Document:

<PAGE>

                                                                   EXHIBIT 10.55

                        INSURANCE AND INDEMNITY AGREEMENT
                          Dated as of November 28, 2000

                           AMBAC ASSURANCE CORPORATION
                                   as Insurer

               ALLIANCE LAUNDRY EQUIPMENT RECEIVABLES TRUST 2000-A
                                    as Issuer

                   ALLIANCE LAUNDRY EQUIPMENT RECEIVABLES LLC
                                    as Seller

                          ALLIANCE LAUNDRY SYSTEMS LLC
                                       and

                              THE BANK OF NEW YORK
                              as Indenture Trustee

               ALLIANCE LAUNDRY EQUIPMENT RECEIVABLES TRUST 2000-A
                           Equipment Loan Backed Notes
<PAGE>

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                                    TABLE OF CONTENTS
                                                                                      Page

ARTICLE I             DEFINITIONS ................................................    2

         Section 1.1.      Defined Terms .........................................    2

         Section 1.2.      Other Definitional Provisions .........................    4

ARTICLE II            REPRESENTATIONS, WARRANTIES AND COVENANTS ..................    4

         Section 2.1.      Representations and Warranties of Alliance ............    4

         Section 2.2.      Affirmative Covenants of Alliance .....................    5

         Section 2.3.      Negative Covenants of Alliance ........................    8

         Section 2.4.      Representations and Warranties of the Insurer .........    9

         Section 2.5.      Representations; Warranties and Covenants of the Seller   10

         Section 2.6.      Affirmative Covenants of the Seller ...................   10

         Section 2.7.      Negative Covenants of the Seller ......................   13

         Section 2.8.      Representations and Warranties of the Issuer ..........   14

         Section 2.9.      Affirmative Covenants of the Issuer ...................   16

         Section 2.10.     Negative Covenants of the Issuer ......................   18

ARTICLE III           THE AMBAC POLICY; REIMBURSEMENT ............................   19

         Section 3.1.      Issuance of the Ambac Policy ..........................   19

         Section 3.2.      Payment of Fees and Premium ...........................   20

         Section 3.3.      Reimbursement Obligation ..............................   20

         Section 3.4.      Indemnification .......................................   21

         Section 3.5.      Payment Procedure .....................................   24

         Section 3.6.      Subrogation ...........................................   24

ARTICLE IV            FURTHER AGREEMENTS .........................................   25

         Section 4.1.      Effective Date; Term of the Insurance Agreement .......   25

         Section 4.2.      Further Assurances and Corrective Instruments .........   25

         Section 4.3.      Obligations Absolute ..................................   25

         Section 4.4.      Assignments; Reinsurance; Third-Party Rights ..........   26

         Section 4.5.      Liability of the Insurer ..............................   27

         Section 4.6.      Annual Servicing Audit and Certification ..............   27

ARTICLE V             DEFAULTS AND REMEDIES ......................................   28

         Section 5.1.      Defaults ..............................................   28

         Section 5.2.      Remedies; No Remedy Exclusive .........................   29
</TABLE>
<PAGE>

                                    TABLE OF CONTENTS
                                       (continued)
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                                                                                    Page

         Section 5.3.      Waivers ...............................................   29

ARTICLE VI            MISCELLANEOUS ..............................................   29

         Section 6.1.      Amendments, Etc .......................................   29

         Section 6.2.      Notices ...............................................   30

         Section 6.3.      Severability ..........................................   31

         Section 6.4.      Governing Law .........................................   31

         Section 6.5.      Consent to Jurisdiction ...............................   31

         Section 6.6.      Consent of the Insurer ................................   32

         Section 6.7.      Counterparts ..........................................   32

         Section 6.8.      Headings ..............................................   32

         Section 6.9.      Trial by Jury Waived ..................................   32

         Section 6.10.     Limited Liability .....................................   32

         Section 6.11.     Entire Agreement ......................................   32

         Section 6.12.     Indenture Trustee .....................................   33

         Section 6.13.     Third-Party Beneficiary ...............................   33

         Section 6.14.     No Proceedings ........................................   33

         Section 6.15.     Limited Recourse ......................................   33

EXHIBIT A FORM OF AMBAC POLICY ...................................................    1

EXHIBIT B AGREED UPON PROCEDURES .................................................    1
</TABLE>

<PAGE>

      INSURANCE AND INDEMNITY AGREEMENT (as it may be amended, modified or
supplemented from time to time, this "Insurance Agreement"), dated as of
November 28, 2000, by and among AMBAC ASSURANCE CORPORATION, as Insurer (the
"Insurer"), ALLIANCE LAUNDRY EQUIPMENT RECEIVABLES TRUST 2000-A, as Issuer (the
"Issuer"), ALLIANCE LAUNDRY EQUIPMENT RECEIVABLES LLC, as Seller (the "Seller"),
ALLIANCE LAUNDRY SYSTEMS LLC ("Alliance"), and THE BANK OF NEW YORK, as
Indenture Trustee (the "Indenture Trustee").

