in reliance upon
Rule 144A under the Act. We agree to comply with any other transfer
restrictions, or other related procedures described in the Indenture and that
the Purchaser or transferee of such Notes will execute and deliver to you an
Investment Representation Letter to substantially the same effect as this letter
prior to the consummation of such sale, pledge or transfer.

                  11. Our taxpayer identification number is ___________________.

                  12. Our wire instructions are as follows: ___________________.

                  13. The undersigned hereby certifies that the undersigned is a
duly authorized officer of the Purchaser. The Purchaser hereby certifies that
the Purchaser is duly authorized to purchase the Notes, and its purchase of
investments having the characteristics of

                                       -2-
<PAGE>   93
the Notes is authorized under, and not directly or indirectly in contravention
of, any law, charter, trust instrument or other operative document, investment
guidelines or list of permissible or impermissible investments that is
applicable to the Purchaser.

                  Capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Indenture.

Date:
                                       (Name of Purchaser)

                                       By:
                                          -------------------------------------
                                       Printed Name:
                                                    ---------------------------
                                       Title:
                                             ----------------------------------
                                       Mailing Address of Purchaser:

                                       -3-
<PAGE>   94

                                                                  EXHIBIT 10.109

================================================================================
                               SALE AND SERVICING

                                    AGREEMENT

                                      among

                       NATIONAL AUTO FINANCE 1999-1 TRUST,

                                   as Issuer,

                     NATIONAL FINANCIAL AUTO FUNDING TRUST,

                                   as Seller,

                      NATIONAL AUTO FINANCE COMPANY, INC.,

                   in its individual capacity and as Servicer

                                       and

                          HARRIS TRUST AND SAVINGS BANK

                  as Trust Collateral Agent and Backup Servicer

                          Dated as of September 1, 1999

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

<PAGE>   95

                                                                  EXHIBIT 10.110

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

                                 SALE AGREEMENT

                                     BETWEEN

                    NATIONAL FINANCIAL AUTO FUNDING TRUST II

                                       AND

                      NATIONAL FINANCIAL AUTO FUNDING TRUST

                                 ---------------

                          DATED AS OF SEPTEMBER 1, 1999

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

<PAGE>   96
                                                                  EXHIBIT 10.111

                               CUSTODIAL AGREEMENT

          This Custodial Agreement (the "Agreement") is dated as of September 1,
1999 by and between HARRIS TRUST AND SAVINGS BANK, an Illinois banking
corporation, as custodian ("Custodian") and as trustee ("Trustee") and trust
collateral agent ("Agent"), and NATIONAL AUTO FINANCE COMPANY, INC., as Servicer
(the "Company" or "NAFCO").

                                    RECITALS

          A. Company and Trustee are entering into this Agreement to provide for
perfection of the pledge of assets pursuant to the Indenture, dated as of
September 1, 1999, ("Indenture") between National Auto Finance 1999-1 Trust (the
"Trust") and Agent and the Sale and Servicing Agreement, dated as of September
1, 1999, ("Sale and Servicing Agreement") among National Financial Auto Funding
Trust ("Funding Trust"), NAFCO, Trust and Agent. Financial Security Assurance,
Inc. ("FSA") is the insurer in respect of the Indenture and the Sale and
Servicing Agreements.

          B. Company and Trustee have requested that Custodian act as agent of
Trustee pursuant to the terms of this Agreement.

          NOW THEREFORE, in consideration of the foregoing recitals which are
incorporated herein and for good and valuable consideration the receipt of which
is hereby acknowledged, the parties hereto agree as follows:

          1. DEFINITIONS. Any capitalized terms used in this Agreement without
definition, shall have the meaning given to such terms in the Indenture or the
Sale and Servicing Agreement.

             (a) For purposes of this Agreement, the term "Custodian Documents"
shall mean with respect to each contract file, (i) the fully executed original
of the contract, (ii) the original certificate of title, and (iii) such other
documents as NAFCO chooses to maintain in its files in accordance with customary
practices and procedures to evidence that a financed vehicle is owned by the
obligor and subject to the interest of NAFCO as first lienholder or secured
party under the Indenture and Sale and Servicing Agreement.

          2. APPOINTMENT OF CUSTODIAN. Subject to the terms and conditions set
forth herein, Trustee on behalf of the Trust hereby revocably appoints the
Custodian to fulfill those obligations specifically set forth herein and
Custodian hereby accepts such appointment, and agrees to act as bailee and
agent on behalf of Trustee and NAFCO to maintain exclusive custody and
possession of the Custodian Documents which may from time to time comprise part
of the Trust Assets pursuant to the terms herein. In performing its duties
hereunder, Custodian shall exercise such standards of care as it exercises in
maintaining motor vehicle installment sale contracts as customary in the
industry and no less than the standard it maintains for other<PAGE>   1

                                                                  EXHIBIT 10.109

================================================================================
                               SALE AND SERVICING

                                    AGREEMENT

                                      among

                       NATIONAL AUTO FINANCE 1999-1 TRUST,

                                   as Issuer,

                     NATIONAL FINANCIAL AUTO FUNDING TRUST,

                                   as Seller,

                      NATIONAL AUTO FINANCE COMPANY, INC.,

                   in its individual capacity and as Servicer

                                       and

                          HARRIS TRUST AND SAVINGS BANK

                  as Trust Collateral Agent and Backup Servicer

                          Dated as of September 1, 1999

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

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                     ARTICLE I

                                                    Definitions

<S>                      <C>                                                                                    <C>
SECTION 1.1.             Definitions..............................................................................1
SECTION 1.2.             Other Definitional Provisions...........................................................22
SECTION 1.3.             Usage of Terms..........................................................................22
SECTION 1.4.             Certain References......................................................................23
SECTION 1.5.             No Recourse.............................................................................23
SECTION 1.6.             Action by or Consent of Noteholders.....................................................23
SECTION 1.7.             Material Adverse Effect.................................................................23
SECTION 1.8.             Calculations as to Principal and Interest in Respect of Receivables.....................23

                                                    ARTICLE II

                                             Conveyance of Receivables

SECTION 2.1.             Conveyance of Receivables...............................................................24
SECTION 2.2.             [Reserved]..............................................................................25
SECTION 2.3.             Further Encumbrance of Trust Property...................................................25
SECTION 2.4.             Books and Records; Payments on Receivables..............................................30
SECTION 2.5.             Seller Repurchase of Receivables........................................................31

                                                    ARTICLE III

                                                  The Receivables

SECTION 3.1.             Representations and Warranties of NAFI and the Seller...................................28
SECTION 3.2.             Repurchase upon Breach..................................................................28
SECTION 3.3.             Custody of Receivables Files............................................................29

                                                    ARTICLE IV

                                    Administration and Servicing of Receivables

SECTION 4.1.             Duties of the Servicer..................................................................29
SECTION 4.2.             Sub-Servicing Agreements between Servicer and the Sub-Servicers.........................32
SECTION 4.3.             Obligations of the Servicer.............................................................33
SECTION 4.4.             No Contractual Relationship between a Sub-Servicer and Trust Collateral Agent or
                         Noteholders.............................................................................33
</TABLE>

                                       i
<PAGE>   3

<TABLE>
<S>                      <C>                                                                                    <C>
SECTION 4.5.             Assumption or Termination of Sub-Servicing Agreement by Trust Collateral Agent..........33
SECTION 4.6.             Collection of Receivable Payments.......................................................34
SECTION 4.7.             Maintenance of Insurance................................................................36
SECTION 4.8.             Realization upon Defaulted Receivables..................................................36
SECTION 4.9.             Total Servicing Fee; Payment of Certain Expenses by Servicer............................37
SECTION 4.10.            [Reserved]..............................................................................37
SECTION 4.11.            Reports.................................................................................37
SECTION 4.12.            Annual Statement as to Compliance, Notice of Servicer Termination Event.................38
SECTION 4.13.            Annual Independent Accountants' Report..................................................39
SECTION 4.14.            Access to Certain Documentation and Information Regarding Receivables...................39
SECTION 4.15.            Monthly Tape............................................................................40
SECTION 4.16.            Retention and Termination of Servicer...................................................40
SECTION 4.17.            Custodial Arrangement...................................................................40

                                                     ARTICLE V

                             Trust Accounts; Distributions; Statements to Noteholders

SECTION 5.1.             Establishment of Trust Accounts.........................................................41
SECTION 5.2.             [Reserved]..............................................................................45
SECTION 5.3.             Certain Reimbursements to the Servicer..................................................45
SECTION 5.4.             Application of Collections..............................................................45
SECTION 5.5.             Withdrawals from Series 1999-1 Spread Account...........................................45
SECTION 5.6.             Additional Deposits.....................................................................46
SECTION 5.7.             Distributions...........................................................................46
SECTION 5.8.             Note Distribution Account...............................................................49
SECTION 5.9.             [Reserved]..............................................................................50
SECTION 5.10.            Statements to Noteholders...............................................................50
SECTION 5.11.            Optional Deposits by the Insurer........................................................50

                                                    ARTICLE VI

                                              The Class A Note Policy

SECTION 6.1.             Claims Under Class A Note Policy........................................................50
SECTION 6.2.             Preference Claims.......................................................................51
SECTION 6.3.             Surrender of Policy.....................................................................52
SECTION 6.4.             Spread Account..........................................................................52
</TABLE>

                                       ii
<PAGE>   4

<TABLE>
<CAPTION>
                                                    ARTICLE VII

                                                     RESERVED

                                                   ARTICLE VIII

                                                    The Seller

<S>                      <C>                                                                                    <C>
SECTION 8.1.             Representations, Warranties and Covenants of the Seller.................................53
SECTION 8.2.             Corporate Existence.....................................................................55
SECTION 8.3.             Liability of Seller; Indemnities........................................................56
SECTION 8.4.             Merger or Consolidation of, or Assumption of the Obligations of, Seller.................57
SECTION 8.5.             Limitation on Liability of Seller and Others............................................57
SECTION 8.6.             Seller May Own Notes....................................................................57

                                                    ARTICLE IX

                                                   The Servicer

SECTION 9.1.             Representations, Warranties and Covenants of the Servicer...............................58
SECTION 9.2.             Liability of Servicer; Indemnities......................................................60
SECTION 9.3.             Merger or Consolidation of, or Assumption of the Obligations of the Servicer or
                         the Trust Collateral Agent..............................................................61
SECTION 9.4.             Limitation on Liability of Servicer, Trust Collateral Agent and Others..................62
SECTION 9.5.             Delegation of Duties....................................................................64
SECTION 9.6.             Servicer and Trust Collateral Agent Not to Resign.......................................65

                                                     ARTICLE X

                                                      Default

SECTION 10.1.            Servicer Termination Event..............................................................65
SECTION 10.2.            Consequences of a Servicer Termination Event............................................67
SECTION 10.3.            Additional Consequences of a Servicer Termination Event.................................68
SECTION 10.4.            Appointment of Successor................................................................68
SECTION 10.5.            [RESERVED]..............................................................................72
SECTION 10.6.            Notification to Noteholders and Rating Agencies.........................................70
SECTION 10.7.            Waiver of Past Defaults.................................................................70
SECTION 10.8.            Termination of Trust Collateral Agent...................................................70
SECTION 10.9.            Successor to Servicer...................................................................71
</TABLE>

                                      iii
<PAGE>   5

<TABLE>
<CAPTION>
                                                    ARTICLE XI

                                                   Termination

<S>                      <C>                                                                                    <C>
SECTION 11.1.            Optional Purchase of All Receivables....................................................72

                                                    ARTICLE XII

                                       Administrative Duties of the Servicer

SECTION 12.1.            Administrative Duties...................................................................73
SECTION 12.2.            Records.................................................................................75
SECTION 12.3.            Additional Information to be Furnished to the Issuer....................................75

                                                   ARTICLE XIII

                                             Miscellaneous Provisions

SECTION 13.1.            Amendment...............................................................................75
SECTION 13.2.            Protection of Title to Trust............................................................77
SECTION 13.3.            Notices.................................................................................79
SECTION 13.4.            Assignment..............................................................................80
SECTION 13.5.            Limitations on Rights of Others.........................................................80
SECTION 13.6.            Severability............................................................................80
SECTION 13.7.            Separate Counterparts...................................................................81
SECTION 13.8.            Headings................................................................................81
SECTION 13.9.            Governing Law...........................................................................81
SECTION 13.10.           Assignment to Trustee...................................................................81
SECTION 13.11.           Nonpetition Covenants...................................................................81
SECTION 13.12.           Limitation of Liability of Owner Trustee and Trustee....................................82
SECTION 13.13.           Independence of the Servicer............................................................82
SECTION 13.14.           No Joint Venture........................................................................82
SECTION 13.14.           Insurer as Controlling Party............................................................84
</TABLE>

                                       iv
<PAGE>   6

                  SALE AND SERVICING AGREEMENT dated as of September 1, 1999,
among NATIONAL AUTO FINANCE 1999-1 TRUST, a Delaware business trust, as issuer
(the "Issuer" or the "Trust"), NATIONAL FINANCIAL AUTO FUNDING TRUST, a Delaware
business trust, as seller (the "Seller"), NATIONAL AUTO FINANCE COMPANY, INC., a
Delaware corporation, in its individual capacity ("NAFI") and as servicer (the
"Servicer"), and HARRIS TRUST AND SAVINGS BANK, an Illinois banking association,
in its capacity as trust collateral agent (the "Trust Collateral Agent") and
backup servicer (the "Backup Servicer").

                  WHEREAS the Issuer desires to purchase a portfolio of
receivables arising in connection with motor vehicle retail installment sale
contracts acquired by NAFI directly or indirectly through motor vehicle dealers
and motor vehicle finance companies;

                  WHEREAS the Seller has acquired such receivables from National
Financial Auto Funding Trust II and is willing to sell such receivables to the
Issuer;

                  WHEREAS the Servicer is willing to service such receivables;

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

                                   ARTICLE I

                                  DEFINITIONS

         SECTION 1.1. Definitions. Whenever used in this Agreement, the
following words and phrases shall have the following meanings:

                  "Accountants' Report" means the report of a firm of nationally
recognized independent accountants described in Section 4.13.

                  "Actuarial Method" means the method of allocating a fixed
level payment on an obligation between principal and interest, pursuant to which
the portion of such payment that is allocated to interest is equal to the
product of (a) 1/12, (b) the fixed annual rate of interest on such obligation
and (c) the outstanding principal balance of such obligation.

                  "Affiliate" means, with respect to any specified Person, any
other Person controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, "control" when used with
respect to any 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.

                  "Aggregate Note Balance" means, the sum of the Class A Note
Balance and the Class B Note Balance.

                  "Aggregate Principal Balance" means, with respect to any date
of determination, the sum of the Principal Balances for all Receivables (other
than (i) any Receivable that became a

<PAGE>   7

Liquidated Receivable during the related Due Period and (ii) any Receivable that
became a Purchased Receivable during the related Due Period) as of the date of
determination.

                  "Agreement" means this Sale and Servicing Agreement, as the
same may be amended and supplemented from time to time in accordance with the
terms hereof.

                  "Amount Financed" means, with respect to a Receivable, the
aggregate amount advanced under such Receivable toward the purchase price of the
Financed Vehicles and any related costs, including amounts advanced in respect
of accessories, insurance premiums, service, car club and warranty contracts,
other items customarily financed as part of motor vehicle retail installment
sale contracts or promissory notes, and related costs.

                  "Annual Percentage Rate" or "APR" of a Receivable means the
annual percentage rate of finance charges or service charges, as stated in the
related Contract.

                  "Assignment Agreement" means the agreement, dated as of
September 1, 1999, between Bankers Trust Company, not in its individual capacity
but solely as Trustee of the National Financial Auto Receivables Master Trust,
and National Financial Auto Funding Trust II, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof.

                  "Available Amount" means, with respect to any Distribution
Date, an amount equal to the sum of (i) the amount on deposit in the
Distribution Account on the preceding Distribution Date after giving effect to
all withdrawals therefrom on such preceding Distribution Date, (ii) the amount
to be transferred by the Trust Collateral Agent to the Distribution Account from
the Collection Account on such Distribution Date pursuant to Section 5.1(c), and
(iii) any amounts paid by the Insurer to the Trust Collateral Agent pursuant to
Section 5.11 hereof for distribution on such Distribution Date.

                  "Average Default Rate" means, with respect to any Reporting
Date, the arithmetic average of the Default Rates for each of the three Due
Periods immediately preceding the Due Period in which such Reporting Date
occurs.

                  "Average Delinquency Ratio" means, with respect to any
Reporting Date, the arithmetic average of the Delinquency Ratios for each of the
three Due Periods immediately preceding the Due Period in which such Reporting
Date occurs.

                  "Average Extension Ratio" has the meaning specified in Section
4.6(a).

                  "Average Net Loss Rate" means, with respect to any Reporting
Date, the arithmetic average of the Net Loss Rates for each of the three Due
Periods immediately preceding the Due Period in which such Reporting Date
occurs.

                  "Backup Servicer" means, Harris Trust and Savings Bank, as the
Backup Servicer hereunder, including in its capacity as Servicer, in the event
NAFI resigns or is removed as Servicer.

                                       2
<PAGE>   8

                  "Backup Servicing Agreement" means the Agreement for
Monitoring and Backup Servicing, dated as of September 1, 1999, among the
Servicer, the Insurer and CSC Logic/MSA LLP d/b/a Loan Servicing Enterprise, as
the same may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof.

                  "Bankruptcy Loss" means, 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 APR on such
Receivable or the rate of interest, if any, specified by the court in such
order) of the scheduled payments as so modified or restructured. A "Bankruptcy
Loss" shall be deemed to have occurred on the date of issuance of such order.

                  "Base Servicing Fee" means, with respect to any Due Period,
the fee payable to the Servicer for services rendered during such Due Period,
which shall be equal to one-twelfth of the Servicing Fee Rate multiplied by the
Pool Balance as of the close of business on the last day of the preceding Due
Period.

                  "Business Day" means a day other than a Saturday, a Sunday or
other day on which commercial banks located in New York, Illinois, Delaware or
Florida are authorized or obligated to be closed.

                  "Certificateholder" or "Certificateholders" means the Person
in whose name the Trust Certificate is registered in the Certificate Register
maintained pursuant to the Trust Agreement.

                  "Class" means either the Class A Notes or the Class B Notes.

                  "Class A Interest Rate" means 7.26% per annum (computed on the
basis of a 360-day year of twelve 30-day months).

                  "Class A Note Balance" means initially, the aggregate
principal amount of Class A Notes issued on the Closing Date and, thereafter,
such principal amount reduced by all amounts paid to the Class A Noteholders in
respect of the Class A Percentage of the Noteholders' Principal Distributable
Amount.

                  "Class A Note Distribution Account" means an account
designated as such, established and maintained pursuant to Section 5.1(a)(ii).

                  "Class A Note Policy" means the financial guaranty insurance
policy number _______ issued by the Insurer to the Trust Collateral Agent, as
agent for the Trustee, for the benefit of the Class A Noteholders, including any
endorsements thereto.

                  "Class A Note Policy Claim Amount" for any Distribution Date,
shall equal the excess, if any, of (x) the amount required to be distributed
pursuant to Section 5.7(a)(iii) and, if

                                       3
<PAGE>   9

such Distribution Date is the Final Scheduled Distribution Date, Section
5.7(a)(v), over (y) the portion of (i) the Available Amount and (ii)] the
Deficiency Claim Amount available to make payments under such sections on such
Distribution Date.

                  "Class A Note Preference Claim" has the meaning set forth in
Section 6.2 hereof.

                  "Class A Noteholders" has the meaning assigned to such term in
the Indenture.

                  "Class A Notes" has the meaning assigned to such term in the
Indenture.

                  "Class A Percentage" means 80%.

                  "Class A Principal Carryover Shortfall" means, as of the close
of business on any Distribution Date, the excess of the Noteholders' Principal
Distributable Amount for the Class A Notes and any outstanding Class A Principal
Carryover Shortfall from the preceding Distribution Date over the amount in
respect of principal that was actually deposited in the Class A Note
Distribution Account and distributed on the Class A Notes on such Distribution
Date.

                  "Class B Interest Rate" means 11.13% per annum (computed on
the basis of a 360-day year of twelve 30-day months).

                  "Class B Note Balance" means initially, the aggregate
principal amount of Class B Notes issued on the Closing Date and, thereafter,
such principal amount reduced by all amounts paid to the Class B Noteholders (i)
in respect of the Class B Percentage of the Noteholders' Principal Distributable
Amount and (ii) pursuant to the provisions contained in Section 5.7(a)(ix).

                  "Class B Note Distribution Account" means an account
designated as such, established and maintained pursuant to Section 5.1(a)(ii).

                  "Class B Noteholders" has the meaning assigned to such term in
the Indenture.

                  "Class B Notes" has the meaning assigned to such term in the
Indenture.

                  "Class B Percentage" means 5%.

                  "Class B Principal Carryover Shortfall" means, as of the close
of business on any Distribution Date, the excess of the Noteholders' Principal
Distributable Amount for the Class B Notes and any outstanding Class B Principal
Carryover Shortfall from the preceding Distribution Date over the amount in
respect of principal that was actually deposited in the Class B Note
Distribution Account and distributed on the Class B Notes on such Distribution
Date.

                  "Closing Date" means September 24, 1999.

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

                  "Collateral Agent" means Harris Trust and Savings Bank, in its
capacity as Collateral Agent under the Spread Account Agreement.

                                       4
<PAGE>   10

                  "Collection Account" means the account designated as such,
established and maintained pursuant to Section 5.1.

                  "Collection Records" means all manually prepared or computer
generated records relating to collection efforts or payment histories with
respect to the Receivables.

                  "Computer Tape" means the computer tapes or other electronic
media furnished by the Seller to the Issuer and its assigns describing certain
characteristics of the Receivables as of the Cut-off Date.

                  "Contract" means a motor vehicle retail installment sale
contract.

                  "Controlling Class" means holders of not less than 51% of the
outstanding balance of the Class A Notes, or if the Class A Notes are not
outstanding, holders of not less than 51% of the outstanding balance of the
Class B Notes.

                  "Controlling Party" means (x) the Insurer, so long as (i) the
Class A Notes shall be outstanding or amounts owing to the Insurer have not been
paid to it and (ii) no Insurer Default shall have occurred and be continuing,
and (y) the Controlling Class, in the event (i) the Class A Notes shall no
longer be outstanding, all amounts owing to the Insurer have been paid to it and
the term of the Class A Note Policy shall have expired or (ii) an Insurer
Default shall have occurred and be continuing.

                  "Conveyance Agreements" means the Sale Agreement and the
Assignment Agreement.

                  "Corporate Trust Office" means (i) with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee, which at the
time of execution of this agreement is Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration, and (ii) with respect to the Trustee and the Trust Collateral
Agent, the principal corporate trust office of the Trustee, which at the time of
execution of this agreement is 311 West Monroe Street, 12th Floor, Chicago, IL
60606, Attention: Indenture Trust Administration.

                  "Custodial Agreement" means any agreement from time to time in
effect between the Custodian named therein and the Trust Collateral Agent, as
the same may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof, which Custodial Agreement and any amendments,
supplements or modifications thereto shall be acceptable to the Controlling
Party (the Custodial Agreement which is effective on the Closing Date is
acceptable to the Controlling Party).

                  "Custodian" means any Person named from time to time as
custodian of the Receivable Files in any Custodial Agreement and acting as agent
for the Trust Collateral Agent, which Person must be acceptable to the
Controlling Party (the Custodian as of the Closing Date is acceptable to the
Controlling Party as of the Closing Date). The initial Custodian on the Closing
Date shall be Harris Trust and Savings Bank, as custodian.

                                       5
<PAGE>   11

                  "Cut-off Date" means August 31, 1999.

                  "Dealer" means a dealer who sold a Financed Vehicle and who
originated and assigned the respective Receivable to NAFI or an Originator under
a Dealer Agreement.

                  "Dealer Agreement" means any agreement between NAFI or an
Originator and a Dealer relating to the acquisition of Receivables from a Dealer
by NAFI or an Originator.

                  "Dealer Assignment" means, with respect to a Receivable, the
executed assignment executed by a Dealer conveying such Receivable to an
Originator.

                  "Dealer Underwriting Guide" means either, (i) the underwriting
guidelines used by or on behalf of NAFI in the origination and purchase of
Receivables, as amended from time to time, or (ii) the underwriting guidelines
used in the origination of Receivables as reviewed by NAFI prior to the purchase
of Receivables by NAFI.

                  "Default Rate" means, with respect to any Due Period, the
product of (i) twelve and (ii) the quotient, expressed as a percentage, obtained
by dividing (a) the sum of (x) the aggregate outstanding Principal Balance of
all Defaulted Receivables which became Defaulted Receivables during such Due
Period and (y) the aggregate outstanding Principal Balance of all Receivables
that became Purchased Receivables during such Due Period and were 30 days or
more past due as of the date such Receivables were retransferred hereunder by
(b) the arithmetic average of the Pool Balance as of the end of such Due Period
and the Pool Balance as of the end of the preceding Due Period.

                  "Defaulted Receivable" means, with respect to any Due Period,
a Receivable with respect to which any of the following has occurred during such
Due Period: (i) all or a part of any Scheduled Receivable Payment is 90 days or
more delinquent as of the end of such Due Period, (ii) such Receivable is in
default and the Servicer (or Sub-Servicer) has in good faith determined that
payments thereunder are not likely to be resumed or (iii) the Financed Vehicle
that secures the Receivable has been repossessed without reinstatement of the
Receivable on or before the last day of such Due Period and any applicable
redemption period has expired.

                  "Deficiency Claim Amount" shall have the meaning set forth in
Section 5.5.

                  "Deficiency Claim Date" means, with respect to any
Distribution Date, the fourth Business Day immediately preceding such
Distribution Date.

                  "Deficiency Notice" shall have the meaning set forth in
Section 5.5.

                  "Delinquency Rate" means, with respect to any Due Period, the
quotient, expressed as a percentage, obtained by dividing (a) the aggregate
Principal Balance of all Receivables with respect to which a Scheduled
Receivable Payment is 30 or more days past due as of the end of such Due Period,
by (b) the Pool Balance as of the end of such Due Period.

                  "Delivery" when used with respect to Trust Account Property
shall mean:

                                       6
<PAGE>   12

                  (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 and are
susceptible of physical delivery, transfer thereof to the Trust Collateral Agent
by physical delivery to the Trust Collateral Agent endorsed to, or registered in
the name of, the Trust Collateral Agent or endorsed in blank, and with respect
to a certificated security (as defined in Section 8-102 of the UCC) transfer
thereof (i) by delivery of such certificated security endorsed to, or registered
in the name of the Trust Collateral Agent or (ii) by delivery thereof to a
"clearing corporation" (as defined in Section 8-102 of the UCC) and the making
by such clearing corporation of appropriate entries on its books reducing the
appropriate securities account of the transferor and increasing the appropriate
securities account of the Trust Collateral Agent by the amount of such
certificated security and the identification by the clearing corporation of the
certificated securities for the sole and exclusive account of the Trust
Collateral Agent (all of the foregoing "Physical Property"), and, in any event,
any such Physical Property in registered form shall be in the name of the Trust
Collateral Agent; and such additional or alternative procedures as may hereafter
become appropriate to effect the complete transfer of ownership of any such
Trust Account Property to the Trust Collateral Agent or its nominee or
custodian, consistent with changes in applicable law or regulations or the
interpretation thereof;

                  (b) 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
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 Trust Account
Property to an appropriate book-entry account maintained with a Federal Reserve
Bank by a securities intermediary that is also a "depository" pursuant to
applicable federal regulations; the making by such securities intermediary of
entries in its books and records crediting such Trust Account Property to the
Trust Collateral Agent's security account at the securities intermediary and
identifying such book-entry security held through the Federal Reserve System
pursuant to federal book-entry regulations as belonging to the Trust Collateral
Agent; and such additional or alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of any such Trust Account
Property to the Trust Collateral Agent, consistent with changes in applicable
law or regulations or the interpretation thereof; and

                  (c) with respect to any item of Trust Account Property that is
an uncertificated security under Article 8 of the UCC and that is not governed
by clause (b) above, registration on the books and records of the issuer thereof
in the name of the Trust Collateral Agent or its nominee or custodian who either
(i) becomes the registered owner on behalf of the Trust Collateral Agent or (ii)
having previously become the registered owner, acknowledges that it holds for
the Trust Collateral Agent.

                  "Depositor" shall mean the Seller in its capacity as Depositor
under the Trust Agreement.

                  "Determination Date" means, with respect to a Distribution
Date, the last day of the Due Period immediately preceding such Distribution
Date.

                                       7
<PAGE>   13

                  "Distribution Account" means the account established pursuant
to Section 5.1(a)(iii) hereof.

                  "Distribution Date" means, with respect to each Due Period,
the twenty-first day of the following calendar month, or if such day is not a
Business Day, the immediately following Business Day, commencing October 21,
1999.

                  "Draw Date" means, with respect to any Distribution Date, the
fourth Business Day (as defined in the Class A Note Policy) immediately
preceding such Distribution Date.

                  "Due Date" means, with respect to a Receivable, the date in
each Due Period on which a Scheduled Receivable Payment on such Receivable is
due.