                             PRELIMINARY STATEMENTS

      A. The Indenture, dated as of November 28, 2000, relating to Alliance
Laundry Equipment Receivables Trust 2000-A Equipment Loan Backed Notes, by and
among the Issuer and the Indenture Trustee (as it may be amended, modified or
supplemented from time to time as set forth therein, the "Indenture") provides
for, among other things, the issuance of the Class A Notes.

      B. The parties hereto desire that the Insurer issue the Ambac Policy to
the Indenture Trustee for the benefit of the Noteholders and to, among other
things, specify the conditions precedent thereto, the premium in respect thereof
and the indemnity, reimbursement, reporting and other obligations of the parties
hereto other than the Insurer in consideration thereof.

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

                                    ARTICLE I

                                   DEFINITIONS

Section 1.1. Defined Terms.

Unless the context clearly requires otherwise, all capitalized terms used but
not defined herein shall have the respective meanings assigned to them in the
Pooling and Servicing Agreement dated as of November 28, 2000 by and among the
Seller, the Issuer and Alliance, as Originator and Servicer (the "Agreement")
or, if not defined therein, in the Ambac Policy described below. For purposes of
this Insurance Agreement, the following terms shall have the following meanings:

      "Alliance" means Alliance Laundry Systems LLC, a Delaware limited
liability company, in its capacity as Originator, Servicer or otherwise.

      "Ambac" means Ambac Assurance Corporation, a Wisconsin domiciled stock
insurance corporation.

      "Ambac Policy" means the Certificate Guaranty Insurance Policy, AB0407BE,
together with all endorsements thereto, issued by the Insurer to the Indenture
Trustee, for the benefit of the Noteholders, in the form attached as Exhibit A
to this Insurance Agreement.

      "Class A Notes" means collectively, the Class A-1 Notes and the Class A-2
Notes, issued by the Issuer under the Indenture.

      "Closing Date" means November 28, 2000.
      "Company Party" has the meaning specified in Section 4.1.

                                       2
<PAGE>

      "Documents" means the Basic Documents and any other information relating
to the Trust Estate, the Issuer, the Seller, or Alliance furnished to the
Insurer by the Issuer, the Seller or Alliance.

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

      "Fee Letter" means that certain letter agreement dated as of the date
hereof between the Issuer and Ambac setting forth certain fees and other matters
referred to herein, as the same may be amended or supplemented from time to time
in accordance therewith and with this Insurance Agreement.

      "Indemnified Party" has the meaning specified in Section 3.4 hereof.

      "Indemnifying Party" has the meaning specified in Section 3.4 hereof.

      "Indenture Trustee" means The Bank of New York, as indenture trustee under
the Indenture, and any successor thereto under the Indenture.

      "Independent Public Accountant" means any of (a) Arthur Andersen & Co.,
(b) Deloitte & Touche, (c) PricewaterhouseCoopers, (d) Ernst & Young and (e)
KPMG (and any successors of any of the foregoing); provided that such firm is
independent with respect to Alliance or any subservicer, as the case may be,
within the meaning of the Securities Act.

      "Initial Purchaser" means Lehman Brothers Inc.

      "Insurance Agreement" has the meaning given such term in the initial
paragraph hereof.

      "Insurer" means Ambac and any successor thereto, as issuer of the Ambac
Policy.

      "Insurer Information" has the meaning given such term in Section
3.4(a)(v).

      "Investment Company Act" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.

      "Issuer" means Alliance Laundry Equipment Receivables Trust 2000-A, a
Delaware business trust, or any of its successors or permitted assigns as
provided for in the Indenture.

      "Late Payment Rate" means the lesser of (a) the greater of (i) the per
annum rate of interest publicly announced from time to time by Citibank, N.A. as
its prime or base lending rate (any change in such rate of interest to be
effective on the date such change is announced by Citibank, N.A.), plus 2% per
annum and (ii) the then applicable highest rate of interest on the Class A Notes
and (b) the maximum rate permissible under applicable usury or similar laws
limiting interest rates. The Late Payment Rate shall be computed on the basis of
the actual number of days elapsed over a year of 360 days.

      "Material Adverse Change" means, in respect of any Person, a material
adverse change in (i) the business, financial condition, results of operations
or properties of such Person on a consolidated basis with its subsidiaries or
(ii) the ability of such Person to perform its obligations under any of the
Basic Documents.

      "Moody's" means Moody's Investors Service and any successor thereto.

      "Noteholder" means any Holder of Class A Notes, other than a Company
Party.

      "Note Purchase Agreement" means the Note Purchase Agreement dated as of
November 13, 2000 among the Initial Purchaser, the Seller and Alliance with
respect to the offer and sale of the Class A Notes, as amended, modified or
supplemented from time to time.

                                       3
<PAGE>

      "Offering Document" means the Confidential Offering Memorandum dated
November 13, 2000, in respect of the offering and sales of the Class A Notes,
any amendment or supplement thereto, and any other offering document in respect
of the Notes that makes reference to the Ambac Policy.

      "Originator" means Alliance Laundry Systems, LLC, a Delaware limited
liability company, as ALS under the Purchase Agreement, and Originator under the
Agreement.

      "Person" means an individual, joint stock company, trust, unincorporated
association, joint venture, corporation, limited liability company, business or
owner trust, partnership or other organization or entity (whether governmental
or private).