                  "Due Period" means, with respect to each Distribution Date,
the period from and including the first day of the calendar month preceding the
month in which such Distribution Date occurs to and including the last day of
the calendar month preceding the month of such Distribution Date.

                  "Electronic Ledger" means the electronic master record of the
retail installment sales contracts or installment loans of the Servicer.

                  "Eligible Bank" means any depository institution (which shall
initially be the Trust Collateral Agent) acceptable to the Controlling Party,
organized under the laws of the United States of America or any one of the
states thereof or the District of Columbia (or any United States branch or
agency of a foreign bank), which is subject to supervision and examination by
federal or state banking authorities and which at all times (a) has a net worth
in excess of $50,000,000 and (b) has either (i) a rating of P-1 from Moody's and
A-1 from S&P with respect to short-term deposit obligations, or (ii) if such
institution has issued long-term unsecured debt obligations, a rating of A2 or
higher from Moody's and AA from S&P with respect to long-term unsecured debt
obligations. Such depository institution (other than the Trust Collateral Agent)
shall have been approved in writing by the Controlling Party, operating in its
discretion, by written notice to the Trust Collateral Agent.

                  "Eligible Deposit Account" means (i) a segregated trust
account that is maintained with the corporate trust department of a depository
institution or trust company acceptable to the Insurer (unless a Insurer Default
has occurred and is continuing, in which case such institution shall be one
subject to regulations regarding fiduciary funds on deposit substantially
similar to 12 CFR Section 9.10(b)), or (ii) a segregated demand 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+" from Standard & Poor's and "P-1" from
Moody's and (unless a Insurer Default has occurred and is continuing) acceptable
to the Insurer.

                  "Eligible Investments" mean book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:

                                       8
<PAGE>   14

                  (a) direct interest-bearing obligations of, and
interest-bearing obligations fully guaranteed as to timely payment of principal
and interest by, the United States of America;

                  (b) demand deposits, time deposits or certificates of deposit
of any depository institution or trust company organized under the laws of the
United States of America or any state thereof or the District of Columbia (or
any domestic branch of a foreign bank) and subject to supervision and
examination by Federal or state banking or depository institution authorities
(including depository receipts issued by any such institution or trust company
as custodian with respect to any obligation referred to in clause (a) above or
portion of such obligation for the benefit of the holders of such depository
receipts); provided, however, that at the time of the investment or contractual
commitment to invest therein (which shall be deemed to be made again each time
funds are reinvested following each Distribution Date), the commercial paper or
other short-term senior unsecured debt obligations (other than such obligations
the rating of which is based on the credit of a Person other than such
depository institution or trust company) of such depository institution or trust
company shall have a credit rating from Standard & Poor's of AAA and from
Moody's of Aaa;

                  (c) commercial paper and demand notes investing solely in
commercial paper that (i) is payable in United States dollars and (ii) has, at
the time of the investment or contractual commitment to invest therein, a rating
from Standard & Poor's of A-1+ and from Moody's of P-1;

                  (d) investments in money market funds (including funds for
which the Trust Collateral Agent or the Owner Trustee in each of their
individual capacities or any of their respective Affiliates is investment
manager or advisor) having a rating from Standard & Poor's of AAA-m or AAAm-G
and from Moody's of Aaa and (other than funds for which the Trust Collateral
Agent or the Owner Trustee in each of their individual capacities or any of
their respective Affiliates is investment manager or advisor) having been
approved in writing by the Insurer;

                  (e) bankers' acceptances issued by any depository institution
or trust company referred to in clause (b) above;

                  (f) repurchase obligations pursuant to a written agreement (i)
with respect to any obligation described in clause (a) above, where the Trustee
has taken actual or constructive delivery of such obligation, 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 Trustee or any
agent of the Trustee acting in its respective commercial capacities); and

                  (g) any other investment which is rated in the highest
investment category by each of the Rating Agencies and which has been approved
by the Controlling Party.

                                       9
<PAGE>   15

                  Any of the foregoing Eligible Investments may be purchased by
or through the Owner Trustee or the Trust Collateral Agent or any of their
respective Affiliates. All Eligible Investments shall be denominated in United
States dollars. No Eligible Investments shall be invested in securities that are
purchased at a premium.

                  "Eligible Servicer" means the Servicer, the Backup Servicer or
another Person that, 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 and (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.

                  "Eligible Sub-Servicer" means any Person which at the time of
its appointment as Sub-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.

                  "Extension Ratio" has the meaning specified in Section 4.6(a).

                  "Final Scheduled Distribution Date" means the Distribution
Date occurring in October, 2004.

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

                  "Funding Trust II" means National Auto Funding Trust II, a
Delaware business trust.

                  "Governmental Authority" means (a) any federal, state, county,
municipal or foreign government or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department, instrumentality or public body, (c) any court or administrative
tribunal or (d) with respect to any Person, any arbitration tribunal or other
non-governmental authority to the jurisdiction of which such Person has
consented.

                  "Indemnification Agreement" means the Indemnification
Agreement, dated as of September 1, 1999, between the Insurer and the Seller, as
such agreement may be amended, supplemented or otherwise modified from time to
time in accordance with the terms hereof.

                  "Indenture" means the Indenture dated as of September 1, 1999,
among the Issuer and Harris Trust and Savings Bank, as Trust Collateral Agent
and Trustee, as the same may be amended and supplemented from time to time.

                                       10
<PAGE>   16

                  "Initial Spread Account Deposit" has the meaning set forth in
the Series 1999-1 Supplement.

                  "Insurance Agreement" means the Insurance and Indemnity
Agreement, dated as of September 1, 1999, among the Insurer, the Trust, the
Seller and NAFI, as such agreement may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof.

                  "Insurance Agreement Event of Default" means an "Event of
Default" as defined in the Insurance Agreement.

                  "Insurance Policy" means, with respect to a Receivable, any
insurance policy (including the insurance policies described in Section 4.4
hereof) benefiting 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.

                  "Insurer" means Financial Security Assurance Inc., a monoline
insurance company incorporated under the laws of the State of New York, or any
successor thereto, as issuer of the Class A Note Policy.

                  "Insurer Default" means the occurrence and continuance of any
of the following events:

                  (a) the Insurer shall have failed to make a payment required
under the Class A Note Policy in accordance with its terms;

                  (b) the Insurer shall have (i) filed a petition or commenced
any case or proceeding under any provision or chapter of the United States
Bankruptcy Code or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii) made
a general assignment for the benefit of its creditors or (iii) had an order for
relief entered against it under the United States Bankruptcy Code or any other
similar federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable; or

                  (c) a court of competent jurisdiction, the New York Department
of Insurance or other competent regulatory authority shall have entered a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Insurer or for all or any material portion of its
property or (ii) authorizing the taking of possession by a custodian, trustee,
agent or receiver of the Insurer (or the taking of possession of all or any
material portion of the property of the Insurer).

                  "Insurer Optional Deposit" means, with respect to any
Distribution Date, an amount delivered by the Insurer pursuant to Section 5.11,
at its sole option, other than amounts in respect of a Class A Note Policy Claim
Amount to the Trust Collateral Agent for deposit into the Collection Account for
any of the following purposes: (i) to provide funds in respect of the payment of
fees or expenses of any provider of services to the Trust with respect to such
Distribution Date; or (ii) to include such amount as part of the Available
Amount for such

                                       11
<PAGE>   17

Distribution Date to the extent that without such amount a draw would be
required to be made on the Class A Note Policy.

                  "Interest Rate" means, as the context may require, either the
Class A Interest Rate or the Class B Interest Rate, as applicable.

                  "Investment Earnings" means, with respect to any Distribution
Date and Trust Account, the investment earnings on amounts on deposit in such
Trust Account on such Distribution Date.

                  "Issuer" or "Trust" means National Auto Finance 1999-1 Trust.

                  "Lien" means a security interest, lien, charge, pledge,
equity, or encumbrance of any kind.

                  "Lien Certificate" means, 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" means, with respect to any Due Period,
a Receivable with respect to which any of the following events has occurred
during such Due Period (the earliest to occur of the following events): (i) 90
days have elapsed since Repossession of the related Financed Vehicle, (ii) the
Servicer (or Sub-Servicer) has in good faith determined that all amounts that it
expects to recover under such Receivable have been received or (iii) 90% or
greater of any Scheduled Receivable Payment on such Receivable is 120 days or
more (or, if the related Obligor is a debtor under Chapter 13 of the U.S.
Bankruptcy Code, 180 days or more) delinquent as of the end of such Due Period.

                  "Liquidation Expenses" means, reasonable out-of-pocket
expenses which are incurred by the Servicer or any Sub-Servicer in connection
with the liquidation of any Defaulted Receivable. Such expenses shall include,
without limitation, legal fees and expenses, any unreimbursed amount expended by
the Servicer or any Sub-Servicer pursuant to Section 4.8 (to the extent such
amount is reimbursable under the terms of Section 4.8) respecting the related
Receivable, and any related and unreimbursed expenditures for property
restoration or preservation.

                  "Liquidation Proceeds" means, with respect to a Liquidated
Receivable, all amounts realized with respect to such Receivable (other than
amounts withdrawn from the Series 1999-1 Spread Account and drawings under the
Class A Note Policy), including any proceeds from any Insurance Policies, net of
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.

                                       12
<PAGE>   18

                  "Lockbox Account" means any bank account held in the name of
the Trustee maintained at a Lockbox Bank into which collections under the
Receivables are deposited in accordance with Section 4.6.

                  "Lockbox Agreement" means a letter agreement among a Lockbox
Bank, the Seller, the Trust Collateral Agent, the Servicer and, if applicable,
any Sub-Servicer, relating to one or more Lockbox Accounts, as the same may be
amended, supplemented, amended and restated or otherwise modified from time to
time in accordance with the terms thereof. Any Lockbox Agreement is also
required to be acceptable to the Controlling Party.

                  "Lockbox Bank" means any bank at which a Lockbox Account is
maintained from time to time and whose short-term debt securities are rated A-1
by S&P and P-1 by Moody's. Any Lockbox Bank is also required to be acceptable to
the Controlling Party.

                  "Lockbox Processor" means First Union National Bank and its
successors or any replacement Lockbox Processor under the Lockbox Agreement.

                  "Master Trust" means National Financial Auto Receivables
Master Trust.

                  "Monthly Records" means 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 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 Scheduled
Receivable Payment; current Insurance Policy expiration date; and past due late
charges.

                  "Moody's" means Moody's Investors Service, Inc., or its
successor.

                  "NAFI" means National Auto Finance Company, Inc and its
permitted successors and assigns hereunder in accordance with the terms hereof.

                  "Net Liquidation Proceeds" means, with respect to a Liquidated
Receivable, all Liquidation Proceeds net of all Liquidation Expenses.

                  "Net Loss Rate" means, with respect to any Due Period, the
product, expressed as a percentage, of (i) twelve and (ii) a fraction, the
numerator of which equals the excess of (A) the sum of (1) the aggregate
Principal Balance of all Receivables that became Liquidated Receivables in such
Due Period and (2) accrued and unpaid interest on such Principal Balance through
the end of such Due Period and (3) the amount of any Bankruptcy Losses, over (B)
the Net Liquidation Proceeds received by the Trust during such Due Period with
respect to all Liquidated Receivables in the Trust (including Liquidated
Receivables that became Liquidated Receivables in a prior Due Period) and the
denominator of which equals the arithmetic average of the Pool Balance as of the
end of such Due Period and the Pool Balance as of the end of the preceding Due
Period.

                                       13
<PAGE>   19

                  "Note" or "Notes" has the meaning assigned to such term in the
Indenture.

                  "Note Balance" means either the Class A Note Balance or the
Class B Note Balance, as applicable.

                  "Note Pool Factor" means, with respect to each Class of Notes
and the close of business on any Distribution Date, a seven-digit decimal figure
equal to the outstanding principal amount of such Class of Notes (after giving
effect to any distributions reducing the related Note Balance on such
Distribution Date) divided by the original outstanding principal amount of such
Class of Notes.

                  "Noteholders" and "Holders" have the meaning assigned to the
term "Noteholders" in the Indenture.

                  "Noteholders' Distributable Amount" means, with respect to any
Distribution Date and each Class of Notes, the sum of the Noteholders' Principal
Distributable Amount and the Noteholders' Interest Distributable Amount.

                  "Noteholders' Interest Carryover Shortfall" means, with
respect to any Distribution Date and each Class of Notes, the excess of the sum
of the Noteholders' Monthly Interest Distributable Amount for such Class for the
preceding Distribution Date and any outstanding Noteholders' Interest Carryover
Shortfall for such Class on such preceding Distribution Date, over the amount in
respect of interest that was actually deposited in the Note Distribution Account
and distributed on such Class on such preceding Distribution Date.

                  "Noteholders' Interest Distributable Amount" means, with
respect to any Distribution Date and each Class of Notes, the sum of (i) the
Noteholders' Monthly Interest Distributable Amount for such Class on such
Distribution Date and (ii) the Noteholders' Interest Carryover Shortfall for
such Class on such Distribution Date.

                  "Noteholders' Monthly Interest Distributable Amount" means,
with respect to any Distribution Date and each Class of Notes, the sum of (i)
thirty (30) days of interest (or, in the case of the initial Distribution Date,
the number of days from and including the Closing Date to but not including such
initial Distribution Date) at the related Interest Rate on the Note Balance of
such Class on such Distribution Date (before reduction of the Note Balance of
such Class by any distributions made on such Distribution Date) and (ii)
interest on the Noteholders' Interest Carryover Shortfall at the greater of (i)
the Prime Rate or (ii) the related Interest Rate plus 2% per annum from the
preceding Distribution Date through the current Distribution Date, to the extent
permitted by law.

                  "Noteholders' Principal Distributable Amount" means for each
Class of Notes, with respect to (i) any Distribution Date prior to the Final
Scheduled Distribution Date, the Principal Distributable Amount and (ii) the
Final Scheduled Distribution Date, the Note Balance for such Class (before
giving effect to any distribution on the related Class on such Final Scheduled
Distribution Date).

                  "Notice of Claim" means the notice required to file a claim
under the Policy.

                                       14
<PAGE>   20

                  "Obligor" on a Receivable means the purchaser or co-purchasers
of the Financed Vehicle and any other Person who owes payments under the
Receivable.

                  "Officers' Certificate" means a certificate signed by (i) a
Co-Trustee of the Seller or Funding Trust II, as the case may be, (ii) the
Chairman of the Board, President, Executive Vice President, Senior Vice
President, Vice President, or Assistant Vice President of the Custodian or NAFI,
as the case may be, or (iii) by a Servicing Official in the case of the
Servicer, and in each case delivered to the Trust Collateral Agent as required
by this Agreement.

                  "Opinion of Counsel" means a written opinion in form
reasonably satisfactory to the Trust Collateral Agent and the Insurer of counsel
reasonably satisfactory to the Trust Collateral Agent and the Controlling Party.
Any such counsel may be counsel to the Seller.

                  "Original Pool Balance" means $61,300,000.00.

                  "Originator" means consumer finance companies, depository
institutions and other financial institutions engaged in the financing of motor
vehicle retail installment sale contracts from whom NAFI acquired Receivables;
provided, however, that "Originators" shall not include Dealers.

                  "Originator Agreement" means an agreement pursuant to which
NAFI acquired Receivables from an Originator, as any of such agreements has been
and may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof.

                  "Other Conveyed Property" means all property conveyed by the
Seller to the Trust pursuant to Section 2.1(b) through (h) of this Agreement.

                  "Owner Trust Estate" has the meaning assigned to such term in
the Trust Agreement.

                  "Owner Trustee" means Wilmington Trust Company, not in its
individual capacity but solely as Owner Trustee under the Trust Agreement, its
successors in interest or any successor Owner Trustee under the Trust Agreement.

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

                  "Physical Property" has the meaning assigned to such term in
clause (a) of the definition of "Delivery" above.

                  "Pool Balance" means, as of any date of determination, the
Original Pool Balance reduced by any principal amounts previously paid
(excluding Purchased Receivables and Liquidated Receivables).

                  "Post-Office Box" means the separate post-office box
established and maintained for the benefit of the Noteholders and the Insurer
pursuant to Section 4.6.

                                       15
<PAGE>   21

                  "Prime Rate" shall mean the rate of interest published in The
Wall Street Journal from time to time as the Prime Rate. If more than one Prime
Rate is published in The Wall Street Journal for a day, the average of the Prime
Rates shall be used.

                  "Principal Balance" means, with respect to any Receivable, as
of any date, the Amount Financed minus (i) the principal portion of each payment
applied to such Receivable in accordance with Section 1.8 hereof and processed
by the Servicer or a Sub-Servicer on or before such date and (ii) any Bankruptcy
Loss in respect of such Receivable; provided, however, that for any date
following the Due Period in which the remaining principal balance of such
Receivable was included in the Principal Distributable Amount as a Liquidated
Receivable or was subject to a principal prepayment in full (including a
repurchase pursuant to Sections 2.5, 3.2 or 4.1), the Principal Balance for such
Receivable shall be zero.

                  "Principal Distributable Amount" means, with respect to any
Distribution Date (other than the Final Scheduled Distribution Date), the sum of
(i) that portion of all collections on the Receivables (other than Liquidated
Receivables and Purchased Receivables and, to the extent included in clause (iv)
below, the Principal Balance of all Purchased Default Receivables) allocable to
principal, including all full and partial principal prepayments, deposited into
the Collection Account during the related Due Period, (ii) the Principal Balance
of all Receivables that became Liquidated Receivables during the related Due
Period (other than Liquidated Receivables that became Purchased Receivables
during such Due Period and, to the extent included in clause (iv) below, the
Principal Balance of all Purchased Default Receivables), (iii) the portion of
the Purchase Amount allocable to principal of all Receivables that became
Purchased Receivables on or prior to the related Reporting Date and subsequent
to the preceding Reporting Date, (iv) in the sole discretion of the Insurer, the
Principal Balance as of the related Reporting Date of all or any part of the
Purchased Default Receivables and (v) the aggregate amount of Bankruptcy Losses
that occurred during the related Due Period.

                  "Purchase Amount" means, with respect to any Receivable
required to be retransferred pursuant to Sections 2.5, 3.2 or 4.1 (or as to
which the Seller has exercised the purchase option in Section 11.1(a)), an
amount equal to the sum of (i) 100% of the Principal Balance thereof on the date
of retransfer and (ii) unpaid accrued interest thereon from the date to which
interest was last paid by the Obligor to the Due Date in the Due Period in which
such retransfer occurs. For purposes of determining the Purchase Amount of any
Receivable, the Principal Balance thereof on the date of retransfer shall not be
reduced to zero as a result of its classification as a Liquidated Receivable.

                  "Purchased Default Receivable" means any Receivable with
respect to which the Seller or the Servicer is required to deposit in the
Collection Account the related Purchase Amount pursuant to Sections 2.5, 3.2 or
4.1 and has not so deposited such amount on the Reporting Date on which it is
required to repurchase such Receivable following receipt of notice from the
Trust Collateral Agent or the Controlling Party that such Receivable is required
to be retransferred.

                                       16
<PAGE>   22

                  "Purchased Receivable" means a Receivable purchased as of the
close of business on the last day of a Due Period by the Servicer pursuant to
Section 4.1(b) or repurchased by NAFI pursuant to Sections 2.5 or 3.2 or by the
Seller pursuant to Sections 2.5, 3.2 or 11.1(a).

                  "Rating Agency" means Moody's and Standard & Poor's. If no
such organization or successor maintains a rating on the Notes, "Rating Agency"
shall be a nationally recognized statistical rating organization or other
comparable Person designated by the Controlling Party.

                  "Rating Agency Condition" means, with respect to any action,
that each Rating Agency shall have been given 10 days' (or such shorter period
as shall be acceptable to each Rating Agency) prior notice thereof and that each
of the Rating Agencies shall have notified the each of the Insurer and the Trust
Collateral Agent that such action will not result in a reduction or withdrawal
of the then current rating of the Notes. Upon receipt of such notice by the
Trust Collateral Agent, the Trust Collateral Agent shall promptly forward such
notice to each of the Seller, the Servicer, the Noteholders and the Owner
Trustee.

                  "Receivable" means each motor vehicle retail installment sale
contract and security agreement (including any and all rights to receive
payments thereunder on and after the Cut-off Date and security interests in the
Financed Vehicle securing such contract or note) assigned and transferred to the
Issuer hereunder as of the Closing Date.

                  "Receivable Documents" means, with respect to a Receivable,
all papers and documents (including those contained in the Receivable File) and
all other papers and records (including computerized data) of whatever kind or
description, whether developed or originated by NAFI, a Dealer, an Originator,
the Servicer or another Person, required to document the Receivable or to
service the Receivable.

                  "Receivable Files" means with respect to a Receivable, the
fully executed original of such Receivable; the assignment of such Receivable by
a Dealer or Originator to NAFI, the original Title Document or UCC financing
statement evidencing that the security interest in a Financed Vehicle granted to
NAFI under such Receivable has been perfected under applicable state law (except
for any Title Documents or UCC financing statements not returned from the
applicable public records office, in which case NAFI will deliver to the Seller,
on the Closing Date an Officer's Certificate of NAFI indicating that the
original of such Title Document has been applied for at, or the original of such
UCC financing statement was delivered to, such public office and shows NAFI as
the lienholder or secured party and that NAFI will deliver the originals thereof
when returned from such office); the original of any assumption agreement or any
modification, extension or refinancing agreement; and the original application
of the related Obligor to obtain the financing extended by such Receivable.

                  "Receivable Rate" means the annual percentage rate (as such
term is used with respect to the federal Truth-in-Lending Act) of interest borne
by, and indicated on, a Contract.

                  "Receivables Schedule" means the schedule of Receivables
attached hereto as Schedule A, such schedule identifying each Receivable being
transferred and assigned to the Trust pursuant to this Agreement by the name of
the Obligor and setting forth as to each such

                                       17
<PAGE>   23

Receivable its Principal Balance as of the Cut-off Date, loan number, Receivable
Rate, scheduled monthly payment of principal and interest, final maturity date
and original principal amount.

                  "Record Date" with respect to each Distribution Date means the
Business Day immediately preceding such Distribution Date, unless otherwise
specified in the Agreement.

                  "Registrar of Titles" means, 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.

                  "Reporting Date" means, with respect to any Distribution Date,
the fourth Business Day preceding such Distribution Date.

                  "Repossession" means any action taken or to be taken pursuant
to the UCC or other applicable laws in connection with recovery on a Defaulted
Receivable (including any Liquidated Receivable), including: (i) repossession of
the related Financed Vehicle with or without judicial proceedings, (ii) sale of
such Financed Vehicle at public or private sale, (iii) retention of such
Financed Vehicle in satisfaction of the Obligor's obligations under such
Defaulted Receivable, or (iv) a levy on and sheriff's sale of the related
Financed Vehicle in enforcement of a judgment on such Defaulted Receivable or by
voluntary surrender or otherwise. The Financed Vehicles referred to in (i)
through (iv) of the preceding sentence, shall be referred to herein as
"Repossessed Financed Vehicles."

                  "Requisite Amount" has the meaning specified in the Series
1999-1 Supplement.

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

                  "Revolving Credit Agreement" means the Revolving Credit, Term
Loan and Security Agreement, dated as of March 31, 1999, among the Seller, NAFI
and First Union National Bank.

                  "Rights" has the meaning specified in Section 13.4 of this
Agreement.

                  "Sale Agreement" means the Sale Agreement, dated as of even
date herewith, between Funding Trust II and the Seller, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms thereof.

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

                                       18
<PAGE>   24

                  "Scheduled Receivable Payment" means, with respect to any Due
Period for any Receivable, the amount set forth in such Receivable as required
to be paid by the Obligor in such Due Period. If after the Closing Date, the
Obligor's obligation under a Receivable with respect to a Due 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,
as amended, or (iii) modifications or extensions of the Receivable permitted by
Sections 4.1(a) and (b), the Scheduled Receivable Payment with respect to such
Due Period shall refer to the Obligor's payment obligation with respect to such
Due Period as so modified.

                  "Seller" means National Financial Auto Funding Trust, a
Delaware business trust, and its successors in interest to the extent permitted
hereunder.

                  "Series 1999-1 Spread Account" means the account designated as
such, established and maintained pursuant to the Spread Account Agreement.

                  "Series 1999-1 Supplement" means the Series 1999-1 supplement
to the Spread Account Agreement.

                  "Servicer" means National Auto Finance Company, Inc., as the
servicer of the Receivables, and each successor Servicer pursuant to Section
10.4.

                  "Servicer Extension Notice" means the notice specified in
Section 4.16.

                  "Servicer Termination Event" means an event specified in
Section 10.1.

                  "Servicing Fee" has the meaning specified in Section 4.9.

                  "Servicing Fee Rate" means 3.00% per annum.

                  "Servicing Official" means any employee of the Servicer
involved in, or responsible for, the administration and servicing of the
Receivables whose name appears on a list of servicing employees furnished to the
Trust Collateral Agent and the Insurer by the Servicer, as such list may from
time to time be amended.

                  "Servicer's Certificate" means an Officers' Certificate of the
Servicer delivered pursuant to Section 4.11(a), substantially in the form of
Exhibit B.

                  "Simple Interest Method" means the method of allocating a
fixed level payment on an obligation between principal and interest, pursuant to
which the portion of such payment that is allocated to interest is equal to the
product of the fixed annual rate of interest on such obligation multiplied by
the period of time (expressed as a fraction of a year, based on the actual
number of days in the calendar month and 365 days in the calendar year) elapsed
since the preceding payment under the obligation was made.

                                       19
<PAGE>   25

                  "Simple Interest Receivable" means a Receivable under which
the portion of the payment allocable to interest and the portion allocable to
principal is determined in accordance with the Simple Interest Method.

                  "Spread Account Agreement" means the First Amended and
Restated Master Spread Account Agreement, dated as of March 31, 1998, among the
Insurer, the Seller, the Trust Collateral Agent and the Collateral Agent, as the
same has been previously supplemented and may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof.

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

                  "Statistical Cut-off Date" means July 31, 1999.

                  "Sub-Servicer" means any Eligible Sub-Servicer with whom NAFI
has entered into a Sub-Servicing Agreement.

                  "Sub-Servicer Account" means an account maintained by a
Sub-Servicer to which Obligors have been or will be instructed to remit payments
in respect of the Receivables, maintained in accordance with Section 4.6(c).

                  "Sub-Servicing Agreement" means the written contract between
NAFI and any Sub-Servicer relating to servicing and/or administration of the
Receivables as permitted by Section 4.2 hereof.

                  "Supplement to the Backup Servicing Agreement" means the
Supplement to Backup Servicing Agreement, dated as of September 1, 1999, among
the Seller, NAFI and Harris Trust Savings Bank.

                  "Supplemental Servicing Fee" means, with respect to any Due
Period, any payments received from an Obligor or a Dealer in connection with any
application fees, tax processing fees, wire transfer fees, express mail fees,
insurance premiums, late charges, taxes, fees or other charges imposed by any
Governmental Authority (other than any extension fees).

                  "Term Of the Class A Note Policy" has the meaning specified
for "Term Of This Policy" in the Class A Note Policy.

                  "Title Documents" means, with respect to any Financed Vehicle,
the actual motor vehicle title or certificate of title for such Financed Vehicle
issued by the Registrar of Titles or other government agency in the jurisdiction
in which such Financed Vehicle is registered; alternatively, in those certain
jurisdictions whose law requires that the original of the actual motor vehicle
title or certificate of title be possessed by the Obligor, then, in lieu of the
actual title or certificate of title, Title Documents shall mean such duplicate
titles, certificates or other documents as are permitted, required and/or
contemplated to be possessed by the secured party under the laws of such
jurisdiction.

                                       20
<PAGE>   26

                  "Transaction Documents" means this Agreement, the Notes, the
Certificate, the Assignment Agreement, the Sale Agreement, the Trust Agreement,
the Indenture, the Insurance Agreement, the Lockbox Agreement, the Custodian
Agreement, the Note Purchase Agreements (as defined in the Trust Agreement), the
Premium Letter (as defined in the Insurance Agreement), the Indemnification
Agreement, any Sub-Servicing Agreement, the Inducement Letter (as defined in the
Insurance Agreement), the Servicer Termination Side Letter (as defined in the
Insurance Agreement), the Spread Account Agreement, the Series 1999-1
Supplement, the Backup Servicing Agreement and the Supplement to the Backup
Servicing Agreement.

                  "Trigger Event" has the meaning assigned thereto in the Series
1999-1 Supplement.

                  "Trust Account Property" means the Trust Accounts, all amounts
and investments held from time to time in any Trust Account (whether in the form
of deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), and all proceeds of the foregoing.

                  "Trust Accounts" has the meaning assigned thereto in Section
5.1.

                  "Trust Agreement" means the Trust Agreement dated and
effective as of September 1, 1999, as amended and restated by the Amended and
Restated Trust Agreement, dated as of September 1, 1999, between the Seller and
the Owner Trustee, as the same may be amended and supplemented from time to
time.

                  "Trust Certificate" means the certificate issued pursuant to
the Trust Agreement evidencing the beneficial ownership interest in the Trust.

                  "Trust Collateral Agent" means the Person acting as Trust
Collateral Agent hereunder, its successors in interest and any successor Trust
Collateral Agent hereunder.