      "Premium" means the premium payable in accordance with the Fee Letter.

      "Purchase Agreement" means the Purchase Agreement dated as of November 28,
2000 between ALS and the Seller with respect to the sale of the Loans, as
amended, modified or supplemented from time to time.

      "Rating Agencies" means Moody's and S&P.

      "Securities Act" means the Securities Act of 1933, including, unless the
context otherwise requires, the rules and regulations promulgated thereunder, as
amended from time to time.

      "Securities Exchange Act" means the Securities Exchange Act of 1934,
including, unless the context otherwise requires, the rules and regulations
promulgated thereunder, as amended from time to time.

      "Seller" means Alliance Laundry Equipment Receivables LLC, a Delaware
limited liability company.

      "Servicer" means Alliance Laundry Systems LLC, a Delaware limited
liability company, as servicer under the Agreement, and any successor thereto in
such capacity.

      "S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and any successor thereto.

      "Transaction" means the transactions contemplated by the Basic Documents.

      "Trust Agreement" means, with respect to the Issuer, the Trust Agreement
of the Issuer, as amended from time to time.

Section 1.2. Other Definitional Provisions.

The words "hereof," "herein" and "hereunder" and words of similar import when
used in this Insurance Agreement shall refer to this Insurance Agreement as a
whole and not to any particular provision of this Insurance Agreement, and
Section, subsection, Schedule and Exhibit references are to this Insurance
Agreement unless otherwise specified. The meanings given to terms defined herein
shall be equally applicable to both the singular and plural forms of such terms.
The words "include" and "including" shall be deemed to be followed by the phrase
"without limitation."

                                   ARTICLE II

                    REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 2.1. Representations and Warranties of Alliance.

                                       4
<PAGE>

Alliance hereby makes to and for the benefit of the Insurer each of the
representations and warranties made by Alliance, whether in its capacity as
Originator, Servicer or otherwise, in each of the Basic Documents to which it is
a party, including, but not limited to, Sections 2.05 and 6.01 of the Agreement
and Sections 3.01 and 3.02 of the Purchase Agreement. Such representations and
warranties are incorporated herein by this reference as if fully set forth
herein, and may not be amended except by an amendment complying with the terms
of the last sentence of Section 6.1. In addition, Alliance represents and
warrants as of the Closing Date as follows:

            (a) The offer and sale of the Notes by the Issuer comply in all
material respects with all requirements of law, including all registration
requirements of applicable securities laws. Without limiting the generality of
the foregoing, the Offering Document does not contain any untrue statement of a
material fact and does not omit to state a material fact necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.

            (b) The Indenture is not required to be qualified under the Trust
Indenture Act of 1939, as amended. The Issuer is not required to be registered
as an "investment company" under the Investment Company Act. Neither the offer
nor the sale of the Notes by the Issuer will be in violation of the Securities
Act or any other federal or state securities law. Alliance will satisfy any of
the information reporting requirements of the Securities Exchange Act arising
out of the Transaction to which it, the Issuer or the Seller is subject.

            (c) The information or statements contained in the Documents
furnished to the Insurer by Alliance, as amended, supplemented or superseded on
or prior to the date hereof, taken as a whole, does not, if restated at and as
of the date hereof, contain any statement of a material fact or omit to state a
material fact necessary to make such information or statements misleading in any
material respect.

Section 2.2. Affirmative Covenants of Alliance.

Alliance hereby makes, to and for the benefit of the Insurer, all of the
covenants made by Alliance, whether in its capacity as Originator or Servicer,
in the Basic Documents to which it is a party, including, but not limited to,
Section 3.07 of the Agreement. Such covenants are hereby incorporated herein by
this reference as if fully set forth herein, and may not be amended except by an
amendment complying with the terms of the last sentence of Section 6.1. In
addition, Alliance hereby agrees that during the term of this Insurance
Agreement, unless the Insurer shall otherwise expressly consent in writing:

            (a) Compliance with Agreements and Applicable Laws. Alliance shall
comply with the terms and conditions of and perform its obligations under the
Basic Documents to which it is a party and shall comply in all material respects
with any law, rule or regulation applicable to it.

            (b) Existence. Subject to Section 2.3(c) hereof, it shall maintain
its existence as a limited liability company and shall at all times continue to
be duly organized under the laws of the State of Delaware and duly qualified and
duly authorized (as described in Sections 3.02(b) and (c) of the Purchase
Agreement) and shall conduct its business in accordance with the terms of its
certificate of formation and operating agreement and shall maintain all
licenses, permits, charters and registrations which are material to the conduct
of its business.

                                       5
<PAGE>

            (c) Compliance Certificate. As soon as practicable and in any event
within 50 days after the end of each of the first three fiscal quarters and 95
days after the fiscal year end of Alliance, Alliance shall deliver to the
Insurer a compliance certificate signed by a senior financial officer of
Alliance stating that to the best of such Person's knowledge, no Event of
Default hereunder and no event which but for the lapse of time or the giving of
notice, or both, would constitute an Event of Default hereunder exists, or if
any such event exists, stating the nature and status thereof (including all
relevant financial and other information and amounts used in determining whether
such events exist).