                  "Trust Officer" means, (i) in the case of the Trust Collateral
Agent, any officer within the Corporate Trust Office of the Trust Collateral
Agent, including any Managing Director, Vice President, Assistant Vice
President, Assistant Treasurer, Assistant Secretary or any other officer of the
Trust Collateral Agent customarily performing functions similar to those
performed by any of the above designated officers, and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject, and
(ii) in the case of the Owner Trustee, any officer in the Corporate Trust Office
of the Owner Trustee or any agent of the Owner Trustee under a power of attorney
with direct responsibility for the administration of this Agreement or any of
the Transaction Documents on behalf of the Owner Trustee.

                  "Trust Property" means the property and proceeds conveyed
pursuant to Section 2.1. Although the Seller has pledged the Series 1999-1
Spread Account to the Collateral Agent (as defined in the Spread Account
Agreement) and the Insurer pursuant to the Spread Account Agreement, the Series
1999-1 Spread Account shall not under any circumstances be deemed to be a part
of or otherwise includible in the Trust or the Trust Property.

                                       21
<PAGE>   27

                  "Trustee" means the Person acting as Indenture Trustee under
the Indenture, its successors in interest and any successor trustee under the
Indenture.

                  "UCC" means the Uniform Commercial Code as in effect in the
relevant jurisdiction on the date of the Agreement.

                  "Unearned Finance Charge" means, with respect to any
Receivable, the amount of the add-on finance charge that, under the term of such
Receivable, would be required to be refunded or credited to the related Obligor
in accordance with such Receivable if such Receivable were then prepaid in full.

         SECTION 1.2. Other Definitional Provisions.

                  (a) Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the Indenture, or, if not defined
therein, in the Trust Agreement.

                  (b) All terms defined in this Agreement shall have the defined
meanings when used in any instrument governed hereby and in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein.

                  (c) As used in this Agreement, in any instrument governed
hereby and in any certificate or other document made or delivered pursuant
hereto or thereto, accounting terms not defined in this Agreement or in any such
instrument, certificate or other document, and accounting terms partly defined
in this Agreement or in any such instrument, certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles as in effect on the date of this
Agreement or any such instrument, certificate or other document, as applicable.
To the extent that the definitions of accounting terms in this Agreement or in
any such instrument, certificate or other document are inconsistent with the
meanings of such terms under generally accepted accounting principles, the
definitions contained in this Agreement or in any such instrument, certificate
or other document shall control.

                  (d) Any agreement, instrument or statute defined or referred
to herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.

         SECTION 1.3. Usage of Terms. With respect to all terms used in this
Agreement, the singular includes the plural and the plural includes 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 and assigns;
the terms "include" or "including" mean "include without limitation" or
"including without limitation"; the words "herein", "hereof" and

                                       22
<PAGE>   28

"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, Sections, Schedules and Exhibits to this Agreement.

         SECTION 1.4. Certain References. All references to the Principal
Balance of a Receivable as of any date of determination shall refer to the close
of business on such day.

         SECTION 1.5. No Recourse. Without limiting the obligations of NAFI
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, director, employee, agent or
attorney as such, of NAFI, or of any predecessor or successor of NAFI.

         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 the 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 Notes registered in the
name of NAFI or any Affiliate thereof shall be deemed not to be outstanding;
provided, however, that, solely for the purpose of determining whether a Trust
Officer of the Trustee or the Trust Collateral Agent is entitled to rely upon
any such action or consent, only Notes which the Owner Trustee, the Trust
Officer of the Trustee or the Trust Collateral Agent, respectively, actually
knows to be so owned shall be so disregarded.

         SECTION 1.7. Material Adverse Effect. Whenever a determination is to be
made under this Agreement as to whether a given event, action, course of conduct
or set of facts or circumstances could or would have a material adverse effect
on the Noteholders (or any similar or analogous determination), such
determination shall be made without taking into account the insurance provided
by the Class A Note Policy.

         SECTION 1.8. Calculations as to Principal and Interest in Respect of
Receivables. For all purposes of this Agreement the allocation of a payment on a
Receivable between principal and interest shall be made based upon the
amortization method provided in such Receivable. For purposes of allocating a
pay-ahead payment on a Receivable between principal and interest, the pay-ahead
shall be deemed to have been received on the date it was actually due. For all
purposes of this Agreement, no amount shall be treated as collected under a
Receivable until such amount has been deposited into the Collection Account.

                                   ARTICLE II

                            CONVEYANCE OF RECEIVABLES

         SECTION 2.1. Conveyance of Receivables. In consideration of the
Issuer's delivery to or upon the order of the Seller on the Closing Date of the
net proceeds from the sale of the Notes and the other amounts to be distributed
from time to time to the Seller in accordance with the terms of this Agreement,
the Seller does hereby sell, transfer, assign, set over and otherwise

                                       23
<PAGE>   29

convey to the Issuer, without recourse (subject to the obligations set forth
herein), all right, title and interest of the Seller in and to the following,
whether now owned or hereafter acquired:

                  (a) the Receivables and all monies received thereon on or
after the Cut-off Date (including amounts due on or before the Cut-off Date but
received by NAFI, the Seller or the Issuer on or after the Cut-off Date);

                  (b) any proceeds and the right to receive proceeds with
respect to the Receivables from claims on any physical damage, credit life,
disability insurance or other policies covering the related Financed Vehicles or
Obligors, including rebates of insurance premiums relating to the Receivables,
and any proceeds from the liquidation of the Receivables;

                  (c) all rights against Dealers pursuant to Dealer Agreements
or against Originators pursuant to Originator Agreements;

                  (d) the related Receivables Files and any and all other
documents that NAFI or the Seller keeps on file in accordance with its customary
procedures relating to the Receivables, the Obligors or the Financed Vehicles;

                  (e) 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;

                  (f) all funds on deposit from time to time in the Trust
Accounts (less all investments and proceeds thereof), and all rights of the
Issuer therein;

                  (g) its rights and benefits, but none of its obligations or
burdens, under the Conveyance Agreements; and

                  (h) the proceeds of any and all of the foregoing.

                  The foregoing transfer and assignment does not constitute and
is not intended to result in an assumption by the Trust Collateral Agent, any
Noteholder or the Insurer of any obligation of the Seller, the Master Trust,
Funding Trust II or NAFI to the Obligors, Dealers, insurers or any other Person
in connection with the Receivables, the Receivable Files, or the insurance
policies or any agreements or instruments relating to any of them.

                  The Seller intends that the transfer and assignment by the
Seller to the Trust contemplated by this Agreement constitute a sale to the
Trust of all the Seller's right, title, and interest in and to the Receivables
and the remainder of the Trust Property and the beneficial interest in and title
to the 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; provided that, in the event that,
notwithstanding the intent of the Seller, the transfer is not held to be a sale,
then it is intended that the conveyance shall be deemed to be a grant of a
security interest as set forth below. By the transfer, assignment and set-over
contemplated by this Section 2.1, the Seller further grants and transfers to the
Trust Collateral Agent, for the benefit of all Noteholders and the Insurer, a
first priority, perfected security

                                       24
<PAGE>   30

interest, as their respective interests appear in Section 5.7, in all of the
Seller's right, title and interest in, to and under the Receivables and the
remainder of the Trust Property, whether now existing or hereafter acquired, and
agrees that this Agreement shall also constitute a security agreement under
applicable law. On or prior to the Closing Date, the Seller shall have filed a
UCC financing statement or statements, appropriate under the applicable UCC, to
reflect the assignment of the Receivables and the remainder of the Trust
Property by the Seller to the Trust and by the Trust to the Trust Collateral
Agent and the Insurer and to protect the Noteholders' and the Insurer's interest
in the Receivables, their proceeds and the Financed Vehicles, against all other
Persons and shall thereafter file any appropriate continuation statements in
respect thereof. During the term of this Agreement, the Seller shall not change
its name, identity, structure or location of jurisdiction of organization or
relocate its chief executive office or principal place of business without first
giving at least 30 days' advance written notice to the Trust Collateral Agent,
the Servicer, the Noteholders and the Insurer; provided however, that the Trust
Collateral Agent, the Servicer, the Noteholders and the Insurer shall, subject
to the last sentence of this paragraph, have no right or power to prohibit a
change in the Seller's name, identity, structure or location of jurisdiction of
organization or a relocation of, its chief executive office or principal place
of business. If any change in the Seller's name, identity, structure or location
of jurisdiction of organization or the relocation of its chief executive office
or principal place of business would make any financing or continuation
statement or notice of lien filed in connection with this Agreement misleading
within the meaning of applicable provisions of the UCC or any title statute, the
Seller, promptly but in no event later than the effective date of such change,
shall file such amendments or take such other actions as may be required to
preserve and protect the Trust Collateral Agent's interest in the Receivables
and proceeds thereof and the Financed Vehicles and the remainder of the Trust
Property. Promptly after filing such amendments or taking such other action, the
Seller shall deliver to the Trust Collateral Agent, the Noteholders and the
Insurer an Opinion of Counsel stating that all financing statements,
continuation statements or amendments thereto necessary to continue the
perfection of the interest of the Trust Collateral Agent in the Trust Property
have been filed and reciting the details thereof.

         SECTION 2.2. [Reserved.]

         SECTION 2.3. Further Encumbrance of Trust Property. (a) Immediately
upon the conveyance to the Trust by the Seller of any item of the Trust Property
pursuant to Section 2.1, all right, title and interest of the Seller in and to
such item of Trust Property shall terminate, and all such right, title and
interest shall vest in the Trust, in accordance with the Trust Agreement and
Sections 3802 and 3805 of the Business Trust Statute (as defined in the Trust
Agreement).

                  (b) Immediately upon the vesting of the Trust Property in the
Trust, the Trust shall have the sole right to pledge or otherwise encumber such
Trust Property. Pursuant to the Indenture and contemporaneously with such
property vesting in the Trust pursuant to clause (a) above, the Trust shall
grant a security interest to the Trust Collateral Agent (on behalf of the
Noteholders and the Insurer) in the Trust Property to secure the repayment of
the Notes. The Trust Certificate shall represent the beneficial ownership
interest in the Trust Property, and the Certificateholder shall be entitled to
receive distributions with respect thereto as set forth herein.

                                       25
<PAGE>   31

                  (c) Prior to the payment in full on the Notes, the payment of
all amounts due to the Insurer under the Insurance Agreement, the end of the
Term of the Class A Note Policy and the surrender of the Class A Note Policy by
the Collateral Agent to the Insurer, the Trust Collateral Agent shall hold the
Trust Property for the exclusive benefit of the Trustee on behalf of the
Noteholders and the Insurer. Following the payment in full of the Notes and the
release and discharge of the Indenture, all covenants of the Trust contained in
Article III of the Indenture shall, until payment in full of the Trust
Certificate, remain as covenants of the Trust for the benefit of the
Certificateholder, enforceable by the Certificateholder to the same extent that
such covenants were enforceable by the Noteholders prior to the discharge of the
Indenture. Any rights of the Trust Collateral Agent under Article IV of the
Indenture following discharge of the Indenture and the expiration of the term of
the Class A Note Policy shall thereupon vest in the Certificateholder.

                  (d) The Trust Collateral Agent shall, at such time as there
are no Notes outstanding and all sums due to (i) the Trustee or any agent or
counsel thereof pursuant to the Indenture, (ii) the Insurer under the Insurance
Agreement and (iii) the Trust Collateral Agent pursuant to this Agreement, have
been paid, and the Term of the Class A Note Policy has expired and the Trust
Collateral Agent has surrendered the Class A Note Policy to the Insurer, release
any remaining portion of the Trust Property to the Certificateholder (subject to
the Revolving Credit Agreement).

         SECTION 2.4. Books and Records; Payments on Receivables. (a) The
Servicer shall be responsible for maintaining, and shall maintain and cause the
respective Sub-Servicers, if any, to maintain, a complete set of books and
records (including tapes and disks for computer use) for each Receivable to the
extent that such books and records were delivered to the Servicer or such
Sub-Servicer or were developed by it during the course of servicing such
Receivable. The Servicer shall, and shall cause the respective Sub-Servicers to,
maintain such books of account and other records as will enable the Trust
Collateral Agent to determine the ownership status of each Receivable; provided
however, that neither the Servicer nor any Sub-Servicer shall be required to
physically mark or segregate any Receivables or other Receivable Documents to
indicate such ownership status. On or before the Closing Date, the Seller and
the Servicer shall deliver to the Custodian all Receivable Documents in its
possession or under its control, and shall promptly deliver to the Custodian any
Receivable Documents that subsequently come into its possession or within its
control. The Servicer hereby warrants, represents and covenants to and with the
Noteholders, the Trust Collateral Agent and the Insurer that recordation of the
name of the Servicer as lienholder in the Title Documents respecting any
Financed Vehicle as well as such lien itself is maintained by the Servicer as
agent for the Trust Collateral Agent for the benefit of the Trust, and the
Servicer has no equitable ownership in the Receivables, except as it may have by
virtue of ownership of a Trust Certificate or an equity interest in the Seller
or any Noteholder. The Servicer acknowledges that it is holding the Receivables
coming into its possession and any other property constituting a part of the
Trust Property held by it, in trust for the benefit of the Trust Collateral
Agent (on behalf of the Noteholders and the Insurer).

                  (b) On the Closing Date, the Seller shall deliver to the Trust
Collateral Agent for deposit in the Collection Account, or to the extent
received by the Servicer or any Sub-Servicer, cause the Servicer to deliver or
cause to be delivered to the Trust Collateral Agent for

                                       26
<PAGE>   32
deposit in the Collection Account, all payments received on the Receivables on
or after the Cut-Off Date an don or before the second Business Day preceding the
Closing Date. Within two Business Days after the Closing Date, the Seller shall
deliver to the Trust Collateral Agent for deposit in the Collection Account, to
the extent received by the Servicer or any Sub-Servicer, cause the Servicer to
deliver or cause to be delivered to the Trust Collateral Agent for deposit in
the Collection Account, all other payments received on the Receivables on or
after the Cut-off Date.

         SECTION 2.5. Seller Repurchase of Receivables. The Trust Collateral
Agent, based solely upon the representations of the Custodian, acknowledges
receipt by the Custodian as of the Closing Date of a Receivable File relating to
each Receivable. At or prior to the Closing Date, the Custodian will certify
that with respect to each Receivable listed on the Receivables Schedule that,
except as set forth on a schedule attached thereto, all documents required to be
delivered to it pursuant to the definition of Custodian Documents (as defined in
the Custodial Agreement) are in its possession. If the Servicer or any such
Sub-Servicer subsequently finds any document or documents constituting a part of
a Receivable File to be missing or defective in any material respect, the
Servicer or such Sub-Servicer shall promptly so notify the Trust Collateral
Agent, the Noteholders, the Insurer and the Seller in writing, and the Servicer
shall add such item to the exceptions list. The Seller shall use best efforts to
cure each such omission or defect on the exceptions list. If the Seller does not
correct or cure any such omission or defect within sixty (60) days from the date
the Trust Collateral Agent was notified of such omission or defect, then the
Seller or NAFI shall promptly accept a retransfer of the related Receivable from
the Trust Collateral Agent. The Purchase Amount for the retransferred Receivable
shall be delivered by the Seller or NAFI to the Trust Collateral Agent for
deposit in the Collection Account and upon receipt of the Purchase Amount by the
Trust Collateral Agent and its receipt of written notice thereof, the Trust
Collateral Agent shall cause the Custodian to release to the Seller the related
Receivable File and the Trust Collateral Agent shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as shall
be reasonably necessary to vest in the Seller or NAFI (as applicable) or its
designee any Receivable released pursuant hereto. It is understood and agreed
that the obligation of the Seller or NAFI to accept a retransfer of any
Receivable as to which a material defect in or omission of a constituent
document exists shall constitute the sole remedy respecting such defect or
omission available to Noteholders or the Trust Collateral Agent on behalf of
Noteholders.

                                  ARTICLE III

                                 THE RECEIVABLES

         SECTION 3.1. Representations and Warranties of NAFI and the Seller.
Each of NAFI and the Seller makes the representations and warranties set forth
on the Schedule of Representations attached hereto as Schedule B as to the
Receivables and the Other Conveyed Property on which the Issuer is deemed to
have relied in acquiring the Receivables and upon which the Insurer shall be
deemed to rely in issuing the Class A Note Policy and on which the Noteholders
have relied in purchasing the Notes. Such representations and warranties speak
as of the execution and delivery of this Agreement and as of the Closing Date in
the case of the

                                       27
<PAGE>   33

Receivables (unless another date or time period is otherwise specified or
indicated in the particular representation or warranty), but shall survive the
sale, transfer and assignment of the Receivables to the Issuer and the pledge
thereof to the Trustee pursuant to the Indenture. Such representations and
warranties shall survive assignment of the Receivables to the Trust Collateral
Agent and shall survive as long as any Note is outstanding or this Agreement has
not been terminated.

         SECTION 3.2. Repurchase upon Breach.

                  (a) NAFI, the Seller, the Servicer, any Sub-Servicer, the
Insurer, any Trust Officer of the Trust Collateral Agent or the Owner Trustee,
as the case may be, shall promptly inform each of the other parties, the
Noteholders and the Insurer, in writing, upon the discovery of any breach of
NAFI's and the Seller's representations and warranties made pursuant to Section
3.1 which materially and adversely affects the interests of the Noteholders or
the Insurer in the related Receivable (any Sub-Servicer being so obligated under
the related Sub-Servicing Agreement); provided, however, that the failure to
give any such notice shall not derogate from any obligations of NAFI or the
Seller under this Section 3.2. In addition, with respect to any Receivables in
respect of which the Title Documents were being applied for on the Closing Date,
if such Title Documents have not been received by the Servicer within 60 days
after the Closing Date, the Servicer shall give the Trust Collateral Agent, the
Noteholders, the Insurer, NAFI and Seller written notice of such fact. If NAFI
or the Seller does not correct or cure such breach (including delivery of such
Title Documents, if applicable) by the Reporting Date occurring during the
second full calendar month following the calendar month in which the Trust
Collateral Agent was notified or NAFI, the Seller, any Sub-Servicer or the
Servicer became aware, if earlier, of such breach (including failure to deliver
such Title Documents), then NAFI or the Seller shall promptly repurchase such
Receivables from the Issuer. Any such repurchase by NAFI or the Seller shall be
in exchange for the delivery by NAFI or the Seller to the Issuer of the Purchase
Amount and shall be accomplished in the manner set forth in Section 5.6 and the
Trust shall execute such assignments and other documents reasonably requested by
such Person in order to effect such repurchase. It is understood and agreed that
the obligation of NAFI and the Seller to repurchase any Receivable as to which
such a breach has occurred and is continuing as described above shall, except as
described in the following paragraph, constitute the sole remedy respecting such
breach available to the Servicer, the Noteholders, the Insurer, the Issuer, the
Trust Collateral Agent, the Trustee and the Owner Trustee under this Agreement.

         In addition to the foregoing and notwithstanding whether the related
Receivable shall have been purchased by NAFI or the Seller or by the Servicer
pursuant to Section 4.1, NAFI and the Seller shall indemnify the Trust, the
Trust Collateral Agent, the Insurer, and the Noteholders and any of their
respective officers, directors, employees or agents against all costs, expenses,
losses, damages, claims and liabilities, including reasonable fees and expenses
of counsel, which may be asserted against or incurred by any of them as a result
of third party claims arising out of the events or facts giving rise to a breach
of the representation.

                  (b) Pursuant to Section 2.1 of this Agreement, the Seller
conveyed to the Trust all of the Seller's right, title and interest in its
rights and benefits, but none of its obligations or burdens, under the Sale
Agreement including the delivery requirements thereunder. The Seller

                                       28
<PAGE>   34

hereby represents and warrants to the Trust that such assignment is valid,
enforceable and effective.

         SECTION 3.3. Custody of Receivables Files. The Custodian shall maintain
custody and possession of the Receivable Files as custodian and bailee for the
Trust Collateral Agent and the Insurer, in accordance with and pursuant to the
Custodial Agreement.

                                   ARTICLE IV

                   ADMINISTRATION AND SERVICING OF RECEIVABLES

         SECTION 4.1. Duties of the Servicer.

                  (a) The Servicer shall service and administer the Receivables
on behalf of the Trust and shall have full power and authority, acting alone
and/or through Sub-Servicers as provided in Section 4.2, to do any and all
things which it may deem necessary or desirable in connection with such
servicing and administration and which are consistent with this Agreement.
Consistent with the terms of this Agreement, the Servicer may waive, modify or
vary any term of any Receivable or consent to the postponement of strict
compliance with any such term or in any manner, grant indulgence to any Obligor
if, such waiver, modification, postponement or indulgence is not materially
adverse to the Noteholders or the Insurer; provided however, that the Servicer
may not permit any modification with respect to any Receivable that would change
its Annual Percentage Rate, defer the payment of any principal or interest
(except to the extent permitted by Section 4.6(a)), reduce the outstanding
principal balance (except for actual payments of principal), or extend (except
to the extent permitted by Section 4.6(a)) the final maturity date on such
Receivable. Without limiting the generality of the foregoing, the Servicer in
its own name or in the name of the Seller is hereby authorized and empowered by
the Trust Collateral Agent when the Servicer believes it appropriate in its best
judgment 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; provided however, that notwithstanding the
foregoing, the Servicer shall not, except pursuant to an order from a court of
competent jurisdiction, release an Obligor from payment of any unpaid amount
under any Receivable or waive the right to collect the unpaid balance of any
Receivable from the Obligor, except that the Servicer may forego collection
efforts if the amount subject to collection is de minimis and if it would forego
collection in accordance with its customary procedures. If any Receivable
contains a "due-on-sale" provision allowing the holder thereof to accelerate the
Receivable upon sale of the Financed Vehicle financed thereunder, the Servicer
shall take reasonable steps under the circumstances to enforce such due on sale
provision if a Financed Vehicle is sold as soon as practicable after determining
that such Financed Vehicle has been sold; provided however, that the Servicer
shall not be obligated to take any legal action to enforce such provision.

                  (b) The Servicer shall service and administer the Receivables
by employing procedures (including collection procedures) and a degree of care
consistent with prudent industry standards and as are customarily employed by
servicers in servicing and administering comparable motor vehicle retail
installment sales contracts and, to the extent more exacting, the

                                       29
<PAGE>   35

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 shall take all actions (in addition to those required to
be taken by the Seller pursuant to this Agreement) that are necessary or
desirable to maintain continuous perfection and first priority of security
interests of NAFI in the Financed Vehicles and to maintain continuous perfection
of the security interest created by each Receivable in the related Financed
Vehicle on behalf of the Trust Collateral Agent, including, but not limited to,
using reasonable efforts to obtain execution by the Obligors and the recording,
registering, filing, re-recording, re-registering and refiling of all Title
Documents (it being understood that Title Documents have not been and need not
be endorsed or delivered to the Trust Collateral Agent and do not and need not
identify the Trust Collateral Agent as the secured party or lienholder with
respect to the Receivables), security agreements, financing statements,
continuation statements or other instruments as are necessary to maintain the
security interests granted by the Obligors under the respective Receivables on
behalf of the Trust Collateral Agent; provided however, that the Servicer is not
required to expend any of its own funds to remove any security interest, lien or
other encumbrance on any Financed Vehicle (unless such security interest, lien
or other encumbrance is due to the gross negligence of the Servicer). The
Servicer shall not take any action to impair the Trust's rights in any
Receivable, except to the extent allowed pursuant to this Agreement or required
by law. 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. The
Servicer shall not extend or otherwise amend the terms of any Receivable, except
in accordance with Section 4.1(a). Upon discovery by the Servicer, any
Sub-Servicer or by a Trust Officer of the Trust Collateral Agent of a default by
the Servicer in the performance of its obligations under this Section 4.1(b)
which materially and adversely affects the interests of the Noteholders or the
Insurer in the related Receivable, the party discovering such breach shall give
prompt written notice thereof to the other parties, the Noteholders and the
Insurer. If the Servicer does not correct or cure such default by the Reporting
Date occurring during the second full calendar month following the calendar
month in which the Trust Collateral Agent was notified, or the Servicer, the
Trust Collateral Agent or the Sub-Servicer became aware, if earlier, of such
default, then the Servicer shall promptly purchase such Receivable from the
Trust. Any such purchase by the Servicer shall be in exchange for the delivery
by the Servicer to the Trust of the Purchase Amount. Except as expressly
provided in Section 9.2 and subject to Section 10.1, it is understood and agreed
that the obligation of the Servicer to repurchase any Receivable as to which
such a default has occurred and is continuing as described above shall
constitute the sole remedy respecting such default available to the Seller, the
Noteholders, the Insurer or the Trustee on behalf of the Noteholders.

                  (c) Upon the occurrence of an Insurance Agreement Event of
Default pursuant to Section 5.01(b), (c), (d), (e) or (j) of the Insurance
Agreement or the occurrence of a Servicer Termination Event, the Controlling
Party may instruct the Trust Collateral Agent and the Servicer in writing to
take or cause to be taken such action as may, in the Opinion of Counsel to the
Controlling Party, 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 Controlling Party, be
necessary or prudent. NAFI hereby makes, constitutes, and appoints,

                                       30
<PAGE>   36

the Trust Collateral Agent acting through its duly appointed officers or any of
them, its true and lawful attorney, for it and in its name and on its behalf,
for the sole and exclusive purpose of authorizing said attorney to execute and
deliver 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 show the Trust Collateral Agent as lienholder or secured party on
the related Lien Certificates relating to a Financed Vehicle. NAFI hereby agrees
to pay all expenses related to such perfection or reperfection and to take all
action necessary therefor. In addition, the Controlling Party may instruct the
Trust Collateral Agent and the Servicer to take or cause to be taken such action
as may, in the Opinion of Counsel to the Controlling Party, be necessary to
perfect or re-perfect the security interest in the Financed Vehicles underlying
the Receivables in the name of the Trust, including by amending the title
documents of such Financed Vehicles or by such other reasonable means as may, in
the Opinion of Counsel to the Controlling Party, be necessary or prudent;
provided, however, that if the Controlling Party requests that the title
documents be amended prior to the occurrence of an Insurance Agreement Event of
Default, the out-of-pocket expenses of the Servicer in connection with such
action shall be reimbursed to the Servicer by the Controlling Party.

                  (d) Subject to Section 9.5, the Servicer may perform any of
its duties pursuant to this Agreement, including those delegated to it by the
Trust Collateral Agent pursuant to this Agreement, through Persons appointed by
the Servicer. Such Persons may include affiliates of the Servicer and may
include the Seller and its affiliates. Notwithstanding any such delegation of a
duty, the Servicer shall remain obligated and liable for the performance of such
duty as if the Servicer were performing such duty.

                  (e) Upon the execution and delivery of this Agreement, the
Servicer shall deliver to the Trust Collateral Agent and the Insurer a list of
officers and employees of the Servicer (which initial list shall be set forth in
the certificate of secretary of the Servicer to be delivered on the Closing
Date), upon which the Trust Collateral Agent may conclusively rely, involved in,
or responsible for, the administration and servicing of the Receivables, which
list shall from time to time be updated by the Servicer as additional officers
and employees of the Servicer become involved, or responsible for, the
administration and servicing of the Receivables or officers or employees of the
Servicer previously identified on any such list become disassociated with the
administration and servicing of the Receivables. The Trust Collateral Agent
shall provide such list to any Noteholder upon written request thereof.

                  (f) The Servicer may take such actions as are necessary to
discharge its duties as Servicer in accordance with this Agreement, including
the power to execute and deliver on behalf of the Trust such instruments and
documents as may be customary, necessary or desirable in connection with the
performance of the Servicer's duties under this Agreement (including consents,
waivers and discharges relating to the Receivables and the Financed Vehicles and
such instruments or documents as may be necessary to effect foreclosure or other
conversion of the ownership of any Financed Vehicle). In furtherance thereof,
the Trust Collateral Agent hereby appoints the Servicer as its attorney-in-fact,
such appointment being coupled with an interest, to execute on its behalf such
documents or instruments as are necessary to effect the Repossession of Financed
Vehicles, to deliver applicable Receivable Files, Receivable Documents and Title
Documents to the Seller upon the sale of a Receivable to the Seller under this
Agreement and to

                                       31
<PAGE>   37

deliver applicable Receivable Files, Receivable Documents and Title Documents
upon liquidation or final payment of a Receivable. The Trust Collateral Agent,
upon receipt of a certificate of a Servicing Official (and delivery of a copy of
such certificate to the Insurer) requesting the same be accepted by the Trust
Collateral Agent and certifying as to the reasons such documents are required,
shall furnish the Servicer with any other powers of attorney or other documents
reasonably necessary or appropriate which the Trust Collateral Agent may legally
execute to enable the Servicer to carry out its servicing and administrative
duties hereunder. Neither the Servicer nor any of its directors, officers,
employees or agents will be under any liability to the Trust, the Trust
Collateral Agent, the Insurer, any Noteholder, or the Seller for the
consequences of any delay resulting from having to obtain such documents from
the Trust Collateral Agent, provided that the Servicer furnished such
certificate to the Trust Collateral Agent reasonably promptly after determining
the necessity therefor in the particular instance.

         SECTION 4.2. Sub-Servicing Agreements between Servicer and the
Sub-Servicers. Subject to Section 9.5, the Servicer may enter into Sub-Servicing
Agreements with one or more Eligible Sub-Servicers for the servicing and
administration of certain of the Receivables with the prior written consent of
the Controlling Party, which consent shall not be unreasonably withheld. The
Servicer shall notify each Rating Agency, the Trust Collateral Agent, the
Noteholders, the Backup Servicer and the Insurer prior to entering into any
Sub-Servicing Agreement. References in this Agreement to actions taken or to be
taken by the Servicer in servicing the Receivables include actions taken or to
be taken by a Sub-Servicer on behalf of the Servicer. Each Sub-Servicing
Agreement shall be upon such terms and conditions as are not inconsistent with
this Agreement and as the Servicer and the Sub-Servicer have agreed. Each
Sub-Servicing Agreement shall require that the related Sub-Servicer acknowledge
that it is holding the Receivables and the Receivable Documents for the related
Receivables coming into its possession and any other property constituting a
part of the Trust Property held by it, in trust, for the benefit of the Trust
Collateral Agent (on behalf of the Noteholders and the Insurer). The Servicer
and a Sub-Servicer may enter into amendments thereto; provided, however, that
any such amendments or different forms shall be consistent with and not violate
the provisions of this Agreement, and provided further, that the Servicer shall
not amend any Sub-Servicing Agreement without (i) with respect to a material
amendment, the prior written consent of the Controlling Party and (ii) with
respect to all other amendments, providing five (5) days prior written notice to
the Noteholders, the Controlling Party, the Rating Agencies and the Trust
Collateral Agent of such amendment.

         SECTION 4.3. Obligations of the Servicer. Notwithstanding any
Sub-Servicing Agreement, any of the provisions of this Agreement relating to
agreements or arrangements between the Servicer or a Sub-Servicer or reference
to actions taken through a Sub-Servicer or otherwise, the Servicer shall remain
obligated for the servicing and administering of the Receivables in accordance
with the provisions of Section 4.1 of this Agreement without diminution of such
obligation or liability by virtue of such Sub-Servicing Agreements or
arrangements or by virtue of indemnification from a Sub-Servicer and to the same
extent and under the same terms and conditions as if the Servicer alone were
servicing and administering the Receivables. The Servicer shall be entitled to
enter into any agreement with a Sub-Servicer for indemnification of the
Servicer, and nothing contained in this Agreement shall be deemed to limit or
modify such indemnification.

                                       32
<PAGE>   38

         SECTION 4.4. No Contractual Relationship between a Sub-Servicer and
Trust Collateral Agent or Noteholders. Any Sub-Servicing Agreement that may be
entered into and any other transactions or services relating to the Receivables
involving a Sub-Servicer in its capacity as such and not as an originator shall
be deemed to be between a Sub-Servicer and the Servicer, with the Trust
Collateral Agent and the Insurer having rights as third-party beneficiaries to
such Sub-Servicing Agreement, and the Trust, the Trustee, the Backup Servicer
and the Noteholders shall not be deemed parties thereto and shall have no
claims, rights, obligations, duties or liabilities with respect to a
Sub-Servicer except as expressly set forth in Section 4.5 or in the applicable
Sub-Servicing Agreement; provided that, if the Servicer is deemed terminated,
the Sub-Servicer may be terminated. The Servicer shall promptly provide to the
Trust Collateral Agent, the Backup Servicer, the Noteholders and the Insurer any
notice received from a Sub-Servicer.

         SECTION 4.5. Assumption or Termination of Sub-Servicing Agreement by
Backup Servicer. In the event the Servicer shall for any reason no longer be the
servicer of the Receivables (including by reason of a Servicer Termination
Event), the Backup Servicer or other successor Servicer or its designee will
thereupon assume all of the rights and obligations of the Servicer under any
Sub-Servicing Agreements that may have been entered into by the Servicer by
giving notice of such assumption to the relevant Sub-Servicer or Sub-Servicers
within ten (10) Business Days of the termination of the Servicer as servicer of
the Receivables. Upon the giving of such notice, the successor Servicer or its
designee shall be deemed to have assumed all of the Servicer's interest therein
and to have replaced the Servicer as a party to the Sub-Servicing Agreement to
the same extent as if the Sub-Servicing Agreement had been assigned to the
assuming party except that the Servicer and the Sub-Servicer, if any, shall not
thereby be relieved of any accrued liability or obligations under the
Sub-Servicing Agreement and the Sub-Servicer, if any, shall not be relieved of
any liability or obligation to the Servicer that survives the assignment or
termination of the Sub-Servicing Agreement. The Trust Collateral Agent shall
notify each Rating Agency, each Noteholder and the Insurer if any Sub-Servicing
Agreement is assumed by a successor Servicer or its designee.

                  The Servicer shall, upon request of the Trust Collateral Agent
but at the expense of the Servicer, deliver to the assuming party all documents
and records relating to the Sub-Servicing Agreement and the Receivables then
being serviced and an accounting of amounts collected and held by it and
otherwise use its reasonable efforts to effect the orderly and efficient
transfer of the Sub-Servicing Agreement to the assuming party.

         SECTION 4.6. Collection of Receivable Payments.

                  (a) The Servicer shall proceed diligently to collect all
payments called for under the terms and provisions of the Receivables, and shall
service the Receivables in a manner consistent with the servicing standards and
procedures generally accepted in the financial services industry for similar
Receivables, and as otherwise expressly provided by this Agreement, including
Section 4.1(a). Consistent with the foregoing, the Servicer may in its
discretion (i) waive any late payment charge and (ii) extend the then current
maturity date of a Receivable by two months, once during each calendar year at
the request of the related Obligor on account of the Obligor's adverse financial
circumstances that affect the Obligor's ability to make payments under such
Receivable; provided however, that the Servicer may not so extend the then
current maturity date

                                       33
<PAGE>   39

of Receivable more than twice during the life of such Receivable; provided
further, that the Average Extension Ratio for any calendar month, commencing
September 1999, shall not exceed 2.5% for each January, August, September and
December and 2.0% for any other calendar month. The "Average Extension Ratio"
for any calendar month, other than September 1999 and October 1999, shall equal
the arithmetic average of the Extension Ratios for such calendar month and the
two preceding calendar months (for example, the Average Extension Ratio for
January 2000 will equal the arithmetic average of the Extension Ratios for the
months November 1999, December 1999 and January 2000 and will be included in the
report delivered by the Servicer pursuant to Section 4.11 on or before the
February 2000 Reporting Date). The Average Extension Ratio for September 1999
shall equal the Extension Ratio for such calendar month and the Average
Extension Ratio for October 1999 shall equal the arithmetic average of the
Extension Ratio for such calendar month and the preceding calendar month. The
"Extension Ratio" for any calendar month shall equal the percentage equivalent
of a fraction the numerator of which is the aggregate number of Receivables that
have been extended during such calendar month and the denominator of which is
the aggregate number of Receivables outstanding as of the first day of such
calendar month.

                  (b) Except as provided in subsection (c) below, the Servicer
shall provide Obligors with a monthly statement in order to enable such Obligors
to make payments with respect to the Receivables, whether by check mailed
directly to the Post-Office Box or by direct debit of the Obligor's bank
account. On each Business Day, pursuant to the Lockbox Agreement, the Lockbox
Processor shall transfer any payments from Obligors received in the Post-Office
Box to the Lockbox Account. The Servicer shall cause all amounts credited to the
Lockbox Account on account of such payments to be transferred to the Collection
Account no later than the next Business Day after receipt of such payments. The
Lockbox Account shall be a demand deposit account held by the Lockbox Bank, or
at the request of the Controlling Party, an Eligible Bank.

                  The Servicer shall on or before the Closing Date have notified
each Obligor that makes its payments on the Receivables by check to make any
such payments after the Cutoff Date directly to the Post-Office Box (except in
the case of Obligors that have already been making such payments to the
Post-Office Box), and shall have provided each such Obligor with remittance
invoices in order to enable such Obligors to make such payments directly to the
Post-Office Box 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 may payments to the Post-Office Box. The Servicer on behalf
of the Trust Collateral Agent shall establish and maintain the Lockbox Account
and the Post-Office Box in the name of the Trust Collateral Agent at a United
States Post Office branch for the benefit of the Noteholders and the Insurer.

                  (c) In the event that a Sub-Servicer is appointed in
accordance with Section 9.5, the Servicer shall cause the Sub-Servicer to
maintain a Sub-Servicer Account for the benefit of the Noteholders and the
Insurer to which Obligors shall have been directed to remit payments in respect
of the Receivables. The Servicer shall instruct (or shall cause the Sub-Servicer
to instruct) all Obligors to make all payments due in respect of the Receivables
to the Sub-Servicer Account. The Servicer shall cause the Sub-Servicer to use
its best efforts to transfer to the Collection Account all collected funds on
deposit in the Sub-Servicer Account that constitute part of the Trust Property
within one Business Day, and in any event within two

                                       34
<PAGE>   40

Business Days of receipt thereof. If a Sub-Servicer Account is terminated for
any reason prior to the establishment of, and notification to Obligors to remit
payments to, a replacement servicing account comparable to such Sub-Servicer
Account, the Servicer shall promptly, and in any event within 30 days of
termination of such Sub-Servicer Account or comparable account, establish a
Lockbox Account pursuant to a Lockbox Agreement and notify all Obligors to remit
payments in respect of the Receivables in accordance with subsection (b) above.

                  (d) If the Servicer, the Seller, NAFI or any Sub-Servicer
receives collections or other payments in respect of the Receivables, each such
Person shall as soon as practicable, but no later than two Business Days
following receipt of such item by such Person, cause such payment to be remitted
to the Trust Collateral Agent for deposit to the Collection Account. If the
Servicer determines that any amount that is not a part of the Trust Property has
been deposited in any Trust Account, the Servicer shall promptly instruct the
Trust Collateral Agent by facsimile (with prompt telephone confirmation) to
segregate such amount, and shall therein direct the Trust Collateral Agent to
turn over such amounts to the Person entitled thereto within two Business Days.
A copy of any such direction shall be delivered by the Servicer to the Insurer.

                  (e) Notwithstanding any Lockbox Agreement, or any of the
provisions of this Agreement relating to a Lockbox Agreement, a Lockbox Bank or
a Lockbox Account, the Servicer shall remain obligated and liable to the Trust
Collateral Agent and the Noteholders for servicing and administering the
Receivables and the rest of the Trust Property in accordance with the provisions
of this Agreement without diminution of such obligations or liability by virtue
thereof, provided, however, that the foregoing shall not apply to any Backup
Servicer for so long as a Lockbox Bank is performing its obligations pursuant to
the terms of a Lockbox Agreement.

                  In the event of a termination of the Servicer, the Backup
Servicer or other successor Servicer shall assume all of the rights and
obligations of the outgoing Servicer under the Lockbox Agreement subject to the
terms hereof. In such event, the Backup Servicer or 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 Backup
Servicer or the successor Servicer, except that the outgoing Servicer shall not
thereby be relieved of any liability or obligations on the part of the outgoing
Servicer to the Lockbox Bank under such Lockbox Agreement. The outgoing Servicer
shall, upon request of the Trust Collateral Agent, but at the expense of the
outgoing Servicer, deliver to the Backup Servicer or the successor Servicer all
documents and records relating to each such Lockbox 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 Backup Servicer or successor Servicer. In the event that the Controlling
Party 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 Party to the Trust Collateral Agent 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.

                                       35
<PAGE>   41

         SECTION 4.7. Maintenance of Insurance. The Servicer shall use its
reasonable efforts to cause each Obligor to maintain on the related Financed
Vehicle a comprehensive and collision policy providing coverage at least equal
to the lesser of (i) the actual cash value of such Financed Vehicle and (ii) the
unpaid balance owing on the related Receivable, less Unearned Finance Charges;
provided however, that the Servicer shall not be obligated to expend its own
funds to pay any insurance premiums or obtain or maintain any such policy.
Pursuant to Section 4.6 any amounts collected by the Servicer under any such
policies (other than amounts to be applied to the restoration or repair of the
related Financed Vehicles or amounts released to the Obligor in accordance with
the Servicer's normal servicing procedures) shall be deposited in the Collection
Account. All policies required by this paragraph shall be endorsed with clauses
providing for loss payable to the Servicer or the relevant Sub-Servicer and its
successors and assigns. Servicer shall maintain and keep in place a vendor's
single interest insurance policy naming the Trustee as beneficiary.

         SECTION 4.8. Realization upon Defaulted Receivables.

                  (a) In the event that a Receivable becomes and continues to be
a Defaulted Receivable, the Servicer shall take all reasonable and lawful steps
necessary for Repossession; provided however, that the Servicer shall not be
obligated to institute any action for Repossession through judicial proceedings
unless it determines in its good faith judgment, which determination will be
conclusive and binding, that Liquidation Proceeds that would be realized in
connection therewith or amounts payable pursuant to the last sentence of this
Section 4.8(a) would be sufficient for the reimbursement in full of its
out-of-pocket expenses pursuant to this Agreement. In connection with such
Repossession, the Servicer shall follow such practices and procedures required
by Section 4.1 and make advances of its own funds for any out-of-pocket expenses
incurred. The Servicer shall be reimbursed for Liquidation Expenses (including
advances) by retention of the required reimbursement from the first Liquidation
Proceeds received with respect to such Defaulted Receivable. The Servicer shall
be entitled to receive the following amounts with respect to any Receivable the
Obligor of which has filed bankruptcy or against whom a petition for involuntary
bankruptcy has been filed: a one time fee of $200 in respect of those
Receivables not referred to outside legal counsel, or, in the case of those
Receivables that are so referred, reimbursement of the reasonable fees and
expenses of outside legal counsel, if their retention was necessary in the
reasonable judgment of the Servicer.

                  (b) In the event the Servicer delivers any Repossessed
Financed Vehicle for sale to a Dealer, it agrees that prior to such delivery, it
shall make such filings and effect such notices as are necessary under Section
9-114(1) of the New York UCC (or comparable section of the UCC of any applicable
state) to preserve its ownership interest (or security interest, as the case may
be) in any such Repossessed Financed Vehicle. The Servicer agrees that at any
time after 45 days from the Closing Date the aggregate number of unliquidated
Repossessed Financed Vehicles delivered for sale to all Dealers with respect to
which the actions referred to in the prior sentence have not been effected shall
not exceed the lesser of (i) 35 Repossessed Financed Vehicles or (ii) 20% of the
aggregate number of unliquidated Repossessed Financed Vehicles. The Servicer
further agrees that the number of unliquidated Repossessed Financed Vehicles
delivered for sale to any individual Dealer shall at no time exceed 35.

                                       36
<PAGE>   42

         SECTION 4.9. 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 Base Servicing Fee and any Supplemental
Servicing Fee (together, the "Servicing Fee") for the related Due Period
pursuant to Section 5.7. 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, fees and expenses of any Sub-Servicer, expenses
incurred in connection with distributions and reports made by the Servicer to
Noteholders or the Insurer and all other fees and expenses of the Owner Trustee,
the Custodian, the Trust Collateral Agent, the Backup Servicer, the Lockbox Bank
or the Trustee, except taxes levied or assessed against the Trust, and claims
against the Trust in respect of indemnification, which taxes and claims in
respect of indemnification against the Trust are expressly stated to be for the
account of NAFI) and shall not be entitled to reimbursement therefor except as
specifically provided herein. The Servicer shall be liable for the fees, charges
and expenses of the Owner Trustee, the Trust Collateral Agent, the Trustee, the
Custodian, the Collateral Agent, the Lockbox Bank, any Sub-Servicer or Backup
Servicer and their respective agents (and any fees under the Lockbox Agreement).

         SECTION 4.10. [Reserved.]

         SECTION 4.11. Reports.

                  (a) Not later than the Reporting Date, the Servicer shall
forward to the Trust Collateral Agent, each Noteholder, the Trustee, the Backup
Servicer, each Rating Agency, the Insurer and the Seller a statement
substantially in the form attached hereto as Exhibit B (as such form may be
modified from time to time by agreement between the Trust Collateral Agent and
the Servicer with the prior written consent of the Insurer), certified by an
officer of the Servicer. In addition to the information required by Exhibit B,
the Servicer shall include in the copy of such statement delivered to the
Insurer, each Noteholder and the Trustee (i) the Delinquency Ratio, Average
Delinquency Ratio, Default Rate, Average Default Rate, Net Loss Rate, Average
Net Loss Rate, Average Extension Ratio and Extension Ratio for such Reporting
Date, (ii) whether any Trigger Event has occurred as of such Reporting Date,
(iii) whether any Trigger Event that may have occurred as of a prior Reporting
Date is deemed cured as of such Reporting Date, and (iv) whether to the
knowledge of the Servicer an Insurance Agreement Event of Default has occurred.

                  (b) On the first Business Day after each Determination Date,
the Trust Collateral Agent shall forward by telecopier to the Servicer, each
Noteholder, the Insurer and the Seller a statement (and shall also mail a copy
to the Servicer, each Noteholder, the Insurer and the Seller) setting forth the
amount, if any, on deposit in the Collection Account, the Distribution Account
and the Note Distribution Account as of such Determination Date. Not later than
the close of business on the fourth Business Day prior to each Distribution
Date, the Trust Collateral Agent shall forward by telecopier to the Collateral
Agent and the Insurer a copy of the statement required to be delivered to
Noteholders on such Distribution Date pursuant to Section 5.10 prepared assuming
that the Insurer will not exercise its right under Section 5.11 and based upon
information set forth by the Servicer in the statement substantially in the form
of Exhibit B hereto. Not later than five days after each Determination Date, the
Trust Collateral Agent shall forward to the Servicer, each Noteholder, the
Insurer and the Seller a statement showing, for the previous

                                       37
<PAGE>   43

Distribution Date, the aggregate of withdrawals from the Distribution Account
and the withdrawals and deposits to the Spread Account.

         SECTION 4.12. Annual Statement as to Compliance, Notice of Servicer
Termination Event.

                  (a) The Servicer shall deliver or cause to be delivered to
each Rating Agency, each Noteholder, the Trustee, the Owner Trustee, the Trust
Collateral Agent, the Backup Servicer and the Insurer 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, 2000, an Officer's Certificate signed by
any responsible officer of the Servicer, or such Eligible Sub-Servicer who is
performing the servicing duties 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 calendar year and
of performance under this Agreement has been made under such officer's
supervision, (ii) to the best of such officer's knowledge, based on such review,
the Servicer has fulfilled all its obligations under this Agreement throughout
such year, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature
and status thereof and (iii) to the best of such officer's knowledge, each
Sub-Servicer has fulfilled its obligations under its Sub-Servicing Agreement in
all material respects, or if there has been a material default in the
fulfillment of such obligations, specifying such default known to such employee
and the nature and status thereof.

                  (b) The Servicer shall deliver to the Trust Collateral Agent,
the Insurer, the Backup Servicer, the Noteholders 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 10.1.

         SECTION 4.13. Annual Independent Accountants' Report.

                  (a) The Servicer shall, at its expense, cause a firm of
nationally recognized independent certified public accountants (the "Independent
Accountants"), who may also render other services to the Servicer or to the
Seller, to deliver to the Trustee, the Owner Trustee, the Trust Collateral
Agent, each Noteholder, the Backup Servicer and the Insurer, on or before March
30 (or 90 days after the end of the Servicer's fiscal year, if other than
December 31) of each year, beginning on March 30, 2000, with respect to the
twelve months ended the immediately preceding December 31 (or other applicable
date) (or such other period as shall have elapsed from the Closing Date to the
date of such certificate), a statement (the "Accountants' Report") addressed to
the Board of Directors of the Servicer, to the Trustee, the Owner Trustee, the
Trust Collateral Agent and to the Insurer, to the effect that such firm has
audited the books and records of the Servicer and that such audit (1) was made
in accordance with generally accepted auditing standards, and accordingly
included such tests of the accounting records and such other auditing procedures
as such firm considered necessary in the circumstances; (2) included an
examination of documents and records relating to the servicing of automobile
installment sales contracts under pooling and servicing agreements substantially
similar one to another (such statement to have attached thereto a schedule
setting forth the servicing agreements

                                       38
<PAGE>   44

covered thereby, including this Agreement); (3) included an examination of the
delinquency and loss statistics relating to the Servicer's portfolio of
automobile installment sales contracts; and (4) except as described in the
statement, disclosed no exceptions or errors in the records relating to
automobile and light truck loans serviced for others that, in the firm's
opinion, generally accepted auditing standards requires such firm to report. The
Accountants' Report shall further state that (1) a review in accordance with
agreed upon procedures was made of three randomly selected Servicer's
Certificates for the Trust; (2) except as disclosed in the Report, no exceptions
or errors in the Servicer's Certificates so examined were found; and (3) the
delinquency and loss information relating to the Receivables contained in the
Servicer Certificates were found to be accurate.

                  (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 Accountant's Report may be obtained by any
Noteholder by a request in writing to the Trust Collateral Agent addressed to
its Corporate Trust Office.

         SECTION 4.14. Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to representatives of the Trust
Collateral Agent, any Noteholder holding 5% or more of the Note Balance of any
Class of Notes, the Trustee, the Backup Servicer and the Insurer reasonable
access to the documentation regarding the Receivables. Each of the Seller and
Servicer will permit any authorized representative or agent designated by the
Insurer to visit and inspect any of the properties of the Seller or Servicer, as
the case may be, to examine the corporate books and financial records of the
Seller or Servicer, as the case may be, its records relating to the Receivables,
and make copies thereof or extracts therefrom and to discuss the affairs,
finances, and accounts of the Seller or Servicer, as the case may be, with its
principal officers, as applicable, and its independent accountants. Any expense
incident to the exercise by the Insurer or any Noteholder of any right under
this Section 4.14 shall be borne by NAFI, so long as NAFI is the Servicer. In
each case, such access shall be afforded without charge but only upon reasonable
request and during normal business hours.

         SECTION 4.15. Monthly Tape. (a) On or before the fourth Business Day,
but in no event later than the fifth calendar day, of each month, the Servicer
will deliver to each of the Trustee, the Insurer, the Backup Servicer and each
Noteholder holding 5% or more of the Note Balance of any Class of Notes (upon
written request by such Noteholder to the Servicer) a computer tape and a
diskette (or any other electronic transmission acceptable to each of the
Trustee, the Insurer and the Backup Servicer) in a format acceptable to each of
the Trustee, the Backup Servicer, the Insurer (if requested by the Insurer) and
such Noteholder (if requested by such Noteholder) containing the information
with respect to the Receivables as of the preceding Determination 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 5.4.

         SECTION 4.16. Retention and Termination of Servicer. The Servicer
hereby covenants and agrees to act as such under the Agreement for an initial
term, commencing on the Closing

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<PAGE>   45

Date and ending on October 31, 1999, which term shall be extendible by the
Controlling Party for successive monthly terms ending on each successive month
(or, pursuant to revocable written standing instructions from time to time to
the Servicer and the Trust Collateral Agent, for any specified number of terms
greater than one), until the termination of the Trust. Each such notice
(including each notice pursuant to standing instructions, which shall be deemed
delivered at the end of successive quarterly terms for so long as such
instructions are in effect) (a "Servicer Extension Notice") shall be delivered
by the Controlling Party to the Trust Collateral Agent and the Servicer. The
Servicer hereby agrees that, as of the date hereof and upon its receipt of any
such Servicer Extension Notice, the Servicer shall become bound, for the initial
term beginning on the date hereof and for the duration of the term covered by
such Notice, to continue as the Servicer subject to and in accordance with the
other provisions of this Agreement. The Trust Collateral Agent agrees that, as
of the fifteenth day prior to the last day of any term of the Servicer, if in
which the Trust Collateral Agent shall not have received any Servicer Extension
Notice from the Controlling Party, the Trust Collateral Agent will, within five
days thereafter, give written notice of such non-receipt to the Insurer, each
Noteholder and the Servicer and the Servicer's term shall not be extended unless
a Servicer Extension Notice is received on or before the last day of such term.

         SECTION 4.17. Custodial Arrangement. The Custodian shall maintain
custody and possession of the Receivable Files as custodian and bailee for the
Servicer and the Trust Collateral Agent in accordance with and pursuant to the
Custodial Agreement. The Servicer hereby assigns all of its right, title and
interest in, but none of its obligations thereunder, to such Custodial Agreement
to the Trust Collateral Agent. To the extent the Servicer receives any notices
with respect to the Custodial Agreement, the Servicer will forward a copy of
such notice to each Noteholder, the Trust Collateral Agent and the Insurer.

                                   ARTICLE V

                         TRUST ACCOUNTS; DISTRIBUTIONS;
                            STATEMENTS TO NOTEHOLDERS

         SECTION 5.1. Establishment of Trust Accounts.

                  (a) (i) The Trust Collateral Agent, on behalf of the
Noteholders, the Certificateholder and the Insurer, shall establish and maintain
in its own name an Eligible Deposit Account (the "Collection Account"), bearing
a designation clearly indicating that the funds deposited therein are held for
the benefit of the Trust Collateral Agent on behalf of the Noteholders, the
Certificateholder and the Insurer. The Collection Account shall initially be
established with the Trust Collateral Agent.

                           (ii) The Trust Collateral Agent, on behalf of the
         Noteholders and the Insurer, shall establish and maintain in its own
         name two separate Eligible Deposit Accounts (the "Class A Note
         Distribution Account" and the "Class B Note Distribution Account"),
         each bearing a designation clearly indicating that the funds deposited
         therein are held for the benefit of the Trust Collateral Agent on
         behalf of the related Class of Noteholders. The Class A Note
         Distribution Account will also be held for the benefit of

                                       40
<PAGE>   46

         the Insurer. Each of the Class A Note Distribution Account and the
         Class B Note Distribution Account shall initially be established with
         the Trust Collateral Agent.

                           (iii) The Trust Collateral Agent, on behalf of the
         Noteholders and the Insurer, shall establish and maintain in its own
         name an Eligible Deposit Account (the "Distribution Account"), bearing
         a designation clearly indicating that the funds deposited therein are
         held for the benefit of the Trust Collateral Agent on behalf of the
         Noteholders and the Insurer. The Distribution Account shall initially
         be established with the Trust Collateral Agent.

                  (b) The Trust Collateral Agent shall deposit the following
amounts into the Collection Account upon receipt: (i) all amounts withdrawn by
the Servicer from the Lockbox Account or by a Sub-Servicer from the Sub-Servicer
Account and all amounts received by the Servicer, the Seller, NAFI or any
Sub-Servicer and transferred to the Trust Collateral Agent pursuant to Section
4.6(d); (ii) the Purchase Amount received in respect of any Purchased
Receivables pursuant to Sections 2.5, 3.2 and 4.1 hereof; (iii) all income and
gain from investments of funds in the Collection Account; and (iv) all
Liquidation Proceeds (net of Liquidation Expenses retained by the Servicer or
Sub-Servicer) and other amounts with respect to the Trust Property, if any,
received from the Seller, the Servicer or any Sub-Servicer.

                  (c) On each Distribution Date, the Trust Collateral Agent
shall, at the written direction of the Servicer, withdraw from the Collection
Account and deposit in the Distribution Account the amount on deposit in the
Collection Account as of the close of business on the related Determination Date
(other than any pay-ahead amounts, as provided in Section 5.4) and any amount
deposited to the Collection Account in respect of Purchased Receivables on or
prior to the related Reporting Date and subsequent to the preceding Reporting
Date, less the sum of (i) the Supplemental Servicing Fee collected with respect
to the Receivables on deposit in the Collection Account as of such Determination
Date, (ii) any income and gain on investments of deposits in the Collection
Account as of such Determination Date and (iii) any collection or other amounts
deposited to the Collection Account in respect of Purchased Receivables other
than the Purchase Amounts. In addition, on each Distribution Date, the Trust
Collateral Agent shall, in accordance with the written direction of the
Servicer, withdraw from the Collection Account and shall pay to the Seller (i)
any income and gain on investments then on deposit in the Collection Account and
all late payment fees then on deposit in the Collection Account and (ii) with
respect to each Purchased Receivable or property acquired in respect thereof,
all amounts received thereon and not distributed as of, or received after, the
date on which the related Principal Balance or Purchase Amount (or, in the case
of a retransfer pursuant to Section 11.1, the purchase amount required therein)
is determined. In the event the Servicer, any Sub-Servicer or the Trust
Collateral Agent shall deposit in the Collection Account any amount in error and
such amount is not required to be deposited therein, the Trust Collateral Agent
may withdraw at any time, on its own behalf if the erroneous deposit was made by
the Trust Collateral Agent and on behalf of the Servicer or Sub-Servicer if the
erroneous deposit was made by the Servicer or Sub-Servicer promptly after
receipt of an Officer's Certificate by the Trust Collateral Agent (if such
amount was erroneously deposited by the Servicer or any Sub-Servicer) and the
Insurer setting forth the reason for such withdrawal of such amount from the
Collection Account, any provision herein to the contrary notwithstanding.