            (d) Notice of Material Events. Alliance shall be obligated promptly
to inform the Insurer in writing of the occurrence of any of the following:

                  (i) the submission of any claim or the initiation of any legal
      process, litigation or administrative or judicial investigation, or
      disciplinary proceeding by or against Alliance that would likely result in
      a Material Adverse Change with respect to Alliance or the promulgation of
      any proceeding or any proposed or final ruling in connection with any such
      litigation, investigation or proceeding which would reasonably likely to
      result in a Material Adverse Change with respect to Alliance;

                  (ii) not less than thirty (30) days after the date thereof,
      any change in the location of the principal office of Alliance;

                  (iii) within two (2) Business Days of the occurrence thereof,
      the occurrence of any Event of Default hereunder; or

                  (iv) the receipt of written notice that (A) any license,
      permit, charter, registration or approval necessary for the conduct of
      Alliance's business is to be, or may be, suspended or revoked and such
      suspension or revocation would be reasonably likely to result in a
      Material Adverse Change with respect to Alliance or (B) Alliance is to
      cease and desist any practice, procedure or policy employed by Alliance in
      the conduct of its business, and such cessation would be reasonably likely
      to result in a Material Adverse Change with respect to Alliance.

            (e) Access to Records; Discussions with Officers and Accountants.
Upon reasonable prior written notice of the Insurer, at any time and in any
event at least annually, Alliance shall permit the Insurer or its authorized
agents:

                  (i) to inspect the books and records of Alliance, as they may
      relate to the Transaction, the Trust Estate, the Notes, or the obligations
      of Alliance under the Basic Documents;

                  (ii) to discuss the affairs, finances and accounts of Alliance
      with the principal executive officer and the principal financial officer
      of Alliance; and

                  (iii) through independent public accountants designated by the
      Insurer, to discuss the affairs, finances and accounts of Alliance with
      Alliance's independent accountants, provided that an officer of Alliance
      shall have the right to be present during such discussions.

                                       6
<PAGE>

      Such inspections and discussions shall be conducted during normal business
hours at Alliance's cost and expense, subject to Section 3.3(b) hereof, and
shall not unreasonably disrupt the business of Alliance.

            (f) Disclosure Document. Each Offering Document delivered with
respect to the Notes shall clearly disclose that the Ambac Policy is not covered
by the property/casualty insurance security fund specified in Article 76 of the
New York Insurance Law.

            (g) Closing Documents. Alliance shall provide or cause to be
provided to the Insurer an executed original copy of each Basic Document and a
copy of each other document executed in connection with the closing of the
Transaction within 30 days of the Closing Date.

            (h) Field Examination by Independent Public Accountants. Upon
reasonable prior written notice of the Insurer at any time, Alliance shall
permit Alliance's independent public accountants or, if such independent public
accountants are not acceptable to the Insurer, Independent Public Accountants
designated by the Insurer, annually to conduct a field examination of Alliance
pursuant to an agreed upon procedures scope attached in the form of Exhibit B
hereto, and in connection therewith shall permit such independent public
accountants or Independent Public Accountants, as the case may be, without
limitation:

                  (i) to inspect the books and records of Alliance as they may
      relate to the Transaction, the Trust Estate, the Notes, or the obligations
      of Alliance under the Basic Documents;

                  (ii) to discuss the affairs, finances and accounts of Alliance
      with the principal executive officer and the principal financial officer
      of Alliance; and

                  (iii) to discuss the affairs, finances and accounts of
      Alliance with Alliance's independent accountants, provided that an officer
      of Alliance shall have the right to be present during such discussions.

Such inspections and discussions shall be conducted during normal business hours
at Alliance's cost and expense, subject to Section 3.3(b) hereof, and shall not
unreasonably disrupt the business of Alliance.

            (i) Financial Reporting. Alliance shall provide or cause to be
provided to the Insurer the following (which, other than management letters and
certificates, Alliance may deliver by electronic mail):

                  (i) Annual and Quarterly Financial Statements. The financial
            statements required pursuant to Section 4.02(d) of the Agreement, as
            and when required pursuant to such section.

                  (ii) Compliance Certificate. Together with the financial
            statements required under Section 4.02(d) of the Agreement, a
            compliance certificate signed by Alliance's principal financial
            officer stating that to the best of such Person's knowledge, (i)
            Alliance is in compliance with its obligations hereunder and under
            the other Basic Documents, and (ii) no Event of Default, Servicer
            Default, or Early Payout Event exists hereunder or under the other
            Basic Documents and no event which but for the lapse of time or the
            giving of notice, or both, would constitute an Event of Default,
            Servicer

                                       7
<PAGE>

            Default, or Early Payout Event exists hereunder or under the other
            Basic Documents, and if any such event exists, stating the nature
            and status thereof (including all relevant financial and other
            information and amounts used in determining whether such Event of
            Default, Servicer Default, or Early Payout Event exists).

                  (iii) Monthly Financial Statements. As soon as available, but
            in any event not later than 30 days after the end of each month
            occurring during each fiscal year of Alliance (other than the third,
            sixth, ninth and twelfth such months), the unaudited consolidated
            balance sheets of Alliance and its subsidiaries as at the end of
            such month, and the related unaudited consolidated statements of
            income and of cash flows for such month and the portion of the
            fiscal year through the end of such month, setting forth in each
            case in comparative form the figures for the previous year,
            certified by the principal financial officer (but solely in the
            event it is required to be so certified pursuant to any financing or
            servicing agreement) as being fairly stated in all material respects
            (subject to normal year end audit adjustments and the absence of
            footnotes).