                                       41
<PAGE>   47

                  (d) Funds on deposit in the Collection Account, the Note
Distribution Accounts and the Distribution Account (collectively, the "Trust
Accounts") shall be invested by the Trust Collateral Agent (or any custodian
with respect to funds on deposit in any such account) in Eligible Investments
selected in writing by the Servicer (pursuant to standing instructions or
otherwise) which, absent any instruction shall be the investments specified in
clause (d) of the definition of Eligible Investments set forth herein. Other
than as permitted by the Rating Agencies and the Controlling Party, funds on
deposit in any Trust Account shall be invested in Eligible Investments that will
mature so that such funds will be available at the close of business on the
Business Day immediately preceding the following Distribution Date. Funds
deposited in a Trust Account on the day immediately preceding a Distribution
Date upon the maturity of any Eligible Investments are not required to be
invested overnight. All Eligible Investments will be held to maturity.

                  (e) All investment earnings of moneys deposited in the Trust
Accounts shall be deposited (or caused to be deposited) by the Trust Collateral
Agent in the Collection Account no later than the close of business on the
Business Day immediately preceding the related Distribution Date, and any loss
resulting from such investments shall be charged to the Collection Account. The
Servicer shall not direct the Trust Collateral Agent to make any investment of
any funds held in any of the Trust Accounts unless the security interest granted
and perfected in such account will continue to be perfected in such investment,
in either case without any further action by any Person, and, in connection with
any direction to the Trust Collateral Agent to make any such investment, if
necessary, the Servicer shall deliver to the Trust Collateral Agent and the
Insurer an Opinion of Counsel to such effect upon which the Trust Collateral
Agent may conclusively rely.

                  (f) The Trust Collateral Agent shall not in any way be held
liable by reason of any insufficiency in any of the Trust Accounts resulting
from any loss on any Eligible Investment included therein except for losses
attributable to the Trust Collateral Agent's negligence or bad faith or its
failure to make payments on such Eligible Investments issued by the Trust
Collateral Agent, in its commercial capacity as principal obligor and not as
trustee, in accordance with their terms.

                  (g) If (i) the Servicer shall have failed to give investment
directions for any funds on deposit in the Trust Accounts to the Trust
Collateral Agent by 2:00 p.m. Eastern Time (or such other time as may be agreed
by the Issuer and Trust Collateral Agent) on any Business Day; or (ii) a Default
or Event of Default (as such capitalized terms are defined in the Indenture)
shall have occurred and be continuing with respect to the Notes but the Notes
shall not have been declared due and payable, or, if such Notes shall have been
declared due and payable following an Event of Default (as defined in the
Indenture) and amounts collected or receivable from the Trust Property are being
applied as if there had not been such a declaration; then the Trust Collateral
Agent shall, to the fullest extent practicable, invest and reinvest funds in the
Trust Accounts in one or more Eligible Investments pursuant to paragraph (d)
above.

                  (h) (i) The Trust Collateral Agent shall possess all right,
title and interest in all funds on deposit from time to time in the Trust
Accounts and in all proceeds thereof (excluding all Investment Earnings on the
Collection Account) and all such funds, investments,

                                       42
<PAGE>   48

proceeds and income shall be part of the Owner Trust Estate. Except as otherwise
provided herein, the Trust Accounts shall be under the sole dominion and control
of the Trust Collateral Agent for the benefit of the Noteholders and the
Insurer. If, at any time, any of the Trust Accounts ceases to be an Eligible
Deposit Account, the Trust Collateral Agent (or the Servicer on its behalf)
shall within five Business Days (or such longer period as to which each Rating
Agency and the Controlling Party may consent) establish a new Trust Account as
an Eligible Deposit Account and shall transfer any cash and/or any investments
to such new Trust Account. In connection with the foregoing, the Servicer agrees
that, in the event that any of the Trust Accounts are not accounts with the
Trust Collateral Agent, the Servicer shall notify the Trust Collateral Agent and
the Insurer in writing promptly upon any of such Trust Accounts ceasing to be an
Eligible Deposit Account.

                           (ii) With respect to the Trust Account Property the
         Trust Collateral Agent agrees that:

                                    (A) any Trust Account Property that is held
                  in deposit accounts shall be held solely in the Eligible
                  Deposit Accounts; and, except as otherwise provided herein,
                  each such Eligible Deposit Account shall be subject to the
                  exclusive custody and control of the Trust Collateral Agent,
                  and the Trust Collateral Agent shall have sole signature
                  authority with respect thereto;

                                    (B) any Trust Account Property that
                  constitutes an instrument within the meaning of Section
                  9-105(1)(i) of the UCC and are susceptible of physical
                  delivery, the Trust Collateral Agent shall accept delivery in
                  accordance with paragraph (a) of the definition of "Delivery"
                  and shall be held, pending maturity or disposition, solely by
                  the Trust Collateral Agent or its nominee or custodian acting
                  solely for the Trust Collateral Agent;

                                    (C) any Trust Account Property that
                  constitutes a certificated security (as defined in Section
                  8-102(a)(4) of the UCC) shall be delivered to the Trust
                  Collateral Agent in accordance with paragraph (b) of the
                  definition of "Delivery" and shall be held, pending maturity
                  or disposition, solely by the Trust Collateral Agent or by a
                  securities intermediary (as defined in Section 8-102(a)(14) of
                  the UCC) acting on behalf of the Trust Collateral Agent;

                                    (D) any Trust Account Property that is a
                  book-entry security held through the Federal Reserve System
                  pursuant to Federal book-entry regulations shall be delivered
                  in accordance with paragraph (c) of the definition of
                  "Delivery" and shall be maintained by the Trust Collateral
                  Agent, pending maturity or disposition, through continued
                  book-entry registration of such Trust Account Property as
                  described in such paragraph;

                                    (E) any Trust Account Property that is an
                  "uncertificated security" under Article 8 of the UCC and that
                  is not governed by clause (D) above shall be delivered to the
                  Trust Collateral Agent in accordance with paragraph (d) of the
                  definition of "Delivery" and shall be maintained by the Trust
                  Collateral

                                       43
<PAGE>   49

                  Agent, pending maturity or disposition, through continued
                  registration of the Trust Collateral Agent's (or its
                  nominee's) ownership of such security or the agreement of the
                  issuer thereof to comply with the instructions of the Trust
                  Collateral Agent as described in such clause (D) pending
                  maturity or disposition; and

                                    (F) any Trust Account Property that is a
                  "security entitlement" (as defined in Section 8-102(a)(17) of
                  the UCC), a securities intermediary (i) credits, accepts for
                  credit or is required to credit a "financial asset" (as
                  defined in Section 8-102(a)(9) of the UCC) to the Trust
                  Collateral Agent's securities account, (ii) has agreed that it
                  will comply with the entitlement orders described in clause
                  (f) of the definition of "Delivery" or (iii) confirms the
                  purchase of such Trust Account Property, and makes such
                  entries on its books and records, in the manner and as
                  described in such clause (f), and such credit, agreement or
                  entries are maintained pending maturity or disposition.

         SECTION 5.2. [Reserved.]

         SECTION 5.3. Certain Reimbursements to the Servicer. The Servicer will
be entitled to be reimbursed from amounts on deposit in the Collection Account
with respect to a Due Period for amounts previously deposited in the Collection
Account but later determined by the Servicer to have resulted from mistaken 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 5.7(a)(i) upon certification by the Servicer of such amounts
and the provision of such information to the Trust Collateral Agent and the
Insurer as may be necessary in the opinion of the Insurer to verify the accuracy
of such certification. If the Trust Collateral Agent has not received written
confirmation from the Controlling Party of the Servicer's entitlement to
reimbursement pursuant to this Section, the Trust Collateral Agent shall not
make a distribution to the Servicer in respect of such amount pursuant to
Section 5.7, or if the Servicer prior thereto has been reimbursed pursuant to
Section 5.7, the Trust Collateral Agent shall withhold such amounts from amounts
otherwise distributable to the Servicer on the next succeeding Distribution
Date.

         SECTION 5.4. Application of Collections. For all purposes of this
Agreement the allocation of a payment on a Receivable between principal and
interest shall be made based upon the amortization method provided in the
related Contract. For purposes of allocating a pay-ahead payment on a Receivable
between principal and interest, the pay-ahead shall be deemed to have been
received on the date it was actually due. For all purposes of this Agreement, no
amount shall be treated as collected under a Receivable until such amount has
been deposited into the Collection Account.

         SECTION 5.5. Withdrawals from Series 1999-1 Spread Account.

                  (a) In the event that the Servicer's Certificate with respect
to any Determination Date shall state that the amount of funds available under
Section 5.7(a)(iii) and, if such Distribution Date is the Final Scheduled
Distribution Date, the amount of funds available under Sections 5.7(a)(iii) and
5.7(a)(v) with respect to such Distribution Date is not sufficient to

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<PAGE>   50

make payment of the amount payable on the related Distribution Date pursuant to
Section 5.7(a)(iii) and, if such Distribution Date is the Final Scheduled
Distribution Date, Sections 5.7(a)(iii) and 5.7(a)(v) (such deficiency being a
"Deficiency Claim Amount"), which notice shall also state if there are not
sufficient amounts in the Spread Account to cover such deficiency, then on the
Business Day immediately preceding the related Draw Date, the Trust Collateral
Agent shall deliver to the Collateral Agent, the Noteholders, the Owner Trustee,
the Insurer and the Servicer, by hand delivery, telex or facsimile transmission,
a written notice (a "Deficiency Notice") specifying the Deficiency Claim Amount
for such Distribution Date and the Class A Note Policy Claim Amount, if any.
Such Deficiency Notice shall direct the Collateral Agent to remit such
Deficiency Claim Amount (to the extent of the funds available to be distributed
pursuant to the Spread Account Agreement) to the Trust Collateral Agent for
deposit in the Collection Account on the related Distribution Date.

                  (b) Any Deficiency Notice shall be delivered by 10:00 am., New
York City time, on the Business Day immediately preceding the Draw Date
immediately preceding the related Distribution Date. The amounts distributed by
the Collateral Agent to the Trust Collateral Agent pursuant to a Deficiency
Notice shall be deposited by the Trust Collateral Agent into the Collection
Account pursuant to Section 5.6.

         SECTION 5.6. Additional Deposits.

                  (a) NAFI and the Seller, as applicable, shall deposit or cause
to be deposited in the Collection Account on the Reporting Date following the
date on which such obligations are due the aggregate Purchase Amount with
respect to Purchased Receivables. On or before each Draw Date, the Trust
Collateral Agent shall remit to the Collection Account any amounts delivered to
the Trust Collateral Agent by the Collateral Agent.

                  (b) Any Insolvency Proceeds shall be deposited in the
Collection Account pursuant to Section 11.1(b).

         SECTION 5.7. Distributions.

                  (a) On each Distribution Date, the Trust Collateral Agent
shall, to the extent of the Available Amount (any amount of which was deposited
to the Distribution Account pursuant to Section 5.11 to be applied only as
directed by the Insurer) together with funds withdrawn from the Spread Account,
if any, make the following payments (in case of the withdrawals from the Spread
Account, for payments of the Servicing Fee, the Noteholders' Distributable
Amount with respect to the Class A Notes and any amounts owing to the Insurer
pursuant to clause (vi) below only) in the following order of priority:

                           (i) from the Distribution Account to the Servicer,
         the Servicing Fee for the related Due Period, and any unpaid Servicing
         Fees from prior Due Periods to the extent not previously paid;

                                       45
<PAGE>   51

                           (ii) from the Distribution Account to each of the
         Trust Collateral Agent, the Backup Servicer, the Trustee, the Owner
         Trustee, the Collateral Agent and the Custodian, their respective
         accrued and unpaid fees to the extent not paid by the Servicer;

                           (iii) from the Distribution Account to the Class A
         Note Distribution Account to the Class A Noteholders, the Noteholders'
         Interest Distributable Amount with respect to the Class A Notes;

                           (iv) from the Distribution Account to the Class B
         Note Distribution Account to the Class B Noteholders, the Noteholders'
         Interest Distributable Amount with respect to the Class B Notes;

                           (v) from the Distribution Account, to the Class A
         Note Distribution Account to the Class A Noteholders, the sum of (i)
         the Class A Percentage of the Noteholders' Principal Distributable
         Amount and (ii) the Class A Principal Carryover Shortfall; provided,
         however, that on the Final Scheduled Distribution Date, the Class A
         Noteholders shall receive an amount sufficient to reduce the Class A
         Note Balance to zero;

                           (vi) from the Distribution Account to the Insurer (or
         any designee thereof), to the extent of any amounts owing to the
         Insurer with respect to this transaction under the Insurance Agreement,
         the Indenture or this Agreement and not paid;

                           (vii) from the Distribution Account to the Class B
         Note Distribution Account to the Class B Noteholders, the sum of (i)
         the Class B Percentage of the Noteholders' Principal Distributable
         Amount and (ii) the Class B Principal Carryover Shortfall; provided,
         however, that on the Final Scheduled Distribution Date, the Class B
         Noteholders shall receive an amount sufficient to reduce the Class B
         Note Balance to zero;

                           (viii) from the Distribution Account to the
         Collateral Agent for deposit to the Spread Account, all Available
         Amounts remaining after distribution pursuant to clauses (i) through
         (vii) above;

                           (ix) from amounts, if any, released from the Spread
         Account on such Distribution Date, for the first 12 Distribution Dates
         after the Closing Date, from the Distribution Account to the Class B
         Note Distribution Account to the Class B Noteholders, as additional
         payment of principal, 15% of the balance of any funds released from the
         Spread Account pursuant to the Series 1999-1 Supplement, and for each
         Distribution Date thereafter until the outstanding Class B Note Balance
         is zero, from the Distribution Account to the Class B Note Distribution
         Account to the Class B Noteholders, as additional payment of principal,
         65% of the balance of any funds released from the Spread Account
         pursuant to the Series 1999-1 Supplement;

                           (x) from amounts (as reduced by the distributions
         pursuant to clause (ix) above), if any, released from the Spread
         Account on such Distribution Date, to the

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<PAGE>   52

         Trustee and the Owner Trustee for any unreimbursed expenses and to pay
         any indemnities owed by the Issuer to the Trustee under the Indenture
         or to the Owner Trustee under the Trust Agreement;

                           (xi) from amounts (as reduced by the distributions
         pursuant to clauses (ix) and (x) above), if any, released from the
         Spread Account on such Distribution Date, to the Servicer for any
         expenses incurred by the Servicer in connection with a realization upon
         a Defaulted Receivable;

                           (xii) from amounts (as reduced by the distributions
         pursuant to clauses (ix), (x) and (xi) above), if any, released from
         the Spread Account on such Distribution Date, to the Backup Servicer
         for reimbursement to the Backup Servicer for expenses incurred by the
         Backup Servicer and to reimburse the Servicer for expenses incurred by
         and reimbursable, or any indemnities payable by the Seller to the
         Servicer pursuant to this Agreement; and

                           (xiii) from amounts (as reduced by the distributions
         pursuant to clauses (ix), (x), (xi) and (xii) above), if any, released
         from the Spread Account on such Distribution Date, to the holder of the
         Trust Certificate (subject to the claims of First Union National Bank
         under the Revolving Credit Agreement), any remaining funds;

provided, however, that, (A) following an acceleration of the Notes or, (B) if
an Insurer Default shall have occurred and be continuing and an Event of Default
pursuant to the Indenture shall have occurred and be continuing, in each case,
to the extent actually known by a Trust Officer of the Trust Collateral Agent,
or (C) the receipt of Insolvency Proceeds pursuant to Section 11.1(b), amounts
deposited in the Note Distribution Account (including any such Insolvency
Proceeds) and the Distribution Account shall be paid to the Noteholders and the
Certificateholder pursuant to Section 5.6 of the Indenture.

                  (b) The Certificateholder and each Noteholder, by its
acceptance of the Trust Certificate or a Note, as applicable, will be deemed to
have consented to the provisions of paragraph (a) above relating to the priority
of distributions and will be further deemed to have acknowledged that no
property rights in any amount of funds or the proceeds of any such amount shall
vest in the Certificateholder or such Noteholder, as applicable, until such
amount has been distributed to the Certificateholder or such Noteholder pursuant
to such provisions; provided, that the foregoing shall not restrict the right of
the Certificateholder or any Noteholder, upon compliance with the provisions
hereof, from seeking to compel the performance of the provisions hereof by the
parties hereto.

                  (c) In furtherance of and not in limitation of the foregoing,
the Certificateholder and each Class B Noteholder, by acceptance of the Trust
Certificate or its Class B Note, as applicable, specifically acknowledges that
no amounts shall be received by it, nor shall it have any right to receive any
amounts, unless and until such amounts have been distributed pursuant to clause
(xiii) above to such Certificateholder or pursuant to clauses (iv), (vii) and
(ix) above to such Class B Noteholder. The Certificateholder and each Class B
Noteholder, by acceptance of the Trust Certificate or its Class B Note, as
applicable, further specifically

                                       47
<PAGE>   53

acknowledges that it has no right to or interest in any monies at any time held
pursuant to the Spread Account Agreement or pursuant hereto prior to the release
of such monies as aforesaid, such monies being held in trust for the benefit of
the Class A Noteholders and the Insurer. Notwithstanding the foregoing, in the
event that it is ever determined that the monies held in the Spread Account
constitute a pledge of collateral, then the provisions of this Agreement and the
Spread Account Agreement shall be considered to constitute a security agreement
and the Seller and the Certificateholder hereby grant to the Collateral Agent
for the benefit of the Trustee and the Insurer a first priority perfected
security interest in such amounts, to be applied as set forth in Section 3.03 of
the Spread Account Agreement. In addition, the Certificateholder, by acceptance
of the Trust Certificate, hereby appoints the Seller as its agent to pledge a
first priority perfected security interest in the Spread Account, and any
amounts held therein from time to time to the Collateral Agent for the benefit
of the Trustee and the Insurer pursuant to the Spread Account Agreement and
agrees to execute and deliver such instruments of conveyance, assignment, grant,
confirmation, etc., as well as any financing statements, in each case as the
Insurer shall consider reasonably necessary in order to perfect the Collateral
Agent's Security Interest in the Collateral (as such terms are defined in the
Spread Account Agreement).

                  (d) In the event that the Collection Account is maintained
with an institution other than the Trust Collateral Agent, the Servicer shall
instruct and cause such institution to make all deposits and distributions
pursuant to Section 5.7(a) on the related Distribution Date.

         SECTION 5.8. Note Distribution Accounts.

                  (a) On each Distribution Date, the Trust Collateral Agent
shall distribute all amounts on deposit in the Class A Note Distribution Account
and Class B Note Distribution Account, as such amounts on deposit in the Class A
Note Distribution Account and Class B Note Distribution Account are specified in
the monthly Servicer's Certificate, to the Class A Noteholders and Class B
Noteholders in respect of the Class A Notes and Class B Notes to the extent of
amounts due and unpaid on the Class A Notes and Class B Notes for principal and
interest in the amounts and priorities set forth in Section 5.7(a).

                  (b) On each Distribution Date, the Trust Collateral Agent
shall send to each Noteholder, in accordance with Section 5.10, the statement
provided to the Trust Collateral Agent by the Servicer pursuant to Section
4.11(b) hereof for distribution on such Distribution Date.

                  (c) In the event that any withholding tax is imposed on the
Trust's payment (or allocations of income) to a Noteholder, such tax shall
reduce the amount otherwise distributable to the Noteholder in accordance with
this Section. The parties hereto hereby agree to provide to the Trust Collateral
Agent the information any such party may have, if any, with respect to any such
withholding tax. The Trust Collateral Agent is hereby authorized and directed to
retain from amounts otherwise distributable to the Noteholders sufficient funds
for the payment of any tax that is legally owed by the Trust (but such
authorization shall not prevent the Trust Collateral Agent from contesting any
such tax in appropriate proceedings, and withholding payment of such tax, if
permitted by law, pending the outcome of such proceedings). The amount of any
withholding tax imposed with respect to a Noteholder shall be treated as cash
distributed to such

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<PAGE>   54

Noteholder at the time it is withheld by the Trust and remitted to the
appropriate taxing authority. If there is a possibility that withholding tax is
payable with respect to a distribution (such as a distribution to a non-U.S.
Noteholder), the Trust Collateral Agent may in its sole discretion withhold such
amounts in accordance with this clause (c). In the event that a Noteholder
wishes to apply for a refund of any such withholding tax, the Trust Collateral
Agent shall reasonably cooperate with such Noteholder in making such claim so
long as such Noteholder agrees to reimburse the Trust Collateral Agent for any
out-of-pocket expenses incurred.

                  (d) Distributions required to be made to Noteholders on any
Distribution Date shall be made to each Noteholder of record on the preceding
Record Date either by wire transfer, in immediately available funds, to the
account of such Noteholder at a bank or other entity having appropriate
facilities therefor, if such Noteholder shall have provided to the Note
Registrar appropriate written instructions at least five Business Days prior to
such Distribution Date and such Holder's Notes in the aggregate evidence a
denomination of not less than $1,000,000 or, if not, by check mailed to such
Noteholder at the address of such holder appearing in the Note Register.

         SECTION 5.9. [Reserved.]

         SECTION 5.10. Statements to Noteholders. Concurrently with each
distribution charged to the Note Distribution Account, the Trust Collateral
Agent shall forward by mail to each Noteholder, the Seller, the Servicer, the
Insurer and each Rating Agency, a written statement prepared by the Servicer
substantially in the form attached hereto as Exhibit 5.10.

         SECTION 5.11. Optional Deposits by the Insurer. The Insurer shall at
any time, and from time to time, with respect to a Distribution Date, have the
option (but shall not be required, except in accordance with the terms of a
Policy) to deliver amounts to the Trust Collateral Agent for deposit into the
Distribution Account for any of the following purposes: (i) to provide funds in
respect of the payment of fees or expenses of any provider of services to the
Trust with respect to such Distribution Date, or (ii) to include such amount to
the extent that without such amount a draw would be required to be made on the
Class A Note Policy.

                                   ARTICLE VI

                             THE CLASS A NOTE POLICY

         SECTION 6.1. Claims Under Class A Note Policy.

                  (a) In the event that the Trust Collateral Agent has delivered
a Deficiency Notice with respect to any Determination Date pursuant to Section
5.5 hereof, the Trust Collateral Agent shall on the related Draw Date determine
the Class A Note Policy Claim Amount for the related Distribution Date. If the
Class A Note Policy Claim Amount specified on the Deficiency Notice for such
Distribution Date is greater than zero, the Trust Collateral Agent shall furnish
to the Insurer no later than 12:00 noon New York City time on the related Draw
Date, a completed Notice of Claim (as defined in (b) below) in the amount of the
Class A Note Policy Claim Amount. Amounts paid by the Insurer pursuant to a
claim submitted under this Section 6.1

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<PAGE>   55

shall be deposited by the Trust Collateral Agent into the Class A Note
Distribution Account for payment pursuant to paragraph (b) below to Class A
Noteholders on the related Distribution Date.

                  (b) Any notice delivered by the Trust Collateral Agent to the
Insurer pursuant to subsection 6.1(a) shall specify the Class A Note Policy
Claim Amount claimed under the Class A Note Policy and shall constitute a
"Notice of Claim" under the Class A Note Policy. In accordance with the
provisions of the Class A Note Policy, the Insurer is required to pay to the
Trust Collateral Agent the Class A Note Policy Claim Amount properly claimed
thereunder by 12:00 noon, New York City time, on the later of (i) the third
Business Day (as defined in the Class A Note Policy) following Receipt (as
defined in the Class A Note Policy) on a Business Day (as defined in the Class A
Note Policy) of the Notice of Claim, and (ii) the applicable Distribution Date.
Any payment made by the Insurer under the Class A Note Policy shall be applied
solely to the payment of the Class A Notes, and for no other purpose.

                  (c) The Trust Collateral Agent shall (i) receive as
attorney-in-fact of each Class A Noteholder any Class A Note Policy Claim Amount
from the Insurer and (ii) deposit the same in the Class A Note Distribution
Account for distribution solely to Class A Noteholders. Any and all Class A Note
Policy Claim Amounts disbursed by the Trust Collateral Agent from claims made
under the Class A Note Policy shall not be considered payment by the Trust or
from the Spread Account with respect to such Class A Notes, and shall not
discharge the obligations of the Trust with respect thereto. The Insurer shall,
to the extent it makes any payment with respect to the Class A Notes, become
subrogated to the rights of the recipients of such payment, to the extent of
such payments. Subject to and conditioned upon any payment with respect to the
Class A Notes by or on behalf of the Insurer, the Trust Collateral Agent shall
assign to the Insurer all rights to the payment of interest or principal with
respect to the Class A Notes which are then due for payment to the extent of all
payments made by the Insurer, and the Insurer may exercise any option, vote,
right, power or the like with respect to the Class A Notes to the extent that it
has made payment pursuant to the Class A Note Policy. To evidence such
subrogation, the Note Registrar (as defined in the Indenture) shall note the
Insurer's rights as subrogee upon the Note Register upon receipt from the
Insurer of proof of payment by the Insurer of any Noteholders' Interest
Distributable Amount or Noteholders' Principal Distributable Amount with respect
to the Class A Notes. The foregoing subrogation shall in all cases be subject to
the rights of the Class A Noteholders to receive all Scheduled Payments (as
defined in the Class A Note Policy) in respect of the Class A Notes.

                  (d) The Trust Collateral Agent shall keep a complete and
accurate record of all funds deposited by the Insurer into the Class A Note
Distribution Account and Distribution Account and the allocation of such funds
to payment of interest on and principal paid in respect of any Class A Note. The
Insurer shall have the right to inspect such records at reasonable times upon
one Business Day's prior notice to the Trust Collateral Agent.

                  (e) The Trust Collateral Agent shall be entitled to enforce on
behalf of the Class A Noteholders the obligations of the Insurer under the Class
A Note Policy. Notwithstanding any other provision of this Agreement or any
Transaction Document, the Class A Noteholders are not entitled to institute
proceedings directly against the Insurer.

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<PAGE>   56

         SECTION 6.2. Preference Claims.

                  (a) In the event that the Trust Collateral Agent has received
a certified copy of an order of the appropriate court that any Scheduled Payment
(as defined in the Class A Note Policy) has been avoided in whole or in part as
a preference payment under applicable bankruptcy law, the Trust Collateral Agent
shall so notify the Insurer, shall comply with the provisions of the Class A
Note Policy to obtain payment by the Insurer of such avoided payment, and shall,
at the time it provides notice to the Insurer, notify Holders of the Class A
Notes by mail that, in the event that any Class A Noteholder's payment is so
recoverable, such Class A Noteholder will be entitled to payment pursuant to the
terms of the Class A Note Policy. The Trust Collateral Agent shall furnish to
the Insurer its records evidencing the payments of principal of and interest on
Class A Notes, if any, which have been made by the Trust Collateral Agent and
subsequently recovered from the Class A Noteholders, and the dates on which such
payments were made. Pursuant to the terms of the Class A Note Policy, the
Insurer will make such payment on behalf of the Class A Noteholder to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy named in
the Order (as defined in the Class A Note Policy) and not to the Trust
Collateral Agent or any Noteholder directly (unless a Class A Noteholder has
previously paid such payment to the receiver, conservator, debtor-in-possession
or trustee in bankruptcy, in which case the Insurer will make such payment to
the Trust Collateral Agent for distribution to such Class A Noteholder upon
proof of such payment reasonably satisfactory to the Insurer).

                  (b) The Trust Collateral Agent shall promptly notify the
Insurer of any proceeding or the institution of any action (of which the Trust
Collateral Agent has actual knowledge) seeking the avoidance as a preferential
transfer under applicable bankruptcy, insolvency, receivership, rehabilitation
or similar law (a "Class A Note Preference Claim") of any distribution made with
respect to the Class A Notes. Each Class A Noteholder, by its purchase of Class
A Notes, and the Trust Collateral Agent hereby agree that so long as an Insurer
Default shall not have occurred and be continuing, the Insurer may at any time
during the continuation of any proceeding relating to a Class A Note Preference
Claim direct all matters relating to such Class A Note Preference Claim
including, without limitation, (i) the direction of any appeal of any order
relating to any Class A Note Preference Claim and (ii) the posting of any
surety, supersedeas or performance bond pending any such appeal at the expense
of the Insurer, but subject to reimbursement as provided in the Insurance
Agreement. In addition, and without limitation of the foregoing, as set forth in
Section 6.1(c), the Insurer shall be subrogated to, and each Class A Noteholder
and the Trust Collateral Agent hereby delegates and assigns, to the fullest
extent permitted by law, the rights of the Trust Collateral Agent and each Class
A Noteholder in the conduct of any proceeding with respect to a Class Note
Preference Claim, including, without limitation, all rights of any party to an
adversary proceeding action with respect to any court order issued in connection
with any such Class A Note Preference Claim.

         SECTION 6.3. Surrender of Class A Note Policy. The Trust Collateral
Agent shall surrender the Class A Note Policy to the Insurer for cancellation
upon the expiration of such policy in accordance with the terms thereof.

         SECTION 6.4. Spread Account. The Seller agrees, simultaneously with the
execution and delivery of this Agreement, to execute and deliver the Spread
Account Agreement, and

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<PAGE>   57

pursuant to the terms thereof, to deposit the Initial Spread Account Deposit in
the Spread Account.

                                  ARTICLE VII

                                    RESERVED

                                  ARTICLE VIII

                                   THE SELLER

         SECTION 8.1. Representations, Warranties and Covenants of the Seller.
The Seller hereby represents, warrants and covenants to the Trust Collateral
Agent, the Insurer, the Noteholders and the Servicer, which representations,
warranties and covenants shall survive as long as any Note shall be outstanding
or this Agreement has not been terminated, that as of the Closing Date:

                  (a) the Seller is a Delaware business trust duly organized,
validly existing, and in good standing under the laws of the State of Delaware
and has all licenses and approvals necessary to carry on its business as now
being conducted and shall appoint and employ agents or attorneys in each
jurisdiction where it shall be necessary to take action under this Agreement and
the other Transaction Documents; the Seller has the full power and authority to
own its property, to carry on its business as presently conducted, and to
execute, deliver and perform each of the Transaction Documents to which it is a
party; the execution, delivery and performance of each of the Transaction
Documents to which it is a party (including all instruments of transfer to be
delivered pursuant to any such Transaction Documents to which it is a party) by
the Seller and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized; each of the Transaction Documents
to which it is a party evidences the valid, binding and enforceable obligations
of the Seller (subject to applicable bankruptcy and insolvency laws and other
similar laws affecting the enforcement of creditors' rights generally and to
general principles of equity, regardless of whether enforcement is sought in a
proceeding in equity or at law); and all requisite corporate action has been
taken by the Seller to make each of the Transaction Documents to which it is a
party valid and binding upon the Seller (subject as aforesaid in the preceding
clause);

                  (b) the Seller is not required to obtain the consent of any
other party or obtain the consent, license, approval or authorization of, or
make any registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Agreement or any other Transaction Document to which it
is a party;

                  (c) the consummation of the transactions contemplated by this
Agreement and the other Transaction Documents will not result in the breach of
any term or provision of the trust agreement of the Seller or result in the
breach of any term or provision of, or conflict with or constitute a default
(with or without notice, lapse of time or both) under or result in the

                                       52
<PAGE>   58

acceleration of any obligation under, any agreement, indenture or loan or credit
agreement or other instrument to which the Seller or its property is subject or
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such agreement, indenture or loan or credit
agreement or other instrument (aside from the lien created pursuant to this
Agreement), or result in the violation of any law (including, without
limitation, any bulk transfer or similar law), rule, regulation, order, judgment
or decree to which the Seller or its property or the Receivables are subject;

                  (d) no statement, report or other document furnished or to be
furnished pursuant to this Agreement or in connection with the transaction
contemplated hereby contains or will, when furnished, contain any untrue
statement of a material fact or omits or will, when furnished, omit to state a
material fact necessary to make the statements contained therein not misleading,
in light of the circumstances under which they were made;

                  (e) neither the Seller nor any of its subsidiaries or
Affiliates is a party to, bound by or in breach or violation of any indenture or
other agreement or instrument, or subject to or in violation of any statute,
order or regulation of any court, regulatory body, administrative agency or
governmental body having jurisdiction over it, which materially and adversely
affects, or may in the future materially and adversely affect, the ability of
the Seller to perform its obligations under this Agreement or any other
Transaction Document;

                  (f) this Agreement and each Conveyance Agreement, when duly
executed and delivered, shall effect a valid sale, transfer and assignment of
the Receivables and the remaining Trust Property, enforceable against the Seller
and creditors of and purchasers from the Seller;

                  (g) except as set forth in Schedule C, there are no actions,
suits, proceedings or investigations pending or, to the Seller's knowledge,
threatened against the Seller or NAFI, before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality having
jurisdiction over the Seller or its properties (i) asserting the invalidity of
this Agreement or any of the Transaction Documents, (ii) seeking to prevent the
issuance of the Notes or the consummation of any of the transactions
contemplated by this Agreement or any of the Transaction Documents, (iii)
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 Transaction Documents, (iv)
involving the Seller and which might adversely affect the federal income tax or
other federal, state or local tax attributes of the Notes, or (v) that could
have a material adverse effect on the Receivables;

                  (h) the Seller has obtained or made all necessary consents,
approvals, waivers and notifications of creditors, lessors and other
non-governmental persons, in each case, in connection with the execution and
delivery of this Agreement and the other Transaction Documents, and the
consummation of all the transactions herein and therein contemplated;

                  (i) the Seller shall not take any action to impair the Trust
Collateral Agent's rights on behalf of the Noteholders and the Insurer in any
Contract;

                                       53
<PAGE>   59

                  (j) the Seller has filed all federal, state, county, local and
foreign income, franchise and other tax returns required to be filed by it
through the date hereof, and has paid all taxes reflected as due thereon;

                  (k) since the date of its organization, the Seller has
maintained its chief executive office in the State of Florida or the State of
Delaware, and there have been no other locations of the Seller's principal
office during the four (4) months preceding the Closing Date;

                  (l) Seller is solvent and will not become insolvent after
giving effect to the transactions contemplated hereunder; Seller is paying its
debts as they become due; Seller, after giving effect to the contemplated
transactions, will have adequate capital to conduct its business;

                  (m) since February 1995, "National Financial Auto Funding
Trust" is the only trade name under which the Seller has operated its business
and, prior to such date, NAFCO Funding Trust was the only trade name under which
the Seller operated its business;

                  (n) the Seller shall not engage in any business or activity
other than in connection with or relating to the purchase of auto loan
receivables and the issuance of securities secured by, or evidencing beneficial
interests in, such auto loan receivables;

                  (o) the Seller is not and shall not be involved in the
day-to-day or other management of its parent or any of its Affiliates;

                  (p) the Seller's financial statements shall reflect its
separate legal existence from any of its Affiliates and the assets of the Seller
shall not be listed on the financial statements of any other entity;

                  (q) the Seller shall maintain records and books of account of
the Seller and shall not commingle such records and books of account, or its
assets, with the records and books of account, or assets, of any Person;

                  (r) the Seller shall act solely in its own name and through
the duly authorized trustees or agents in the conduct of its business, and shall
conduct its business so as not to mislead others as to the identity of the
entity with which they are concerned;

                  (s) at all times, except in the case of a temporary vacancy,
which shall promptly be filled, the Seller shall have at least one trustee who
qualifies as an independent trustee.

                  The Seller shall indemnify the Trust Collateral Agent, the
Insurer, the Servicer, their respective officers, directors, agents and
employees and each Noteholder, and hold each of them harmless against any and
all damages (including all expenses and legal fees) resulting from a breach of
the representations and warranties set forth in this Section 8.1.

                  The Insurer shall be deemed to have relied on the foregoing
representations, warranties and covenants in executing and delivering the Class
A Note Policy.

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         SECTION 8.2. 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 business trust
or a corporation under the laws of Delaware 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 Transaction Documents and each other instrument or agreement
necessary or appropriate to the proper administration of this Agreement and such
other agreements and the transactions contemplated hereby and thereby and the
performance of its obligations hereunder and thereunder.

                  (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 business 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 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

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

         SECTION 8.3. Liability of Seller; Indemnities. The Seller shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken under this Agreement by the Seller and the representations made by
the Seller under this Agreement.

                  (a) The Seller shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Trust, the Insurer, the Noteholders, the Trustee,
the Trust Collateral Agent and their respective officers, directors, agents and
employees from and against any taxes that may at any time be asserted against
any such Person with respect to the transactions contemplated in this Agreement
and any of the Transaction Documents (except any income taxes arising out of
fees paid to the Owner Trustee, the Trust Collateral Agent, the Noteholders, the
Trustee and the Insurer and except any taxes to which the Owner Trustee, the
Trust Collateral Agent, the Noteholders or the Trustee may otherwise be subject
to), including any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes (but, in the case of the Issuer, not
including any taxes asserted with respect to, federal or other income taxes
arising out of distributions on the Notes) and costs and expenses in defending
against the same.

                  (b) The Seller shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Trustee, the Trust Collateral Agent, the Insurer,
their respective officers, directors, agents and employees and the Noteholders
from and against any loss, liability or expense incurred by reason of (i) the
Seller's willful misfeasance, bad faith or negligence in the performance of its

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<PAGE>   61

duties under this Agreement, or by reason of reckless disregard of its
obligations and duties under this Agreement and (ii) the Seller's or the
Issuer's violation of Federal or state securities laws in connection with the
offering and sale of the Notes.

                  (c) The Seller shall indemnify, defend and hold harmless the
Owner Trustee, Trustee, the Noteholders and the Trust Collateral Agent and their
respective officers, directors, employees and agents from and against any and
all costs, expenses, losses, claims, damages and liabilities arising out of, or
incurred in connection with the acceptance or performance of the trusts and
duties set forth herein and in the Transaction Documents 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
the Owner Trustee.

                  Indemnification under this Section shall survive the
resignation or removal of the Owner Trustee, the Trustee or the Trust Collateral
Agent and the termination of this Agreement or the Indenture or the Trust
Agreement or the Custodial Agreement, as applicable, and shall include
reasonable fees and expenses of counsel and other expenses of litigation. If the
Seller shall have made any indemnity payments pursuant to this Section and the
Person to or on behalf of whom such payments are made thereafter shall collect
any of such amounts from others, such Person shall promptly repay such amounts
to the Seller, without interest.

         SECTION 8.4. Merger or Consolidation of, or Assumption of the
Obligations of, Seller. The Seller may not be merged or consolidated with or
into any Person or transfer substantially all of its assets to any Person.

         SECTION 8.5. 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 written advice of counsel or on any document of any kind, prima
facie properly executed and submitted by any Person respecting any matters
arising under any Transaction Document. The Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its obligations under this Agreement, and that in its opinion may
involve it in any expense or liability.

         SECTION 8.6. Seller May Own Notes. The Seller and any Affiliate thereof
(except NAFI) 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 expressly provided herein or in any
Transaction Document. Notes so owned by the Seller or such Affiliate shall have
an equal and proportionate benefit under the provisions of the Transaction
Documents, without preference, priority, or distinction as among all of the
Notes; provided, however, 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 the Transaction Documents and will not be
entitled to the benefits of the Class A Note Policy. The Seller shall notify the
Owner Trustee, the Trustee, the Trust Collateral Agent and the Insurer promptly
after it or any of its Affiliates become the owner or pledgee of a Note.

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<PAGE>   62

                                   ARTICLE IX

                                  THE SERVICER

         SECTION 9.1. Representations, Warranties and Covenants of the Servicer.
The Servicer hereby represents, warrants and covenants to the Trust Collateral
Agent, the Noteholders and the Insurer that as of the Closing Date:

                  (a) the Servicer is duly organized, validly existing and in
good standing under the laws of the state of its organization and is qualified
to transact business in and is in good standing under the laws of each state in
which it is necessary for it to be so qualified in order to carry on its
business as now being conducted and has all licenses necessary to carry on its
business as now being conducted; the Servicer has the full power and authority
to own its property, to carry on its business as presently conducted, and to
execute, deliver and perform each of the Transaction Documents to which it is a
party; the execution, delivery and performance of each of the Transaction
Documents to which it is a party (including all instruments of transfer to be
delivered pursuant to any such Transaction Documents to which it is a party) by
the Servicer and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized; each of the Transaction Documents
to which it is a party evidences the valid, binding and enforceable obligation
of the Servicer (subject to applicable bankruptcy and insolvency laws and other
similar laws affecting the enforcement of creditors' rights generally and to
general principles of equity, regardless of whether enforcement is sought in a
proceeding in equity or at law) and all requisite action has been taken by the
Servicer to make each of the Transaction Documents to which it is a party valid
and binding upon the Servicer (subject as aforesaid in the preceding clause);

                  (b) the Servicer is not required to obtain the consent of any
other party or obtain the consent, license, approval or authorization of, or
make any registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Agreement or any other Transaction Documents to which it
is a party;

                  (c) the consummation of the transactions contemplated by the
Transaction Documents will not result in the breach of any term or provision of
the certificate of incorporation or by-laws of the Servicer or result in the
breach of any term or provision of, or conflict with or constitute a default
(with or without notice, lapse of time or both) under or result in the
acceleration of any obligation under, any agreement, indenture or loan or credit
agreement or other instrument to which the Servicer or its property is subject,
or result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such agreement, indenture or loan or credit
agreement or other instrument (aside from the lien created pursuant to this
Agreement) or result in the violation of any law, rule, regulation, order,
judgment or decree to which the Servicer or its property or the Receivables are
subject;

                  (d) the Servicer is not a party to, bound by or in breach or
violation of any indenture or other agreement or instrument, or subject to or in
violation of any statute, order or regulation of any court, regulatory body,
administrative agency or governmental body having

                                       57
<PAGE>   63

jurisdiction over it, which materially and adversely affects, or may in the
future materially and adversely affect, the ability of the Servicer to perform
its obligations under this Agreement or the interest of the Noteholders, the
Trust or the Insurer in any material respect;

                  (e) except as set forth on Schedule C, there are no actions,
suits, 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 any of its properties (i) asserting the
invalidity of this Agreement or any of the Transaction Documents, (ii) seeking
to prevent the issuance of the Notes or the consummation of any of the
transactions contemplated by this Agreement or any of the other Transaction
Documents, (iii) 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 Transaction
Documents, (iv) involving the Servicer and which might adversely affect the
federal income tax or other federal, state or local tax attributes of the Notes,
or (v) that could have a material adverse effect on the Receivables, the
Servicer or the rights of the Noteholders, the Insurer or the Trustee under the
Transaction Documents;

                  (f) the principal office of the Servicer is located at 10302
Deerwood Park Boulevard, Suite 100, Jacksonville, Florida 32256; and

                  (g) to the Servicer's best knowledge (after using its best
efforts in conducting a detailed and complete analysis), any reprogramming
required to permit the proper functioning, in and following the year 2000, of
(i) the Servicer's computer systems used to conduct, operate and manage the
business, assets and operations of the Servicer, and (ii) equipment containing
embedded microchips (including systems and equipment supplied by others to the
Servicer, or with which systems used by, or on behalf of, the Servicer
interface) and the testing of all such systems and equipment, as so
reprogrammed, has been completed as of the date hereof. To the Servicer's best
knowledge (after using its best efforts in conducting a detailed and complete
analysis), the cost to the Servicer of such reprogramming and testing and of the
reasonably foreseeable consequences of year 2000 to the Servicer's systems and
equipment (including, without limitation, reprogramming errors and the failure
of others' systems) will not result in a Servicer Termination Event or have a
material adverse effect upon the Servicer's business, assets, operations,
prospects or condition, financial or otherwise. Except for such of the
reprogramming referred to in the preceding sentence as may be necessary, to the
Servicer's best knowledge (after using its best efforts in conducting a detailed
and complete analysis), the Servicer's computer and management information
systems used to conduct, operate and manage the Servicer's business, assets and
operations are and, with ordinary course upgrading and maintenance, will
continue for the term of this Agreement to be, sufficient to permit the Servicer
to conduct its business without having a material adverse effect upon the
Servicer's business, assets, operations, prospects or condition, financial or
otherwise.

                  It is understood and agreed that the representations and
warranties set forth in this Section 9.1 shall survive delivery of the
respective Receivable Files to the Custodian and the Sub-Servicers, if any, on
behalf of the Trust Collateral Agent and shall survive as long as any Note shall
be outstanding or this Agreement has not been terminated. Upon discovery by the
Seller, the

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<PAGE>   64

Servicer or a Responsible Officer of the Trust Collateral Agent of a breach of
any of the representations and warranties set forth in this Section 9.1 which
affects the interests of the Noteholders or the Insurer, the party discovering
such breach shall give prompt written notice thereof to the other parties, the
Noteholders and to the Insurer. In addition to the foregoing, the Servicer shall
indemnify the Seller, the Trust Collateral Agent, the Insurer, the Trust and the
Noteholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to a breach of the covenants or
representations and warranties set forth in Section 9.1.

                  The Insurer shall be deemed to have relied on the foregoing
representations, warranties and covenants in executing and delivering the Class
A Note Policy.

         SECTION 9.2. Liability of Servicer; Indemnities.

                  (a) The Servicer (in its capacity as such) 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 Trustee, the Trust Collateral Agent, the Owner Trustee, the Backup
Servicer, the Insurer, 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, any Affiliate thereof, or any
Sub-Servicer of any Financed Vehicle.

                  (c) The Servicer shall indemnify, defend and hold harmless the
Trustee, the Trust Collateral Agent, the Backup Servicer, the Noteholders, the
Insurer and the Owner Trustee and their respective officers, directors, agents
and employees from and against any taxes that may at any time be asserted
against any of such parties with respect to the transactions contemplated in
this Agreement except to the extent that such costs, expenses, losses, damages,
claims and liabilities arise out of the negligence or willful misconduct of such
parties.

                  (d) The Servicer (when the Servicer is NAFI) shall indemnify,
defend and hold harmless the Trust, the Trustee, the Trust Collateral Agent, the
Owner Trustee, the Backup Servicer, the Insurer, their respective officers,
directors, agents and employees and the Noteholders from and against any taxes
that may at any time be asserted against any of such parties with respect to the
transactions contemplated in this Agreement, including, without limitation, any
sales, gross receipts, tangible or intangible personal property, privilege or
license taxes (but not including any federal or other income taxes, including
franchise taxes, asserted with respect to, and as of the date of, the sale of
the Receivables and the Other Conveyed Property to the Trust or the issuance and
original sale of the Notes or asserted with respect to ownership of the
Receivables, or federal or other income taxes arising out of distributions on
the Notes) and costs and expenses in defending against the same.

                                       59
<PAGE>   65

                  (e) The Servicer (when the Servicer is not NAFI) shall
indemnify, defend and hold harmless the Trust, the Trustee, the Trust Collateral
Agent, the Owner Trustee, the Backup Servicer, the Insurer, their respective
officers, directors, agents and employees and the Noteholders from and against
any taxes with respect to the sale of Receivables in connection with servicing
hereunder that may at any time be asserted against any of such parties with
respect to the transactions contemplated in this Agreement, including, without
limitation, any sales, gross receipts, tangible or intangible personal property,
privilege or license taxes (but not including any federal or other income taxes,
including franchise taxes, asserted with respect to, and as of the date of, the
sale of the Receivables and the Other Conveyed Property to the Trust or the
issuance and original sale of the Notes or asserted with respect to ownership of
the Receivables, or federal or other income taxes arising out of distributions
on the Notes) and costs and expenses in defending against the same.

                  (f) The Servicer shall indemnify, defend and hold harmless the
Trust, the Trustee, the Trust Collateral Agent, the Backup Servicer, the Owner
Trustee, the Insurer, 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
Trustee, the Trust Collateral Agent, the Insurer or the Noteholders by reason of
the breach of this Agreement by the Servicer, 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 or otherwise incurred in connection with the transactions
contemplated hereby.

                  (g) NAFI shall indemnify, defend and hold harmless the Trust,
the Trustee, the Trust Collateral Agent, the Owner Trustee, the Backup Servicer,
the Insurer, their respective officers, directors, agents and employees and the
Noteholders from and against any loss, liability or expense incurred by reason
of the violation by Servicer or Seller of federal or state securities laws in
connection with the sale of the Notes.

                  (h) Indemnification under this Article shall survive the
termination of this Agreement and will survive the early resignation or removal
of any of the parties hereto and 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.
Notwithstanding any other provision of this Agreement, the obligations of the
Servicer shall not terminate or be deemed released upon the resignation or
termination of NAFI as the Servicer and shall survive any termination of this
Agreement.

         SECTION 9.3. Merger or Consolidation of, or Assumption of the
Obligations of the Servicer or the Trust Collateral Agent.

                  (a) During the term of this Agreement, the Servicer will keep
in full force and effect its existence, rights and franchises as a business
trust or corporation under the laws of Delaware and will obtain and preserve its
qualification to do business in each jurisdiction in which

                                       60
<PAGE>   66

such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Transaction Documents and each other
instrument or agreement necessary or appropriate to the proper administration of
this Agreement and the transactions contemplated hereby and thereby and the
performance of its obligations hereunder and thereunder.

                  (b) The Servicer may be merged or consolidated with or into
any Person, or transfer substantially all of its assets to any Person, in which
case any Person resulting from any merger or consolidation to which the Servicer
shall be a party, or any Person succeeding to the business of the Servicer,
shall be the successor of the Servicer hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding; provided however, that the
successor or surviving person to the Servicer shall be an Eligible Servicer and
each successor to the Servicer by virtue of its acquisition of substantially all
of the Servicer's assets shall be deemed to have made the representations and
warranties set forth in Section 9.1 hereof and shall agree in writing to be
bound by each of the Servicer's obligations hereunder; provided further, that,
(i) no representation or warranty of the Servicer is breached at the time of
merger, (ii) no event has occurred that, after notice or lapse of time or both,
would be an Insurance Agreement Event of Default or an Event of Default and
(iii) an Opinion of Counsel to the effect that all conditions precedent to
merger have been satisfied and a first priority security interest opinion have
been provided to the Insurer and the Trust Collateral Agent. The Servicer shall
provide notice of any such merger, consolidation or transfer of substantially
all of its assets to the Insurer, the Trust Collateral Agent and the Rating
Agencies (which notice shall be forwarded by the Trust Collateral Agent to the
Noteholders).

                  (c) Any Person (i) into which the Trust Collateral Agent or
the Backup Servicer may be merged or consolidated, (ii) resulting from any
merger or consolidation to which the Trust Collateral Agent or the Backup
Servicer shall be a party, (iii) which acquires by conveyance, transfer or lease
substantially all of the assets of the Trust Collateral Agent or the Backup
Servicer, or (iv) succeeding to the business of the Trust Collateral Agent or
the Backup Servicer, in any of the foregoing cases shall execute an agreement of
assumption to perform every obligation of the Trust Collateral Agent or the
Backup Servicer, as the case may be, under this Agreement and, whether or not
such assumption agreement is executed, shall be the successor to the Trust
Collateral Agent or the Backup Servicer, as the case may be, 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. The Trust Collateral Agent or the Backup Servicer, as
the case may be, or its successor hereunder shall provide the Servicer, the
Noteholders and the Insurer with prompt notice of any such transaction. In the
case of the Trust Collateral Agent, in the event that the resulting entity does
not meet the eligibility requirements set forth in Section 6.11 of the
Indenture, the Trust Collateral Agent, upon the written request of the
Controlling Party, shall resign. Nothing contained herein shall be deemed to
release the Trust Collateral Agent or the Backup Servicer, as the case may be,
from any obligation.

         SECTION 9.4. Limitation on Liability of Servicer, Trust Collateral
Agent and Others.

                  (a) In addition to the indemnities provided pursuant to
Section 9.2, the Servicer will defend and indemnify the Trust Collateral Agent,
the Backup Servicer, the Insurer

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<PAGE>   67

and their respective officers, directors, employees and agents and the
Noteholders against any and all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel and expenses of
litigation, arising from a breach of its obligations to service the Receivables
in accordance with this Agreement; provided however, that the Servicer shall not
be liable for any such costs, expenses, losses, damages, claims or liabilities
to the extent that any thereof resulted from the negligence or willful
misconduct of the Trust Collateral Agent, the Backup Servicer or their
respective officers, directors, employees and agents; and provided further that
the Servicer will not be liable for any such amount that resulted from any act
or omission to act by it done in conformity with the written instruction of the
Trust Collateral Agent. If the Servicer or Seller has made any indemnity
payments to the Noteholders or the Trust Collateral Agent, the Insurer or their
respective officers, directors, employees or agents pursuant to this paragraph,
and the Trust Collateral Agent, the Insurer or their respective officers,
directors, employees or agents thereafter collects any of the amounts which gave
rise to such indemnity payments from others or any such amounts are received by
the Trust Collateral Agent or its officers, directors, employees or agents or
the Noteholders, the Trust Collateral Agent, the Insurer or its officers,
directors, employees or agents, the Insurer shall repay such amounts collected
to the Servicer or Seller who made such indemnity payment. These indemnities of
the Servicer and the Seller will survive any transfer of the respective rights,
duties and obligations of the Servicer or the Seller hereunder to another
Person, the termination of this Agreement, any Servicer Termination Event, the
termination of the Trust Property or the resignation or replacement of the Trust
Collateral Agent for acts accruing prior to the transfer, termination of the
Trust Property or the resignation or replacement of the Trust Collateral Agent,
but will not cover actions or omissions of any successor Servicer after a
Servicer Termination Event. Neither the Servicer nor any of its directors,
officers, employees or agents shall be under any liability to the Trust
Property, the Trust Collateral Agent, any Noteholder, the Insurer or the Seller
for any action taken by the Servicer in its capacity as such (and not in any
other capacity) in good faith or for errors in judgment except for any action
taken or errors committed which caused a breach of a representation or warranty
of the Servicer under Section 9.1. The Seller, the Servicer, the Backup Servicer
and any director, officer, employee or agent of the Seller, the Servicer or the
Backup Servicer may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder.

                  (b) The Seller, the Servicer and any director, officer,
employee or agent of the Seller or the Servicer shall be indemnified by the
Trust Property and held harmless against any loss, liability or expense incurred
in connection with any legal action relating to this Agreement or the Notes,
other than any loss, liability or expense for which the Seller or Servicer
provides an indemnity as provided in Sections 8.3 and 9.2 hereof, respectively,
and in the preceding paragraph (except as any such loss, liability or expense
shall be otherwise reimbursable pursuant to this Agreement). Neither the Seller
nor the Servicer shall be under any obligation to appear in, prosecute or defend
any legal action which is not in its reasonable judgment incidental to its
respective duties under this Agreement and which in its reasonable judgment may
subject it to any expense or liability; provided however, that the Servicer may
in its discretion undertake any such action which it may deem necessary or
desirable in respect to this Agreement and the rights and duties of the parties
hereto and the interest of the Noteholders hereunder. In such event, the legal
expenses and costs of such action and any liability resulting therefrom shall be
expenses, costs and

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<PAGE>   68

liabilities of the Trust Property, and the Servicer shall be entitled to be
reimbursed therefor as provided herein. The rights of the Servicer to indemnity,
reimbursement or limitation on its liability pursuant to this Section 9.4 shall
survive the transfer of the rights, duties and obligations of the Servicer to
another Person or any Servicer Termination Event.

                  (c) The Backup Servicer shall not be required to expend or
risk its own funds or otherwise incur financing liability in the performance of
any of its duties hereunder, or in the exercise of any of its rights or powers,
if the repayment of such funds or adequate written indemnity against such risk
or liability is not reasonably assured to it in writing prior to the expenditure
or risk of such funds or incurrence of financial liability. Notwithstanding
anything herein to the contrary, neither the Trust Collateral Agent nor the
Backup Servicer shall be liable for any obligation of the Servicer contained in
this Agreement, and the Trust Collateral Agent, the Seller, the Insurer and the
Noteholders shall look only to the Servicer to perform such obligations. The
Backup Servicer shall perform such duties and only such duties as are
specifically set forth in the Transaction Documents, and no implied covenants or
obligations shall be read into the Transaction Documents against the Backup
Servicer.

                  (d) [Reserved]

                  (e) Neither the Backup Servicer, the Trust Collateral Agent
nor any of its directors, officers, employees or agents shall be under any
liability of any kind or type to any Person arising from the incomplete or
inaccurate contents of any computer tape provided by the Servicer in accordance
with Section 4.15 hereof. Neither the Trust Collateral Agent nor the Backup
Servicer shall be under any obligations to appear in, prosecute or defend any
legal motion that is not incidental to its duties hereunder and that in its
reasonable opinion may involve it in any expense or liability; provided,
however, that the Backup Servicer or the Trust Collateral Agent may, but shall
not be obligated to, take any such action that is reasonable and that may be
necessary or desirable in respect of this Agreement and the rights and duties of
the parties hereto. If any such proposed action is commenced, the legal expenses
and costs of such action and any liabilities resulting therefrom shall be
expenses, costs and liabilities of the Servicer, the Backup Servicer and the
Trust Collateral Agent shall be entitled to be reimbursed therefor by the
Servicer.

         SECTION 9.5. Delegation of Duties. The Servicer may delegate duties
under this Agreement to an Affiliate of NAFI, or, pursuant to Section 4.2, to a
Sub-Servicer, in each case with the prior written consent of the Controlling
Party and the Trust Collateral Agent. The Servicer also may at any time perform
through sub-contractors the specific duties of (i) repossession of Financed
Vehicles, (ii) tracking Financed Vehicles' insurance and (iii) pursuing the
collection of deficiency balances on certain Liquidated Receivables, in each
case, without the written consent of the Controlling Party and may perform other
specific duties through such sub-contractors in accordance with Servicer's
customary servicing policies and procedures, with the prior written consent of
the Controlling Party; 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. Neither NAFI nor any party acting as
Servicer hereunder shall appoint any Sub-Servicer hereunder without the prior
written consent of the Controlling Party.