                  (iv) S.E.C. Filings. Promptly after the filing thereof, copies
            of all registration statements and annual, quarterly or other
            regular reports which Alliance or any subsidiary files with the
            Securities and Exchange Commission.

            (j) Credit and Collections Policy. Within 90 days after the end of
each fiscal year of Alliance, Alliance shall deliver to the Insurer a complete
copy of the Credit and Collection Policy then in effect.

            (k) Financial Projections. Projected financial information prepared
by Alliance in the ordinary course of business and delivered by Alliance to any
of its other lenders, including revisions of previously delivered information,
in each case concurrently with delivery thereof to such other lenders.

            (l) Public Debt Ratings. Promptly, but in any event within 15 days
after the date of any upgrade in Alliance's public debt ratings and 2 Business
Days of any downgrade in such ratings, Alliance shall deliver to the Insurer a
written certification of Alliance's public debt ratings after giving effect to
such change.

            (m) Trigger Events. Alliance shall include in the Servicer's
Certificate delivered pursuant to Section 3.10 of the Agreement a certification
signed by Alliance's principal financial officer stating that to the best of
such Person's knowledge, no Servicer Default, Early Payout Event or Event of
Default (hereunder and under the Indenture) has occurred and is continuing.

            (n) Exemption from Securities Act Registration. Alliance shall take
all actions necessary to exempt the sale of the Notes from registration under
the Securities Act and under any applicable securities laws of any state of the
United States where any Notes may be offered or sold by the Issuer.

            (o) Other Information. Alliance shall provide to the Insurer such
other information (including non-financial information) in respect of the Loans,
the Transaction and the Basic Documents and such other financial or operating
information in respect of Alliance, the Seller, the Issuer or any of their
Affiliates, in each case, which the Insurer may from time to time reasonably
request.

                                       8
<PAGE>

Section 2.3. Negative Covenants of Alliance.

            Alliance hereby agrees that during the term of this Insurance
Agreement, unless the Insurer shall otherwise expressly consent in writing:

            (a) Impairment of Rights. Alliance shall not take any action, or
fail to take any action, if such action or failure to take action (x) is
reasonably likely to result in a Material Adverse Change pursuant to clause (ii)
of the definition of "Material Adverse Change" or (y) is reasonably likely to
interfere with the enforcement of any rights of the Insurer under or with
respect to any of the Basic Documents. Alliance shall give the Insurer written
notice of any such action or failure to act promptly prior to the date of
consummation of such action or failure to act. Alliance shall furnish to the
Insurer all information requested by it that is reasonably necessary to
determine compliance with this paragraph.

            (b) Amendments, Etc. Alliance shall not modify, amend or waive, or
consent to any modification or amendment of, any of the terms, provisions or
conditions of the Basic Documents to which it is a party without the prior
written consent of the Insurer thereto, but excluding any amendment to the Basic
Documents or Offering Document required by law, provided that Alliance shall
provide the Insurer with reasonable prior written notice of any such amendment
and a copy thereof.

            (c) Limitation on Mergers, Etc. Except as expressly permitted by the
Agreement, Alliance shall not consolidate with or merge with or into any Person
or transfer all or substantially all of its assets to any Person (each, a
"Transaction") or liquidate or dissolve. Without limiting the foregoing, no
Transaction shall be consummated unless Alliance shall delivered to the Insurer
(a) an Officer's Certificate reasonably satisfactory to it, stating that such
consolidation, conversion, merger, or succession and such agreement of
assumption comply with this Section and the other Basic Documents that all
conditions precedent, if any, provided for in this Agreement and the other Basic
Documents relating to such transaction have been complied with, and (b) an
opinion of counsel, reasonably satisfactory to it, stating that, in the opinion
of such counsel, (1) the agreement of assumption is the valid and binding
obligations of the parties thereto and effective to accomplish the assumption of
liabilities contemplated therein, (2) either (A) all financing statements and
continuation statements and amendments thereto have been executed and filed that
are necessary fully to preserve and protect the interest of the Issuer, the
Indenture Trustee, the Insurer and the Noteholders in the Loans and reciting the
details of such filings, or (B) no such action shall be necessary to preserve
and protect such interest in either case, such opinion shall cover the matters
covered in the opinion delivered pursuant to Section 3.6(a) of the Indenture,
taking into account changes of law, and (3) after giving effect to such merger
or consolidation, Alliance (or its successor) would not be substantively
consolidated with the Seller or the Issuer in the event of a bankruptcy of
Alliance or its successor.

            (d) Change in Lockbox Processor. Alliance shall not permit a change
in the Lockbox Account or the lockbox processor designated in the Lockbox
Agreement without the prior written consent of the Insurer.

Section 2.4. Representations and Warranties of the Insurer.