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         SECTION 9.6. Servicer and Backup Servicer Not to Resign. Subject to the
provisions of Section 9.3, neither the Servicer nor the Backup Servicer shall
resign from the obligations and duties imposed on it by this Agreement as Backup
Servicer or as Servicer except (i) 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 or the Backup Servicer, as
the case may be, and the Controlling Party does not elect to waive the
obligations of the Servicer or the Backup Servicer, as the case may be, to
perform the duties which render it legally unable to act or to delegate those
duties to another Person or (ii) with respect to the Backup Servicer, upon 90
days written notice to the Noteholders, the Insurer, the Trustee, the Owner
Trustee and the Servicer, and an entity that is an Eligible Servicer acceptable
to the Controlling Party shall have assumed the responsibilities and obligations
of the Backup Servicer. Any such determination permitting the resignation of the
Servicer or the Backup Servicer pursuant to clause (i) above shall be evidenced
by an Opinion of Counsel to such effect delivered and acceptable to the Trust
Collateral Agent, the Owner Trustee and the Insurer (unless an Insurer Default
shall have occurred and be continuing). No resignation of the Servicer shall
become effective until the Backup Servicer or an entity acceptable to the
Insurer shall have assumed the responsibilities and obligations of the Servicer
or a successor Servicer that is an Eligible Servicer shall have assumed the
responsibilities and obligations of the Servicer. Upon the resignation of the
Servicer, the Servicer shall give prompt written notice thereof to the Rating
Agencies. No resignation of the Backup Servicer shall become effective until an
entity acceptable to the Controlling Party shall have assumed the
responsibilities and obligations of the Backup Servicer.

                                   ARTICLE X

                                     Default

         SECTION 10.1. Servicer Termination Event. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination Event"
(whatever the reason for such Servicer Termination Event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):

                  (a) Any failure by the Servicer to deliver, or cause to be
delivered by any Sub-Servicer, to the Trust Collateral Agent for distribution to
Noteholders or deposit in the Spread Account any proceeds or payment required to
be so delivered by the Servicer or Sub-Servicer under the terms of this
Agreement (including deposits of the Purchase Amount) that continues unremedied
for a period of two Business Days (one Business Day with respect to payment of
Purchase Amounts) after the earlier of the date on which (i) a responsible
officer of the Servicer obtains knowledge of such failure or (ii) notice is
received by the Servicer from the Trust Collateral Agent acting at the direction
of the Controlling Party (but in no event later than five Business Days after
the Servicer is required to make such delivery or deposit); or

                  (b) Any failure by the Servicer to observe or perform any
other of the covenants or agreements on the part of the Servicer in this
Agreement, which failure (i) materially

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and adversely affects any Noteholder (determined without regard to the
availability of funds under the Class A Note Policy) or the Insurer (unless an
Insurer Default shall have occurred and be continuing), and (ii) continues
unremedied for a period of thirty days after the earlier of the date on which
(i) a responsible officer of the Servicer has knowledge of such failure or (ii)
notice, requiring the same to be remedied, shall have been given to the Servicer
by the Trust Collateral Agent acting at the direction of the Controlling Party,
or to the Servicer and the Trust Collateral Agent by the Insurer or any
Noteholder; or

                  (c) The entry of a decree or order for relief by a court or
regulatory authority having jurisdiction in respect of the Servicer in an
involuntary case under the federal bankruptcy laws, as now or hereafter in
effect, or another present or future, federal bankruptcy, insolvency or similar
law, or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Servicer or of any substantial
part of its property or ordering the winding up or liquidation of the affairs of
the Servicer; or 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

                  (d) The commencement by the Servicer 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 to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Servicer or of any substantial part of its property or
the making by the Servicer of an assignment for the benefit of creditors or the
failure by the Servicer generally to pay its debts as such debts become due or
the taking of corporate action by the Servicer in furtherance of any of the
foregoing; or

                  (e) Any representation, warranty or statement of the Servicer
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, and the incorrectness of such
representation, warranty or statement has a material adverse effect on the
interests of the Trust, the Insurer or the Noteholders (or of the Seller if NAFI
is the Servicer) in any Trust Property or Transaction Document (determined
without regard to the availability of funds under the Class A Note Policy) and,
within 30 days after the earlier of the date on which (i) a responsible officer
of the Servicer has knowledge of such failure or (ii) notice shall have been
given to the Servicer by the Trust Collateral Agent acting at the direction of
the Controlling Party, the circumstances or condition in respect of which such
representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured; or

                  (f) There shall have occurred an Insurance Agreement Event of
Default or an event of default under any other insurance agreement to which the
Insurer and NAFI and/or the Seller or any other Affiliate of NAFI are party; or

                  (g) The Servicer fails to deliver the report required to be
delivered by the Servicer pursuant to Section 4.11 and such failure remains
unremedied for a period of five days;

                  (h) A claim is made under the Class A Note Policy; or

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                  (i) so long as an Insurer Default shall not have occurred and
be continuing, the Insurer shall not have delivered a Servicer Extension Notice
pursuant to Section 4.16.

         SECTION 10.2. Consequences of a Servicer Termination Event. If a
Servicer Termination Event shall occur, then, and in each and every such case,
so long as such Servicer Termination Event shall not have been remedied, the
Trust Collateral Agent may, with the prior written consent or direction of the
Controlling Party, the Trust Collateral Agent shall, by notice in writing to the
Servicer, the Seller and the Backup Servicer, (i) terminate all of the rights
and obligations of the Servicer under this Agreement and in and to any
Receivables and the proceeds thereof, subject to compensation, rights of
reimbursement, indemnity and limitation on liability to which the Servicer is
then entitled and the rights of indemnity to which the Trust Collateral Agent
and the Insurer are then entitled pursuant to Sections 9.2 and 9.4 hereof,
together with any and all actions to which any Noteholder, the Trust Collateral
Agent or the Insurer may be entitled to under any applicable law, and (ii)
subject to Section 10.4, appoint the Backup Servicer as the successor Servicer.
Such notice shall specify, to the extent possible, the timing and method of
transition of the servicing of the Receivables from the Servicer to the Backup
Servicer or another successor Servicer appointed pursuant to Section 10.4. On
and after the receipt by the Servicer of such written notice and upon the
effective date of the transfer to the Backup Servicer or such other successor
Servicer specified in such notice, all authority and power of the Servicer under
this Agreement, whether with respect to the Notes, the Receivables, control over
the Post-Office Box and Lockbox Account or otherwise, shall pass to and be
vested in the Backup Servicer or such other successor Servicer, pursuant to and
under this Section; and, without limitation, such Person is hereby authorized
and empowered to execute and deliver, on behalf of the Servicer, an
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 or assignment of the Receivables and related documents, or
otherwise. The Servicer agrees to cooperate with such Person in effecting the
termination of the Servicer's responsibilities and rights hereunder, including,
without limitation, the transfer to such party for administration by it of all
cash amounts which shall thereafter be received with respect to the Receivables.

                  The Trust Collateral Agent shall not be charged with knowledge
of any event referred to in clauses (a) through (f) above unless a Responsible
Officer of the Trust Collateral Agent at the Corporate Trust Office obtains
actual knowledge of such event or receives written notice of such event from the
Servicer, the Insurer or from a Noteholder. The Trust Collateral Agent promptly
shall send written notice to each Rating Agency, the Noteholders and the Insurer
of each Servicer Termination Event of which it is charged with knowledge in
accordance with the preceding sentence.

                  If the Servicer is terminated pursuant to this Section 10.2,
then the Servicer shall bear all of the costs and expenses of transferring the
duties and obligations of the Servicer to the Backup Servicer or a successor
Servicer, and such costs and expenses shall not be reimbursable from the Trust
Property nor payable by the Seller or the Trust Collateral Agent. To the extent
not borne by the Servicer as described above, such costs and expenses (including
attorney's fees and expenses) shall be borne by the Trust Property.

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         SECTION 10.3. Additional Consequences of a Servicer Termination Event.
The successor Servicer 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 Conveyed Property and related documents to show the
Trust as lienholder or secured party on the related Lien Certificates, or
otherwise. The terminated Servicer agrees to cooperate with the Backup Servicer
or the successor Servicer, as the case may be, in effecting the termination of
the responsibilities and rights of the terminated Servicer under this Agreement,
including, without limitation, the transfer to the Backup Servicer or 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 Backup Servicer or the
successor Servicer of all Receivable Files, Monthly Records and a computer tape
in readable form as of the most recent Business Day containing all information
necessary to enable the Backup Servicer or a successor Servicer to service the
Receivables and the Other Conveyed Property. If requested by the Controlling
Party, the successor Servicer shall terminate the Lockbox Agreement and direct
the Obligors to make all payments under the Receivables directly to the
successor Servicer (in which event the successor Servicer shall process such
payments in accordance with Section 4.6(e)), or to a lockbox established by the
successor Servicer at the direction of the Controlling Party, at the terminated
Servicer's expense. The terminated Servicer shall grant the Trust Collateral
Agent, the Backup Servicer or successor Servicer and the Controlling Party
reasonable access to the terminated Servicer's premises at the terminated
Servicer's expense.

         SECTION 10.4. Appointment of Successor.

                  (a) (i) On and after the time the Servicer receives a notice
of termination pursuant to Section 10.2, (ii) upon non-extension of the
servicing term as referred to in Section 4.16, or (iii) upon the resignation of
the Servicer pursuant to Section 9.6, the Backup Servicer (unless an alternate
successor Servicer shall have been appointed pursuant to Section 10.4(b)) 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 rights, responsibilities,
restrictions, duties, liabilities and termination provisions relating thereto
placed on the Servicer by the terms and provisions of this Agreement except as
otherwise stated herein; provided, however, that the Backup Servicer shall not
be required to be the successor servicer unless it shall have been provided with
four weeks' advance notice of any of the events described in clauses (i), (ii)
and (iii) above. The Trust Collateral Agent 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 term-to-term servicing as referred to in Section 4.16 and to
termination under Section 10.2 upon the occurrence of any Servicer Termination
Event applicable to it as Servicer.

                  (b) The Controlling Party may exercise at any time its right
to appoint as successor to the Servicer a Person other than the Person serving
as Backup Servicer at the time, and (in the case of the Insurer, without
limiting its obligations under the Class A Note

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Policy) shall have no liability to the Trust Collateral Agent, NAFI, the Seller,
the Person then serving as Backup Servicer, any Noteholders or any other Person
if it does so.

                  (c) If, pursuant to Section 10.4(a) and (b) hereof, the Backup
Servicer would become successor Servicer and at such time the Backup Servicer
shall be legally unable or unwilling to act as Servicer, the Controlling Party
shall appoint a successor Servicer; provided, however, that if the Controlling
Party shall not appoint a successor Servicer within 180 days thereof, the Backup
Servicer may petition a court of competent jurisdiction to appoint, any
experienced servicer of motor vehicle installment sales contracts and notes
having a net worth of not less than $10,000,000 as the successor to the Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Servicer hereunder. Pending appointment of a successor
Servicer pursuant to the preceding sentence, the Backup Servicer 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.

                  (d) Subject to Section 9.6, no provision of this Agreement
shall be construed as relieving the Backup Servicer of its obligation to succeed
as Servicer upon the termination of the Servicer pursuant to Section 10.2, the
resignation of the Servicer pursuant to Section 9.6 or the non-extension of the
servicing term of the Servicer, as referred to in Section 4.16. If, upon the
termination of the Servicer pursuant to Section 10.2, the resignation of the
Servicer pursuant to Section 9.6 or the non-extension of the servicing term of
the Servicer pursuant to Section 4.16, a Person other than the Backup Servicer
is appointed as successor Servicer pursuant to subsection (b) or (c) above, the
Backup Servicer shall not be relieved of its duties as Backup Servicer
hereunder. If the Backup Servicer becomes the successor Servicer at a time when
it is also serving as Trust Collateral Agent, it may, with the prior written
consent of the Controlling Party, seek to have a successor to it appointed as
Servicer; and if such successor is appointed by the Controlling Party (or by a
court of competent jurisdiction pursuant to clause (c) above), the Backup
Servicer shall not be liable for the acts or omissions of such successor
Servicer.

                  (e) In connection with any appointment of a successor
Servicer, the Trust Collateral Agent may make such arrangements for the
compensation of such successor Servicer out of payments on Receivables as it and
such successor shall agree; provided however, that no such compensation to such
successor Servicer shall be in excess of that permitted the Servicer hereunder
unless the Trust Collateral Agent and the Controlling Party agree in writing to
a larger Servicing Fee

                  (f) The Seller, the Backup Servicer, the Trust Collateral
Agent, any Sub-Servicer and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.

                  (g) If the Backup Servicer shall succeed to the Servicer's
duties as Servicer of the Receivables as provided herein, it shall do so in its
individual capacity and not in its capacity as Trust Collateral Agent. In the
event that the Backup Servicer shall not seek to appoint a successor Servicer
within three months of its succession to the Servicer's duties as servicer, it
shall resign as Trust Collateral Agent pursuant to Section 10.8 and the Seller
shall, with the

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written consent of the Controlling Party, appoint, or petition a court to
appoint, a successor trust collateral agent. To the extent a successor Servicer
is appointed, the Backup Servicer shall not be liable for the acts or omissions
of such successor Servicer.

         SECTION 10.5. [RESERVED]

         SECTION 10.6. Notification to Noteholders and Rating Agencies. Upon any
termination of, or appointment of a successor to, the Servicer, the Trust
Collateral Agent shall give prompt written notice thereof to each Noteholder and
Rating Agency.

         SECTION 10.7. Waiver of Past Defaults. The Controlling Party may, on
behalf of all Noteholders, 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 thereto. Written notice of such waiver
shall be given promptly to each Rating Agency.

         SECTION 10.8. Termination of Trust Collateral Agent. The Trust
Collateral Agent may at any time resign and be discharged from the trusts hereby
created by giving 60 days' prior written notice thereof to the Seller, the
Insurer and the Noteholders. Upon receiving such notice of resignation, the
Seller shall, with the prior written consent of the Controlling Party, promptly
appoint a successor trust collateral agent by written instrument, in triplicate,
one copy of which instrument shall be delivered to the resigning Trust
Collateral Agent, one copy to the Insurer, one copy to the Noteholders and one
copy to the successor trust collateral agent. If no successor shall have been so
appointed and have accepted appointment within thirty (30) days after the giving
of such notice of resignation, the resigning Trust Collateral Agent may petition
any court of competent jurisdiction for the appointment of a successor trust
collateral agent. If the Trust Collateral Agent shall resign voluntarily, for
any reason, except lack of eligibility, then the Trust Collateral Agent shall
bear all of its costs and expenses (including without limitation its attorney's
fees) of transferring the trusteeship to a successor trustee and such costs and
expenses shall not be reimbursable from the Trust Property nor payable by the
Seller or the Servicer.

                  If any of the following events occur and shall be continuing,
the Controlling Party may terminate all of the duties of the Trust Collateral
Agent under this Agreement:

                           (i) the Trust Collateral Agent shall cease to meet
         the eligibility requirements for the Trustee as set forth in Section
         6.11 of the Indenture and shall fail to resign after written request
         therefor by the Controlling Party, or

                           (ii) the Trust Collateral Agent shall become
         incapable of acting, or shall be adjudged a bankrupt or insolvent, or a
         receiver of the Trust Collateral Agent or of its property shall be
         appointed, or any public officer shall take charge or control of the
         Trust Collateral Agent or of its property or affairs for the purpose of
         rehabilitation, conservation or liquidation, or

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                           (iii) the Trust Collateral Agent has failed to
         perform its duties hereunder.

                  On or after the receipt by the Trust Collateral Agent of such
written notice (which notice shall be forwarded by the Trust Collateral Agent to
the Noteholders), all authority, power, obligations and responsibilities of the
Trust Collateral Agent under this Agreement, whether with respect to the
Receivables or the Other Conveyed Property or otherwise, automatically shall
pass to, be vested in and become obligations and responsibilities of such other
successor trust collateral agent appointed by the Controlling Party. Nothing
contained herein shall be deemed to release the Trust Collateral Agent from any
obligation.

                  The Controlling Party at any time may remove the Trust
Collateral Agent and appoint a successor trust collateral agent by written
instrument or instruments, in triplicate, signed by the Insurer or such
Noteholders, as the case may be, or their attorneys-in-fact duly authorized, one
complete set of which instruments shall be delivered to the Seller, one complete
set to the Trust Collateral Agent so removed and one complete set to the
successor trust collateral agent so appointed.

         SECTION 10.9. Successor to Servicer.

                  (a) The Backup Servicer, in its capacity as successor to the
Servicer, shall perform such duties and only such duties as are specifically set
forth in this Agreement with respect to the assumption of any servicing duties,
including, without limitation, to supervise, verify, monitor or administer the
performance of the Servicer and no implied covenants or obligations shall be
read into this Agreement against the Backup Servicer.

                  (b) In the absence of bad faith or negligence on its part, the
Backup Servicer may conclusively rely as to the truth of the statements and the
correctness of the opinions expressed in certificates or opinions furnished to
the Backup Servicer and conforming to the requirements of this Agreement; but in
the case of any such certificates or opinions, which by any provision hereof are
specifically required to be furnished to the Backup Servicer, the Backup
Servicer shall be under a duty to examine the same and to determine whether or
not they conform to the requirements of this Agreement.

                  (c) The Backup Servicer shall have no liability for any
actions taken or omitted by the Servicer.

                                   ARTICLE XI

                                   TERMINATION

         SECTION 11.1. Optional Purchase of All Receivables.

                  (a) On the last day of any Due Period as of which the Pool
Balance shall be less than or equal to 10% of the Original Pool Balance sold to
the Trust on the Cut-off Date, the Seller or the Servicer shall have the option
to purchase the Owner Trust Estate, other than the

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Trust Accounts (with the prior written consent of the Insurer if such purchase
would result in a claim on the Class A Note Policy or would result in any amount
owing to any Noteholder or the Insurer under the Insurance Agreement remaining
unpaid); 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 Seller shall (i) deliver written notice of such purchase to the
Trust Collateral Agent, the Insurer, the Noteholders and the Servicer not later
than the fifteenth day of the month next preceding the month in which such
purchase will occur, and (ii) deposit pursuant to Section 5.6 in the Collection
Account an amount equal to the aggregate Purchase Amount for the Receivables
(including Liquidated Receivables), plus the appraised value of any other
property held by the Trust, such value to be determined by an appraiser mutually
agreed upon by the Servicer, the Insurer and the Trust Collateral Agent, and
shall succeed to all interests in and to the Trust. Written notice of the
exercise of the option to purchase described in this Section 11.1(a) shall be
given to each Rating Agency by the Seller.

                  (b) Upon any sale of the assets of the Trust pursuant to
Section 9.1 of the Trust Agreement, the Servicer shall instruct the Trust
Collateral Agent to deposit the proceeds from such sale after all payments and
reserves therefrom (including the expenses of such sale) have been made (the
"Insolvency Proceeds") in the Collection Account.

                  (c) Notice of any termination of the Trust shall be given by
the Servicer to the Owner Trustee, the Noteholders, the Trustee, the Trust
Collateral Agent, the Backup Servicer, the Insurer and the Rating Agencies as
soon as practicable after the Servicer has received notice thereof. Such notice
shall state (i) the Distribution Date upon or with respect to which final
payment of the Notes shall be made upon which presentation and surrender of the
Notes at the office of the Trust Collateral Agent herein designated shall be
made on a date not more than 30 days following such payment on the Notes, (ii)
the amount of any such final payment, (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Notes at the office of the Trust
Collateral Agent therein specified and (iv) no amounts will thereafter be
payable under the Notes.

                                  ARTICLE XII

                      ADMINISTRATIVE DUTIES OF THE SERVICER

         SECTION 12.1. Administrative Duties.

                  (a) Duties with Respect to the Indenture. The Servicer shall
perform all its duties and the duties of the Issuer under the Indenture. In
addition, the Servicer shall consult with the Owner Trustee as the Servicer
deems appropriate regarding the duties of the Issuer under the Indenture. The
Servicer shall monitor the performance of the Issuer and shall advise the Owner
Trustee when action is necessary to comply with the Issuer's duties under the
Indenture. The Servicer shall prepare for execution by the Issuer or shall cause
the preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture. In furtherance of
the foregoing, the Servicer shall take all necessary action that is the duty of
the

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Issuer to take pursuant to the Indenture, including, without limitation,
pursuant to Sections 2.7, 3.5, 3.6, 3.7, 3.9, 3.10, 3.17, 5.1, 7.3, 8.3, 9.2,
9.3, 11.1 and 11.15 of the Indenture.

                  (b) Duties with Respect to the Issuer.

                           (i) In addition to the duties of the Servicer set
         forth in this Agreement or any of the Transaction Documents, the
         Servicer shall perform such calculations and shall prepare for
         execution by the Issuer or the Owner Trustee or shall cause the
         preparation by other appropriate Persons of all such documents,
         reports, filings, instruments, certificates and opinions as it shall be
         the duty of the Issuer or the Owner Trustee to prepare, file or deliver
         pursuant to this Agreement or any of the Transaction Documents or under
         state and federal tax and securities laws, and at the request of the
         Owner Trustee shall take all appropriate action that it is the duty of
         the Issuer to take pursuant to this Agreement or any of the Transaction
         Documents, including, without limitation, pursuant to Sections 2.6 and
         2.11 of the Trust Agreement. In accordance with the directions of the
         Issuer or the Owner Trustee, the Servicer shall administer, perform or
         supervise the performance of such other activities in connection with
         the Collateral (including the Transaction Documents) as are not covered
         by any of the foregoing provisions and as are expressly requested by
         the Issuer or the Owner Trustee and are reasonably within the
         capability of the Servicer.

                           (ii) Notwithstanding anything in this Agreement or
         any of the Transaction Documents to the contrary, the Servicer shall be
         responsible for promptly notifying the Owner Trustee and the Trust
         Collateral Agent in the event that any withholding tax is imposed on
         the Issuer's payments (or allocations of income) to an Owner (as
         defined in the Trust Agreement) as contemplated by this Agreement. Any
         such notice shall be in writing and specify the amount of any
         withholding tax required to be withheld by the Owner Trustee or the
         Trust Collateral Agent pursuant to such provision.

                           (iii) Notwithstanding anything in this Agreement or
         the Transaction Documents to the contrary, the Servicer shall be
         responsible for performance of the duties of the Issuer or the Seller
         set forth in Section 5.1(a), (b), (c) and (d) of the Trust Agreement
         with respect to, among other things, accounting and reports to Owners
         (as defined in the Trust Agreement).

                           (iv) The Servicer shall perform the duties of the
         Servicer specified in Section 10.2 of the Trust Agreement required to
         be performed in connection with the resignation or removal of the Owner
         Trustee, and any other duties expressly required to be performed by the
         Servicer under this Agreement or any of the Transaction Documents.

                           (v) In carrying out the foregoing duties or any of
         its other obligations under this Agreement, the Servicer may enter into
         transactions with or otherwise deal with any of its Affiliates;
         provided, however, that the terms of any such transactions or dealings
         shall be in accordance with any directions received from the Issuer and
         shall be, in the Servicer's opinion, no less favorable to the Issuer in
         any material respect.

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                  (c) Tax Matters. The Servicer shall prepare and file, on
behalf of the Seller, all tax returns, tax elections, financial statements and
such annual or other reports of the Issuer as are necessary for preparation of
tax reports as provided in Article V of the Trust Agreement, including without
limitation forms 1099 and 1066. All tax returns will be signed by the Seller.

                  (d) Non-Ministerial Matters. With respect to matters that in
the reasonable judgment of the Servicer are non-ministerial, the Servicer shall
not take any action pursuant to this Article XII unless within a reasonable time
before the taking of such action, the Servicer shall have notified the Owner
Trustee, the Noteholders, the Trust Collateral Agent and the Insurer of the
proposed action and the Owner Trustee and, with respect to items (A), (B), (C)
and (D) below, the Insurer shall not have withheld consent or provided an
alternative direction. For the purpose of the preceding sentence,
"non-ministerial matters" shall include:

                                    (A) the amendment of or any supplement to
                  the Indenture;

                                    (B) the initiation of any claim or lawsuit
                  by the Issuer and the compromise of any action, claim or
                  lawsuit brought by or against the Issuer (other than in
                  connection with the collection of the Receivables);

                                    (C) the amendment, change or modification of
                  this Agreement or any of the Transaction Documents;

                                    (D) the appointment of successor Note
                  Registrars, successor Paying Agents and successor Trustees
                  pursuant to the Indenture or the appointment of successor
                  Servicers or the consent to the assignment by the Note
                  Registrar, Paying Agent or Trustee of its obligations under
                  the Indenture; and

                                    (E) the removal of the Trustee, the
                  Custodian, the Backup Servicer or the Trust Collateral Agent.

                  (e) Exceptions. Notwithstanding anything to the contrary in
this Agreement, except as expressly provided herein or in the other Transaction
Documents, the Servicer, in its capacity hereunder, shall not be obligated to,
and shall not, (1) make any payments to the Noteholders under the Transaction
Documents, (2) sell the Indenture Trust Property pursuant to Section 5.4 of the
Indenture, (3) take any other action that the Issuer directs the Servicer not to
take on its behalf, or (4) in connection with its duties hereunder assume any
indemnification obligation of any other Person.

                  (f) Notwithstanding anything to the contrary in this
Agreement, neither the Backup Servicer nor any successor Servicer shall be
responsible for any obligations or duties of the Servicer under Section 12.1.

         SECTION 12.2. Records. The Servicer shall maintain appropriate books of
account and records relating to services performed under this Agreement, which
books of account and records shall be accessible for inspection by the Issuer
and the Trust Collateral Agent at any time during normal business hours.

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         SECTION 12.3. Additional Information to be Furnished to the Issuer. The
Servicer shall furnish to the Issuer and the Trust Collateral Agent from time to
time such additional information regarding the Collateral as the Issuer and the
Trust Collateral Agent shall reasonably request.

                                  ARTICLE XIII

                            MISCELLANEOUS PROVISIONS

         SECTION 13.1. Amendment.

                  (a) This Agreement may be amended from time to time by the
parties hereto, with the consent of the Trustee (which consent may not be
unreasonably withheld), with the prior written consent of the Controlling Party
and First Union National Bank (so long as First Union National Bank or an
Affiliate shall hold the Class B Notes), but without the consent of any of the
Noteholders, to cure any ambiguity, to correct or supplement any provisions in
this Agreement, to comply with any changes in the Code, or to make any other
provisions with respect to matters or questions arising under this Agreement
which shall not be inconsistent with the provisions of this Agreement or the
Insurance Agreement; provided, however, that such action shall not adversely
affect in any material respect the interests of any Noteholder or the Insurer.

                  (b) This Agreement may also be amended from time to time by
the parties hereto, with the prior written consent of the Controlling Party, the
consent of First Union National Bank (so long as First Union National Bank or an
Affiliate shall hold the Class B Notes), the consent of the Trustee and the
consent of the Holders of Notes evidencing not less than a majority of the
outstanding principal amount of the Notes of each Class (which consent of such
Holders of Notes given pursuant to this Section 13.1 or pursuant to any other
provision of this Agreement shall be conclusive and binding on such Holder and
on all future Holders of such securities and of any security issued upon the
transfer thereof or in exchange thereof or in lieu thereof whether or not
notation of such consent is made upon the security) 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 (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Receivables or distributions that shall be required to be made for
the benefit of the Noteholders, or (b) reduce the aforesaid percentage of the
outstanding principal amount of the Notes and the Note Balance, the Holders of
which are required to consent to any such amendment, without the consent of the
Holders of all the outstanding Notes.

                  Promptly after the execution of any such amendment or consent,
the Trust Collateral Agent shall furnish written notification of the substance
of such amendment or consent to each Noteholder and each Rating Agency. In
addition, a copy of the final executed amendment shall be delivered to each
Rating Agency.

                  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 any

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<PAGE>   80

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

                  The Owner Trustee, the Trust Collateral Agent and the Trustee
may, but shall not be obligated to, enter into any amendment which affects the
Issuer's, the Owner Trustee's, the Trust Collateral Agent's or the Trustee's, as
applicable, own rights, duties or immunities under this Agreement or otherwise.

                  (c) Prior to the execution of any amendment to this Agreement,
the Trustee and the Trust Collateral Agent shall be entitled to receive and rely
conclusively upon an Opinion of Counsel stating that the execution of such
amendment is authorized or permitted by this Agreement and that all conditions
precedent to the execution and delivery of such amendment have been satisfied.

                  (d) Notwithstanding anything to the contrary contained in
subsection 13.1(a) above, the provisions of the Agreement relating to (i) the
Spread Account Agreement, the Series 1999-1 Spread Account, the Requisite
Amount, a Trigger Event or any component definition of a Trigger Event and (ii)
any additional sources of funds which may be added to the Series 1999-1 Spread
Account or uses of funds on deposit in the Series 1999-1 Spread Account may be
amended in any respect by the Seller, the Servicer, the Insurer and the Trust
Collateral Agent (the consent of which shall not be withheld or delayed with
respect to any amendment that does not adversely affect the Trust Collateral
Agent) without the consent of, or notice to, the Noteholders, but with the
consent of First Union National Bank (solely in their capacity as lender under
the Revolving Credit Agreement).

         SECTION 13.2. Protection of Title to Trust.

                  (a) The Seller shall execute and file such financing
statements and cause to be executed and filed such continuation statements, all
in such manner and in such places as may be required by law fully to preserve,
maintain and protect the interest of the Issuer and the interests of the Trust
Collateral Agent and the Insurer in the Receivables and the Other Conveyed
Property and in the proceeds thereof. The Seller shall deliver (or cause to be
delivered) to the Insurer, any Noteholder holding 5% or more of the Note Balance
of any Class, the Owner Trustee and the Trust Collateral Agent file-stamped
copies of, or filing receipts for, any document filed as provided above, as soon
as available following such filing.