The Insurer represents and warrants to the Indenture Trustee (on behalf of the
Noteholders), the Issuer, the Seller and Alliance as follows:

                                       9
<PAGE>

            (a) Organization and Licensing. The Insurer is a stock insurance
corporation duly organized, validly existing and in good standing under the laws
of the State of Wisconsin.

            (b) Corporate Power. The Insurer has the corporate power and
authority to issue the Ambac Policy and execute and deliver this Insurance
Agreement and to perform all of its obligations hereunder and thereunder.

            (c) Authorization; Approvals. All proceedings legally required for
the issuance of the Ambac Policy and the execution, delivery and performance of
this Insurance Agreement have been taken and all licenses, orders, consents or
other authorizations or approvals of the Insurer's Board of Directors or
stockholders or any governmental boards or bodies legally required for the
enforceability of the Ambac Policy have been obtained or are not material to the
enforceability of the Ambac Policy.

            (d) Enforceability. The Ambac Policy, when issued, will constitute,
and this Insurance Agreement constitutes, a legal, valid and binding obligation
of the Insurer, enforceable in accordance with its terms, subject to insolvency,
reorganization, moratorium, receivership and other similar laws affecting
creditors' rights generally and by general principles of equity and subject to
principles of public policy limiting the right to enforce the indemnification
provisions contained therein and herein, insofar as such provisions relate to
indemnification for liabilities arising under federal securities laws.

            (e) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Insurer's knowledge, threatened
against it at law or in equity or before or by any court, governmental agency,
board or commission or any arbitrator which, if decided adversely, would
materially and adversely affect its ability to perform its obligations under the
Ambac Policy or this Insurance Agreement.

            (f) No Conflict. The execution by the Insurer of this Insurance
Agreement will not, and the satisfaction of the terms hereof will not, conflict
with or result in a breach of any of the terms, conditions or provisions of the
Certificate of Incorporation or By-Laws of the Insurer, or any restriction
contained in any contract, agreement or instrument to which the Insurer is a
party or by which it is bound or constitute a default under any of the foregoing
which would materially and adversely affect its ability to perform its
obligations under the Ambac Policy or this Insurance Agreement.

Section 2.5. Representations; Warranties and Covenants of the Seller.

The Seller hereby makes to and for the benefit of the Insurer each of the
representations, warranties and covenants made by the Seller in the Basic
Documents to which it is a party, including, but not limited to, Section 2.05
and 6.01 of the Agreement. Such representations, warranties and covenants are
incorporated herein by this reference as if fully set forth herein, and may not
be amended except by an amendment complying with the terms of the last sentence
of Section 6.1. In addition, the Seller represents and warrants as of the
Closing Date as follows:

            (a) The offer and sale of the Notes by the Issuer comply in all
material respects with all requirements of law, including all registration
requirements of applicable securities laws. Without limiting the generality of
the foregoing, the Offering Document does not contain any untrue statement of a
material fact and does not omit to state a material fact necessary to

                                       10
<PAGE>

make the statements made therein, in light of the circumstances under which they
were made, not misleading.

            (b) The Indenture is not required to be qualified under the Trust
Indenture Act of 1939, as amended. The Issuer is not required to be registered
as an "investment company" under the Investment Company Act. Neither the offer
nor the sale of the Notes by the Issuer will be in violation of the Securities
Act or any other federal or state securities law. The Seller will satisfy any of
the information reporting requirements of the Securities Exchange Act arising
out of the Transaction to which it is subject.

            (c) The information or statements contained in the Documents
furnished to the Insurer by Seller, as amended, supplemented or superseded on or
prior to the date hereof, taken as a whole, does not, if restated at and as of
the date hereof, contain any statement of a material fact or omit to state a
material fact necessary to make such information or statements misleading in any
material respect.

Section 2.6. Affirmative Covenants of the Seller.

The Seller hereby makes, to and for the benefit of the Insurer, all of the
covenants of the Seller set forth in the Basic Documents to which it is a party.
Such covenants are incorporated herein by this reference, and may not be amended
except by an amendment complying with the terms of the last sentence of Section
6.1. In addition, the Seller hereby agrees that during the term of this
Insurance Agreement, unless the Insurer shall otherwise expressly consent in
writing:

            (a) Compliance with Agreements and Applicable Laws. It shall comply
with the terms and conditions of and perform its obligations under the Basic
Documents to which it is a party and shall comply with all material requirements
of any law, rule or regulation applicable to it.

            (b) Existence. It shall maintain its existence as a limited
liability company and shall at all times continue to be duly organized under the
laws of the State of Delaware and duly qualified and duly authorized (as
described in Sections 3.03(b) and (c) of the Purchase Agreement) and shall
conduct its business in accordance with the terms of its certificate of
formation and operating agreement and shall maintain all licenses, permits,
charters and registrations which are material to the conduct of its business.

            (c) Access to Records; Discussions with Officers and Accountants.
Upon reasonable prior written notice of the Insurer, at any time and any event
at least annually, the Seller shall permit the Insurer or its authorized agents:

                  (i) to inspect the books and records of the Seller;

                  (ii) to discuss the affairs, finances and accounts of the
      Seller with the principal executive officer and the principal operating
      officer of the Seller; and

                  (iii) through independent public accountants designated by the
      Insurer, to discuss the affairs, finances and accounts of the Seller with
      the Seller's independent accountants, provided that an officer of the
      Seller shall have the right to be present during such discussions.