                  (b) Neither the Seller nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed 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 Insurer, the Noteholders, the Owner
Trustee, the Trust Collateral Agent and the Trustee at least thirty days' prior
written notice thereof and shall have filed appropriate amendments to all
previously filed financing statements or continuation statements prior to the
effectiveness of such change. Promptly upon such filing, the Seller or the
Servicer, as the case may be, shall deliver an Opinion

                                       75
<PAGE>   81

of Counsel in form and substance reasonably satisfactory to the Insurer, the
Noteholders, the Trust Collateral Agent and the Trustee, stating either (A) all
financing statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the Issuer and
the Trust Collateral Agent in the Receivables and the Other Conveyed Property,
and reciting the details of such filings or referring to prior Opinions of
Counsel in which such details are given, or (B) no such action shall be
necessary to preserve and protect such interest.

                  (c) Each of the Seller and the Servicer shall have an
obligation to give the Insurer, the Noteholders, the Owner Trustee, the Trust
Collateral Agent and the 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 and shall file any such amendment prior to the date of such
relocation. The Servicer shall at all times maintain each office from which it
shall service Receivables, and its principal executive office, within the United
States of America.

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

                  (e) The Servicer shall maintain or cause to be maintained, a
computer systems so that, from and after the time of sale under this Agreement
of the Receivables to the Issuer, such master computer records (including any
backup archives) that refer to a Receivable shall indicate clearly the interest
of the Trust in such Receivable and that such Receivable is owned by the Trust.
Indication of the Trust's interest in a Receivable shall be deleted from or
modified on such computer systems when, and only when, the related Receivable
shall have been paid in full or repurchased by NAFI or the Seller.

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

                  (g) Upon request, the Servicer shall furnish or cause to be
furnished to the Insurer, any Noteholder holding 5% or more of the Note Balance
of any Class, the Owner Trustee or to the Trustee, at any time upon request, a
list of all Receivables (by contract number and name of Obligor) then held as
part of the Trust, together with a reconciliation of such list to the
Receivables Schedule and to each of the Servicer's Certificates furnished before
such request indicating removal of Receivables from the Trust. The Trustee shall
hold any such list and

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<PAGE>   82

Receivables Schedule 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.

                  (h) The Servicer shall deliver to the Insurer, the
Noteholders, the Owner Trustee, the Trust Collateral Agent and the Trustee:

                                    (A) simultaneously with the execution and
                  delivery of the Agreement and, if required pursuant to Section
                  13.1, of each amendment, an Opinion of Counsel stating that,
                  in the opinion of such Counsel, in form and substance
                  reasonably satisfactory to the Insurer, either (A) 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 Trust Collateral
                  Agent 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) no such action shall be
                  necessary to preserve and protect such interest or (C) any
                  action which is necessary to preserve and protect such
                  interest during the following 12-month period; and

                                    (B) within 90 days after the beginning of
                  each calendar year beginning with the first calendar year
                  beginning more than three months after the Cut-off Date, an
                  Opinion of Counsel, dated as of a date during such 90-day
                  period, stating that, in the opinion of such counsel, either
                  (A) 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 Trust Collateral
                  Agent 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) no such action shall be
                  necessary to preserve and protect such interest.

                  Each Opinion of Counsel referred to in clause (A) or (B) above
shall specify any action necessary (as of the date of such opinion) to be taken
in the following year to preserve and protect such interest.

                  (i) The Servicer shall permit the Trustee, the Trust
Collateral Agent, the Backup Servicer, the Noteholders, the Insurer and their
respective agents, during regular business hours and upon reasonable advance
notice, to inspect and make copies of the records regarding any Receivables or
any other portion of the Receivables.

         SECTION 13.3. Notices. All demands, notices and communications upon or
to the Seller, the Servicer, the Owner Trustee, the Trustee, the Insurer or the
Rating Agencies under this Agreement shall be in writing, personally delivered,
or mailed by certified mail, or sent by confirmed telecopier transmission and
shall be deemed to have been duly given upon receipt (a) in the case of the
Seller to National Financial Auto Funding Trust, 10302 Deerwood Park Boulevard,
Suite 100, Jacksonville, Florida 32256, (b) in the case of the Servicer to
National Auto Finance Company, Inc., 10302 Deerwood Park Boulevard, Suite 100,
Jacksonville, Florida 32256, (c) in the case of the Issuer or the Owner Trustee,
at 1100 North Market Street, Rodney

                                       77
<PAGE>   83

Square North, Wilmington, Delaware 19890; Attention: Corporate Trust
Administration, (d) in the case of the Trustee or the Trust Collateral Agent, at
311 West Monroe Street, Chicago, Illinois 60606, (e) in the case of the Insurer,
to Financial Security Assurance Inc., 350 Park Avenue, New York, New York 10022;
Attention: Senior Vice President, Transaction Oversight (in each case in which
notice or other communication to the Insurer refers to a Servicer Termination
Event, an Insurance Agreement Event of Default, an Event of Default, a claim on
a Class A Note Policy, a Deficiency Notice pursuant to Section 5.5 of this
Agreement or with respect to which failure on the part of the Insurer to respond
shall be deemed to constitute consent or acceptance, then a copy of such notice
or other communication should also be sent to the attention of each of the
General Counsel and the Head -Financial Guaranty Group and shall be marked to
indicate "URGENT MATERIAL ENCLOSED") Telecopier # 212-339-3518, (f) in the case
of Moody's, to Moody's Investors Service, Inc., ABS Monitoring Department, 99
Church Street, New York, New York 10007, Telecopier # 212-553-0344, (g) in the
case of Standard & Poor's, to Standard & Poor's Ratings Group, 25 Broadway -
15th Floor, New York, New York 10004, Attention: Asset Backed Surveillance
Department, Telecopier # 212- 208-1582, (h) in the case of Prudential, to One
Gateway Center, 11th Floor, Newark, New Jersey 07102-5311, Attention: Michael J.
Bozzo, Telecopier # 973-802-2147 and (i) in the case of First Union National
Bank, to 301 South College Street, Charlotte, North Carolina 28288-0610,
Attention: Prakash Wadhwani, Telecopier # 704-374-3254. 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 Noteholder as shown in the Note
Register, as applicable. Any notice so mailed within the time prescribed in the
Agreement shall be conclusively presumed to have been duly given, whether or not
the Noteholder shall receive such notice.

         SECTION 13.4. Assignment. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. Notwithstanding anything to the contrary contained herein,
except as provided in Sections 8.4 and 9.3 and as provided in the provisions of
this Agreement concerning the resignation of the Servicer, this Agreement may
not be assigned by the Seller or the Servicer without the prior written consent
of the Owner Trustee, the Trust Collateral Agent, the Trustee and the Insurer
(or if an Insurer Default shall have occurred and be continuing, the Noteholders
holding not less than 66% of the principal amount of each Class of the
outstanding Notes). Notwithstanding anything to the contrary contained herein,
the assignment or other transfer of all or any portion of the Servicer's rights
("Rights") or obligations under this Agreement (including, without limitation,
its right to receive all or any part of the Servicing Fee) shall only be
permitted to be transferred to a single transferee and such prospective
transferee must, as a condition to such assignment or other transfer acknowledge
and agree that (i) it has neither acquired nor will it transfer the such Rights
or cause such Rights to be marketed on or through an "established securities
market" within the meaning of Section 7704(b)(1) of the Code, including, without
limitation, an over-the- counter-market or an interdealer quotation system that
regularly disseminates firm buy or sell quotations; (ii) it either (A) is not,
and will not become, a partnership, an S corporation or a grantor trust for U.S.
federal income tax purposes, or (B) is such an entity, but none of the direct or
indirect beneficial owners of any of the interests in such transferee have
allowed or caused, or will allow or cause, fifty percent (50%) or more of the
value of such interests to be attributable to such transferee's ownership of the
Rights; and (iii) it understands that tax counsel to the Trust has

                                       78
<PAGE>   84

provided an opinion substantially to the effect that the Trust will not be
treated as a publicly traded partnership taxable as a corporation for U.S.
federal income tax purposes and that the validity of such opinion is dependent
in part on the accuracy of the representations in paragraphs (i) and (ii) above.

         SECTION 13.5. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the parties hereto and for the benefit
of the Trustee and the Noteholders, as third-party beneficiaries. The Insurer
and its successors and assigns shall be a third-party beneficiary to the
provisions of this Agreement, and shall be entitled to rely upon and directly
enforce such provisions of this Agreement so long as no Insurer Default shall
have occurred and be continuing. Except as expressly stated otherwise herein,
any right of the Insurer to direct, appoint, consent to, approve of, or take any
action under this Agreement, shall be a right exercised by the Insurer in its
sole and absolute discretion. The Insurer may disclaim any of its rights and
powers under this Agreement (but not its duties and obligations under the Class
A Note Policy) upon delivery of a written notice to the Owner Trustee. Nothing
in this Agreement, whether express or implied, shall be construed to give to any
other Person any legal or equitable right, remedy or claim in the Owner Trust
Estate or under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.

         SECTION 13.6. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

         SECTION 13.7. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.

         SECTION 13.8. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.

         SECTION 13.9. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

         SECTION 13.10. Assignment to Trustee. The Seller hereby acknowledges
and consents to any mortgage, pledge, assignment and grant of a security
interest by the Issuer to the Trustee pursuant to the Indenture for the benefit
of the Noteholders and the Insurer of all right, title and interest of the
Issuer in, to and under the Receivables and/or the assignment of any or all of
the Issuer's rights and obligations hereunder to the Trustee.

                                       79
<PAGE>   85

         SECTION 13.11. Nonpetition Covenants. (a) Notwithstanding any prior
termination of this Agreement, the Servicer, the Backup Servicer, the Trustee,
the Trust Collateral Agent, the Custodian, the Insurer, the Owner Trustee 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.

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

         SECTION 13.12. Limitation of Liability of Owner Trustee, Trustee, Trust
Collateral Agent and Backup Servicer.

                  (a) Notwithstanding anything contained herein to the contrary,
this Agreement has been countersigned by Wilmington Trust Company not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Wilmington Trust Company in its individual capacity or,
except as expressly provided in the Trust Agreement, as Owner Trustee have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer. For all purposes of this Agreement, in the
performance of its duties or obligations hereunder or in the performance of any
duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII, VIII and X of the Trust Agreement.

                  (b) Notwithstanding anything contained herein to the contrary,
this Agreement has been countersigned by Chase Manhattan Bank Delaware not in
its individual capacity but solely in its capacity as Trustee of the Seller and
in no event shall Chase Manhattan Bank Delaware in its individual capacity have
any liability for the representations, warranties, covenants, agreements or
other obligations of the Seller hereunder or in any of the certificates, notices
or agreements delivered pursuant hereto, as to all of which recourse shall be
had solely to the assets of the Seller.

                  (c) Notwithstanding anything contained herein to the contrary,
this Agreement has been executed and delivered by Harris Trust and Savings Bank
not in its individual capacity but solely as Trust Collateral Agent and Backup
Servicer and in no event shall Harris Trust and

                                       80
<PAGE>   86

Savings Bank, have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.

                  (d) In no event shall Wilmington Trust Company, in any of its
capacities hereunder, be deemed to have assumed any duties of the Owner Trustee
under the Delaware Business Trust Statute, common law, or the Trust Agreement.

         SECTION 13.13. Independence of the Servicer. For all purposes of this
Agreement, the Servicer shall be an independent contractor and shall not be
subject to the supervision of the Issuer, the Trust Collateral Agent or the
Owner Trustee with respect to the manner in which it accomplishes the
performance of its obligations hereunder. Unless expressly authorized by this
Agreement, the Servicer shall have no authority to act for or represent the
Issuer or the Owner Trustee in any way and shall not otherwise be deemed an
agent of the Issuer or the Owner Trustee.

         SECTION 13.14. No Joint Venture. Nothing contained in this Agreement
(i) shall constitute the Servicer, the Backup Servicer and either of the Issuer
or the Owner Trustee as members of any partnership, joint venture, association,
syndicate, unincorporated business or other separate entity, (ii) shall be
construed to impose any liability as such on any of them or (iii) shall be
deemed to confer on any of them any express, implied or apparent authority to
incur any obligation or liability on behalf of the others.

         SECTION 13.15. Insurer as Controlling Party. Each Noteholder by
purchase of the Notes held by it acknowledges that as partial consideration of
the issuance of the Class A Note Policy, the Insurer shall have certain rights
hereunder for so long as no Insurer Default shall have occurred and be
continuing and the Class A Notes shall remain outstanding or amounts or amounts
owing the Insurer have not been paid to it. So long as an Insurer Default has
occurred and is continuing, any provision giving the Insurer the right to
direct, appoint or consent to, approve of, or take any action under this
Agreement shall be inoperative during the period of such Insurer Default and
such right shall instead vest in the Trust Collateral Agent acting at the
written direction of the Controlling Class. The Insurer may disclaim any of its
rights and powers under this Agreement (but not its duties and obligations under
the Class A Note Policy) upon delivery of a written notice to the Trust
Collateral Agent. The Insurer may give or withhold any consent hereunder in its
sole and absolute discretion.

         SECTION 13.16. Duties of Trust Collateral Agent. Prior to the payment
in full of the Notes and the expiration of the term of the Class A Note Policy,
the Trust Collateral Agent shall act solely for the benefit of the Noteholders
and the Insurer, as their interests may appear herein.

                                       81
<PAGE>   87

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

                 NATIONAL AUTO FINANCE 1999-1 TRUST,
                 by Wilmington Trust Company, not in its individual capacity but
                 solely as Owner Trustee on behalf of the Trust,

                           By: /s/ JAMES P. LAWLER
                               --------------------------------------
                               Name: James P. Lawler
                               Title: Vice President

                 NATIONAL FINANCIAL AUTO FUNDING TRUST, Seller,
                 by Chase Manhattan Bank Delaware not in its individual capacity
                 but solely as Trustee of National Financial Auto Funding Trust,

                           By: /s/ JOHN J. CASHIN
                               --------------------------------------
                               Name: John J. Cashin
                               Title: Vice President

                 NATIONAL AUTO FINANCE COMPANY, INC.,
                 in its individual capacity and as Servicer,

                           By: /s/ STEPHEN R. VETH
                               --------------------------------------
                               Name: Stephen R. Veth
                               Title: Vice President, Secretary &
                                      General Counsel

                 HARRIS TRUST AND SAVINGS BANK,
                 not in its individual capacity but solely as
                 Trust Collateral Agent and Backup Servicer

                           By: /s/ KEITH RICHARDSON
                               --------------------------------------
                               Name: Keith Richardson
                               Title: Assistant Vice President

<PAGE>   88

                                   SCHEDULE A

                             SCHEDULE OF RECEIVABLES

                                      A-1
<PAGE>   89

                                   SCHEDULE B

                  REPRESENTATIONS AND WARRANTIES OF THE SELLER

         Each of NAFI and the Seller hereby represents and warrants to the Trust
Collateral Agent on behalf of the Noteholders and the Insurer as of the Closing
Date with respect to the Receivables transferred to the Trust on the Closing
Date (unless another date or time period is otherwise specified or indicated in
the particular representation or warranty):

         1. immediately prior to the Closing Date, the Seller had a valid and
enforceable security interest in the related Financed Vehicle, and such security
interest had been duly perfected and was prior to all other present and future
liens and security interests (except future tax liens and liens that, by
statute, may be granted priority over previously perfected security interests)
that now exist or may hereafter arise, and the Seller had the full right to
assign such security interest to the Trust Collateral Agent;

         2. on and after the Closing Date, there shall exist under the
Receivable a valid, subsisting and enforceable first priority perfected security
interest in the Financed Vehicle securing such Receivable (other than, as to the
priority of such security interest, any statutory lien arising by operation of
law after the Closing Date which is prior to such interest) and at such time as
enforcement of such security interest is sought there shall exist a valid,
subsisting and enforceable first priority perfected security interest in such
Financed Vehicle in favor of the Trust Collateral Agent (other than, as to the
priority of such security interest, any statutory lien arising by operation of
law after the Closing Date, which is prior to such interest);

         3. no Receivable has been sold, assigned or pledged to any other Person
other than an endorsement to the Servicer for purposes of servicing or any such
pledge has been released; immediately prior to the transfer and assignment
herein contemplated, the Seller has good and marketable title thereto free and
clear of any lien, encumbrance, equity, pledge, charge, claim or security
interest and is the sole owner thereof and has full right to transfer such
Receivable to the Trust Collateral Agent. No Dealer has a participation in, or
other right to receive, proceeds of any Receivable. None of NAFI, the Master
Trust, Funding Trust II 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, Dealer Agreements or Originator
Agreements or to payments due under such Receivable;

         4. upon the transfers pursuant to Section 2.1, the Trust Collateral
Agent will have a first priority ownership or security interest in each such
Receivable free and clear of any encumbrance, lien, pledge, charge, claim,
security interest or rights of others; the purchase of each such Receivable by
NAFI from a Dealer or Originator was not an extension of financing to such
Dealer or Originator;

         5. as of the Cut-off Date, no such Receivable is delinquent for more
than thirty days in payment as to any scheduled payment. In addition, as of the
Statistical Cut-off Date, each Receivable has a remaining maturity of 56 months
or less, has an original outstanding principal

                                      B-1
<PAGE>   90

balance of not more than $35,000, has made a minimum of 4 scheduled payments to
NAFI and has an APR of not less than 14% per annum;

         6. there is no lien against any related Financed Vehicle for delinquent
taxes;

         7. there is no right of rescission, offset, defense or counterclaim to
the obligation of the related Obligor to pay the unpaid principal or interest
due under such Receivable; the operation of the terms of such Receivable or the
exercise of any right thereunder will not render such Receivable unenforceable
in whole or in part or subject to any right of rescission, offset, defense or
counterclaim, and no such right of rescission, offset, defense or counterclaim
has been asserted;

         8. no Receivable is assumable by another Person in a manner which would
release the Obligor thereon from such Obligor's obligations to the Seller with
respect to such Receivable;

         9. there are no prior liens or claims for work, labor or material
affecting any related Financed Vehicle which are or may become a lien prior to
or equal with the security interest granted by such Receivable;

         10. each such Receivable, and the sale of the Financed Vehicle securing
such Receivable, where applicable, complied, at the time it was made and as of
the Closing Date in all material respects with applicable state and federal laws
(and regulations thereunder), including, without limitation, usury, disclosure
and consumer protection laws, equal credit opportunity, fair credit reporting,
truth-in-lending or other similar law, the Federal Trade Commission Act, and
applicable state laws regulating retail installment sales contracts and loans in
general and motor vehicle retail installment sales contracts and loans in
particular, and the transfer of such Receivable to the Trust will not violate
any such laws;

         11. each such Receivable is a legal, valid and binding obligation of
the Obligor thereunder and is enforceable in accordance with its terms, except
only as such enforcement may be limited by laws affecting the enforcement of
creditors' rights generally whether enforcement is sought in a proceeding in
equity or at law, and all parties to such Receivable had full legal capacity to
execute such Receivable and all documents related thereto and to grant the
security interest purported to be granted thereby at the time of execution and
grant;

         12. as of the Closing Date, the terms of each such Receivable have not
been impaired, waived, altered or modified in any respect, except by written
instruments that are part of the Receivable Documents, and no such Receivable
has been satisfied, subordinated or rescinded;

         13. at the time of origination of each such Receivable, the proceeds of
such Receivable were fully disbursed, there is no requirement for future
advances thereunder, and all fees and expenses in connection with the
origination of such Receivable have been paid;

         14. there is no default, breach, violation or event of acceleration
existing under any such Receivable (except payment delinquencies permitted by
paragraph 5 above) and no event which, with the passage of time or with notice
or with both, would constitute a default, breach, violation or event of
acceleration under any such Receivable or would otherwise affect the value

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or marketability of such contract; NAFI and the Seller have not waived any such
default, breach, violation or event of acceleration; and as of the Cut-off Date,
the related Financed Vehicle has not been repossessed;

         15. at the origination date of each such Receivable, the related
Financed Vehicle was covered by a comprehensive and collision insurance policy
(a) in an amount at least equal to the lesser of (i) the actual cash value of
the related Financed Vehicle or (ii) the unpaid balance owing of such
Receivable, less the related Unearned Finance Charge, (b) naming NAFI as a loss
payee and (c) 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 NAFI as an additional insured party;

         16. each such Receivable was acquired by NAFI from either a Dealer with
which it ordinarily does business or from an Originator; such Dealer or
Originator, as applicable, had full right to assign to NAFI such Receivable and
the security interest in the related Financed Vehicle (and the Dealer that
assigned any such Receivable to any such Originator had full right to assign to
such Originator such Receivable and the security interest in the related
Financed Vehicle) and the Dealer's or Originator's assignment thereof to NAFI is
legal, valid and binding (and any assignment by an Dealer to any Originator is
legal, valid and binding) and NAFI had full right to assign to the Seller such
Receivable and the respective security interest in the related Financed Vehicle
and NAFI's respective assignment thereof to the Seller is legal, valid and
binding;

         17. each such Receivable contains customary and enforceable provisions
such as to render the rights and remedies of the holder thereof adequate for the
realization against the related Financed Vehicle of the benefits of the
security;

         18. scheduled payments under each such Receivable are due monthly (or,
in the case of the first payment, no later than the forty-fifth day after the
date of the Receivable) in substantially equal amounts to maturity (other than
with respect to those Receivables designated as balloon contracts on the related
Receivables Schedule), and will be sufficient to fully amortize such Receivable
at maturity, assuming that each scheduled payment is made on its Due Date; such
scheduled payments are applicable only to payment of principal and interest on
such Receivable and not to the payment of any insurance premiums (although the
proceeds of the extension of credit on such Receivable may have been used to pay
insurance premiums); and the original term to maturity of each such Receivable
was not more than 60 months;

         19. the collection practices used with respect to each such Receivable
have been in all material respects legal, proper, prudent and customary in the
automobile installment sales contract or installment loan servicing business;

         20. there is only one original of each such Receivable, the Servicer or
a Sub-Servicer is currently in possession of the Receivable Documents for such
Receivable and there are no custodial agreements in effect adversely affecting
the rights of the Seller to make the deliveries required hereunder on the
Closing Date;

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<PAGE>   92

         21. as of the Cut-off Date, no Obligor was the subject of a current
bankruptcy proceeding;

         22. with respect to each Due Period, the aggregate of the interest due
on all the Receivables in such Due Period from scheduled payments is in excess
of the sum of (i) the Servicing Fee due and any fees due to the Trust Collateral
Agent and the Insurer, each with respect to such Due Period and (ii) the amount
of interest payable on the Notes with respect to such Due Period, in each case
assuming that each scheduled payment is made on its Due Date;

         23. the Receivables constitute "chattel paper" within the meaning of
the UCC as in effect in the applicable jurisdiction and all filings (including
without limitation, UCC filings) required to be made and all actions required to
be taken or performed by any Person in any jurisdiction to give the Trust
Collateral Agent a first priority perfected lien on, or ownership interest in,
the Receivables and the proceeds thereof and the remaining Trust Property have
been made, taken or performed;

         24. the information regarding such Receivables set forth in the
applicable Receivables Schedule is true and correct in all material respects at
the Cut-off Date and the Closing Date; each Receivable was originated in the
United States of America and at the time of origination, materially conformed to
all requirements of the NAFI underwriting policies and guidelines then in
effect; and no Obligor is the United States of America or any state or any
agency, department, subdivision or instrumentality thereof;

         25. by the Closing Date, NAFI will have caused the portions of NAFI's
servicing records 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 this Agreement;

         26. the computer tape or listing made available by NAFI to the Trust
Collateral Agent on the Closing Date was complete and accurate as of the Cut-off
Date, and includes a description of the same Receivables that are described in
the applicable Receivables Schedule;

         27. 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. The Seller has not entered into any agreement with any
account debtor that prohibits, restricts or conditions the assignment of any
portion of the Receivables;

         28. no selection procedures adverse or beneficial to the Noteholders or
to the Insurer have been utilized in selecting such Receivable from all other
similar Receivables originated or purchased by NAFI;

         29. as of the Statistical Cut-off Date, the APR of the Receivables was
approximately 19.10% and the weighted average remaining scheduled maturity on
the Receivables was approximately 58.28 months and the percentage of the
aggregate outstanding balance of the Receivables relating to the financing of
used Financed Vehicles was 85%. The final scheduled

                                       4
<PAGE>   93

payment date on the Receivable with the latest maturity is April, 2004. Each
Receivable amortizes based on a Simple Interest Method or Rule of 78 Method;

         30. as of the Statistical Cut-off Date, Receivables originated by NAFI
are at least 75% of the Original Pool Balance, the top three states will
represent no more than 54.47% of the pool, PAC Receivables (i.e., Receivables
with planned principal balances) will not exceed 20% of the Original Pool
Balance, no originator will exceed 3% of the Original Pool Balance; and

         31. no Receivable provides for a prepayment penalty.

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<PAGE>   94

                                   SCHEDULE C

                                LEGAL PROCEEDINGS

         On October 22, 1998, Pearl Peckerman, I.R.A., on behalf of herself and
all others similarly situated, filed a putative class-action complaint (the
"Peckerman Complaint") in the United States District Court for the Southern
District of Florida against the Company and certain current and former officers
and directors of the Company, as well as the co-lead underwriters of the
Company's initial public offering. On December 4, 1998, Harvey Rooks, Rachel
Rooks and Joyce Bornstein, on behalf of themselves and all others similarly
situated, filed a putative class action complaint (the "Rooks Complaint") in the
United States District Court for the Southern District of Florida against the
Company and certain current and former officers and directors of the Company, as
well as the co-lead underwriters of the Company's initial public offering.

         On February 5, 1999, the United States District Court for the Southern
District of Florida ordered that these actions be consolidated. Thereafter, on
July 29, 1999, the plaintiffs filed an amended and consolidated class-action
complaint (the "Amended and Consolidated Complaint") styled In re National Auto
Finance Company, Inc. Securities Litigation, Case Number 98-8767-CIV-Hurley.

         The individual lead plaintiffs in the Amended and Consolidated
Complaint are Pearl Peckerman, Harvey Rooks, Rachel Rooks, Joyce Bornstein,
Emanuel Androulidakis, Frank Rosetti, Thomas R. Bopp, Noel V. Brodtman, Jr.,
Susan H. Jacobsen, Leonard R. Carothers, Fred Gaunce, Duane Morris, Ralph Casey,
Hiram Graham, and Vance Prigge. In addition, the action was instituted on behalf
of a putative class of plaintiffs consisting of those persons who purchased or
otherwise acquired stock of the Company between January 29, 1997 and April 15,
1998 inclusive, excluding the Company, its subsidiaries and affiliates, the
individual defendants, members of the immediate families of each of the
individual defendants, and the successors and assigns of any defendant. Other
than the Company, the defendants to the action are: Gary L. Shapiro, Keith B.
Stein, Roy E. Tipton, Kevin G. Adams, Edgar A. Otto, Peter Offerman, Morgan M.
Schussler, Steven L. Gurba, and the co-lead underwriters of the Company's
January 1997 initial public offering, Raymond James & Associates, Inc. and
Cruttenden Roth, Inc.

         The Amended and Consolidated Complaint sets forth allegations
surrounding the Company's 1997 restated financial statements, the interpretation
of FASB No. 125 and the relationship between the Company and its prior outside
service provider, Omni Financial Services of America, Inc. The plaintiffs'
allegations of liability are based on various theories of recovery, including
alleged violations of Section 11, 12(a)(2), 15 and 20(a) of the Securities Act
of 1933, as amended, and Section 10(b) and Rule 10b-5 of the Securities Exchange
Act of 1934, as amended. The plaintiffs are seeking compensatory damages as the
court deems appropriate.

         The Company is presently assessing the merits of the claims and
anticipates filing a motion to dismiss the complaint in its entirety in the near
future. In addition, the two underwriter defendants, Raymond James, Inc. and
Cruttenden Roth, Inc. have asserted that pursuant to the underwriting agreement
entered into with the Company in connection with its initial public offering,
the Company is required to indemnify the underwriters for their legal and other
costs

                                       1
<PAGE>   95

incurred in this litigation, including but not limited to any potential judgment
against them. The Company is presently assessing the merits of those claims.

         The Company has directors' and officers' liability insurance policy
with a liability limit of $5 million; and two excess policies with liability
limits of $2 million and $3 million, respectively. Each insurer has raised
certain coverage defenses or denied coverage. The Company has engaged, and will
continue to pursue appropriate strategies to protect and preserve its claims of
full coverage under all such policies.

         Litigation is subject to many uncertainties, and it is possible that
the above action could be decided unfavorably. In addition, the Company may
enter into discussions in an attempt to settle the pending litigation if it is
in the best interests of the Company's stockholders to do so. Management is
presently unable to make a meaningful estimate of the amount or range of loss
that could result from an unfavorable outcome or settlement of the pending
litigation. It is possible that the Company's business, volume, results of
operations, cashflows or financial position could be materially affected by an
unfavorable outcome or settlement of the pending litigation.

                                       2
<PAGE>   96

                                  EXHIBIT 5.10

                        FORM OF STATEMENT TO NOTEHOLDERS

                                       3
<PAGE>   97

                                    EXHIBIT A

                                   [RESERVED]

<PAGE>   98

                                    EXHIBIT B

                         FORM OF SERVICER'S CERTIFICATE

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