                                       11
<PAGE>

      Such inspections and discussions shall be conducted during normal business
hours at the cost and expense of the Seller, subject to Section 3.3(b) hereof,
and shall not unreasonably disrupt the business of the Seller.

            (d) Notice of Material Events. The Seller shall be obligated
promptly to inform the Insurer in writing of the occurrence of any of the
following:

                  (i) the submission of any claim or the initiation of any legal
      process, litigation or administrative or judicial investigation, or
      disciplinary proceeding by or against the Seller that would likely result
      in a Material Adverse Change with respect to the Seller or the
      promulgation of any proceeding or any proposed or final ruling in
      connection with any such litigation, investigation or proceeding which
      would reasonably likely to result in a Material Adverse Change with
      respect to the Seller;

                  (ii) not less than thirty (30) days after the date thereof,
      any change in the location of the principal office of the Seller;

                  (iii) within two (2) Business Days of the occurrence thereof,
      the occurrence of an Event of Default hereunder in respect of the Seller;

                  (iv) the commencement of any proceedings by or against the
      Seller under any applicable reorganization, liquidation, rehabilitation,
      insolvency or other similar law now or hereafter in effect or of any
      proceeding in which a receiver, liquidator, conservator, trustee or
      similar official shall have been, or may be, appointed or requested for
      such Seller or any of its assets; or

                  (v) the receipt of written notice that (A) any license,
      permit, charter, registration or approval necessary for the conduct of the
      Seller's business is to be, or may be, suspended or revoked and such
      suspension or revocation would be reasonably likely to result in a
      Material Adverse Change with respect to the Seller or (B) the Seller is to
      cease and desist any practice, procedure or policy employed by the Seller
      in the conduct of its business, and such cessation would be reasonably
      likely to result in a Material Adverse Change with respect to the Seller.

            (e) Field Examination by Independent Public Accountants. Upon the
prior written notice of the Insurer at any time, each of the Seller shall permit
the independent public accountants of the Seller or, if such independent public
accountants are not acceptable to the Insurer, Independent Public Accountants
designated by the Insurer, annually to conduct a field examination of the Seller
pursuant to an agreed upon procedures scope attached in the form of Exhibit B
hereto, and in connection therewith shall permit such independent public
accountants or Independent Public Accountants, as the case may be, without
limitation:

                  (i) to inspect the books and records of the Seller; and

                  (ii) to discuss the affairs, finances and accounts of the
      Seller with the Seller's independent accountants, provided that an officer
      of the Seller shall have the right to be present during such discussions.

                                       12
<PAGE>

      Such inspections and discussions shall be conducted during normal business
hours at the cost and expense of such Seller, subject to Section 3.3(b) hereof,
and shall not unreasonably disrupt the business of the Seller.

            (f) Exemption from Securities Act Registration. The Seller shall
take all actions necessary to exempt the sale of the Notes from registration
under the Securities Act and under any applicable securities laws of any state
of the United States where Notes may be offered or sold by the Issuer.

            (g) Financial Reporting. To the extent the Seller shall otherwise be
preparing the same, the Seller shall provide or cause to be provided to the
Insurer, as soon as practicable and in any event within 95 days after the end of
each fiscal year of the Seller annual balance sheets of the Seller as at the end
of such fiscal year and the notes thereto, and the related statements of income
and cash flows and the respective notes thereto for such fiscal year certified
by the principal financial officer of the Seller.

            (h) Other Information. The Seller shall provide to the Insurer such
other information (including non-financial information) in respect of the Loans,
the Transaction and the Basic Documents and such other financial or operating
information in respect of the Seller, in each case, which the Insurer may from
time to time reasonably request.

            (i) Operation of the Seller. The Seller shall:

                        (1) be a limited purpose, limited liability company
            whose primary activities are restricted pursuant to its certificate
            of formation and operating agreement;

                        (2) not engage in any action that would cause the
            separate legal identity of the Seller not to be respected,
            including, without limitation, (a) holding itself out as being
            liable for the debts of any other party or (b) acting other than
            through its duly authorized agents;

                        (3) not be involved in the day-to-day management of
            Alliance;

                        (4) not incur, assume or guarantee any indebtedness
            except for such indebtedness as may be incurred by the Seller in
            connection with the issuance of the Notes or as otherwise permitted
            by the Insurer;

                        (5) act solely in its own name in the conduct of its
            business, including business correspondence and other
            communications, and shall conduct its business so as not to mislead
            others as to the identity of the entity with which they are
            concerned;

                        (6) maintain separate company records and books of
            account, deposit accounts (and funds therein) or other assets and
            shall not commingle its deposit accounts (and funds therein) with
            the deposit accounts (and funds therein) of any entity;

                                       13
<PAGE>

                        (7) not engage in any business or activity other than in
            connection with or relating to its certificate of formation and
            operating agreement;

                        (8) not form, or cause to be formed, any subsidiaries
            (other than the Issuer);

                        (9) comply with all restrictions and covenants in, and
            shall not fail to comply with the limited liability company
            formalities established in, its certificate of formation and
            operating agreement;

                        (10) manage its day-to-day business without the
            involvement of Alliance except pursuant to its obligations as
            Servicer;

                        (11) maintain a separate office from that of Alliance,
            which may be located on Alliance's premises;

                        (12) not act as an agent of Alliance;

                        (13) maintain at all times two independent managers as
            required by its articles of organization and operating agreement;

                        (14) ensure that, to the extent that it shares the same
            officers or other employees as any of its Affiliates, the salaries
            of and the expenses related to providing benefits to such officers
            and other employees shall be fairly allocated among such entities,
            and each such entity shall bear its fair share of the salary and
            benefit costs associated with all such common officers and
            employees;

                        (15) ensure that, to the extent that it jointly
            contracts with any of its stockholders or Affiliates to do business
            with vendors or service providers or to share overhead expenses, the
            costs incurred in doing so shall be allocated fairly among such
            entities, and each such entity shall bear its fair share of such
            costs. To the extent that the Seller contracts or does business with
            vendors or service providers when the goods and services provided
            are partially for the benefit of any other Person, the costs
            incurred in so doing shall be fairly allocated to or among such
            entities for whose benefit the goods and services are provided, and
            each such entity shall bear its fair share of such costs. All
            material transactions between the Seller and its Affiliates shall
            only be on an arm's-length basis;

                        (16) require that all full-time employees of the Seller
            identify themselves as such and not as employees of Alliance
            (including, without limitation, by means of providing appropriate
            employees with business or identification cards identifying such
            employees as the Seller's employees); and

                        (17) compensate all employees, consultants and agents
            directly, from the Seller's bank accounts, for services provided to
            the Seller by such employees, consultants and agents, and, to the
            extent any employee, consultant or agent of the Seller is also an
            employee, consultant or agent of Alliance, allocate

                                       14
<PAGE>

            the compensation of such employee, consultant or agent between the
            Seller and Alliance on a basis which reflects the services rendered
            to the Seller and Alliance.

Section 2.7. Negative Covenants of the Seller.

The Seller hereby agrees that during the term of this Insurance Agreement,
unless the Insurer shall otherwise expressly consent in writing:

            (a) Impairment of Rights. The Seller shall not take any action, or
fail to take any action, if such action or failure to take action (x) is
reasonably likely to result in a Material Adverse Change or (y) is reasonably
likely to interfere with the enforcement of any rights of the Insurer under or
with respect to any of the Basic Documents. The Seller shall give the Insurer
written notice of any such action or failure to act promptly prior to the date
of consummation of such action or failure to act. The Seller shall furnish to
the Insurer all information requested by it that is reasonably necessary to
determine compliance with this paragraph.

            (b) Amendments, Etc. The Seller shall not modify, amend or waive, or
consent to any modification, amendment or waiver of, any of the terms,
provisions or conditions of the Basic Documents to which it is a party or its
organizational documents, including, without limitation, its certificate of
formation and operating agreement, without the prior written consent of the
Insurer thereto, but excluding any amendment to the Basic Documents or Offering
Document required by law, provided that the Seller shall provide the Insurer
with prior written notice of any such amendment and a copy thereof.

            (c) Limitation on Mergers, Etc. The Seller shall not consolidate
with or merge with or into any Person or transfer all or substantially all of
its assets to any Person or liquidate or dissolve except as expressly permitted
in the Agreement.

            (d) Operating Expenses. The Seller shall not permit Alliance to pay
any of the Seller's operating expenses except pursuant to allocation
arrangements that comply with the requirements of Section 2.6(i)(17) above.

            (e) Certain Other Limitations. The Seller shall not permit the
Seller to be named as an insured on the insurance policy covering the property
of Alliance, or enter into an agreement with the holder of such policy whereby
in the event of a loss in connection with such property, proceeds are paid to
the Seller.

Section 2.8. Representations and Warranties of the Issuer.

The Issuer hereby makes, to and for the benefit of the Insurer, each of the
representations and warranties made by the Issuer in the Basic Documents to
which it is a party. Such representations and warranties are incorporated herein
by this reference as if fully set forth herein, and may not be amended except by
an amendment complying with the terms of Section 6.1. In addition, the Issuer
represents and warrants as of the Closing Date as follows:

            (a) Due Organization and Qualification. The Issuer is a Delaware
business trust, duly organized, validly existing and in good standing under the
laws of Delaware. The Issuer is duly qualified to do business, is in good
standing and has obtained all necessary licenses, permits, charters,
registrations and approvals (together, "approvals") necessary for the conduct of
its business as currently conducted and as described in the Offering Document
and the performance of its obligations under the Basic Documents in each
jurisdiction in which the

                                       15
<PAGE>

failure to be so qualified or to obtain such approvals would render any Basic
Document unenforceable in any respect or would have a material adverse effect
upon the Transaction.

            (b) Power and Authority. The Issuer has all necessary Delaware
business trust power and authority to conduct its business as currently
conducted and as described in the Offering Document, to execute, deliver and
perform its obligations under the Basic Documents and to consummate the
Transaction.

            (c) Due Authorization. The execution, delivery and performance of
the Basic Documents by the Issuer has been duly authorized by all necessary
Delaware business trust action and do not require any additional approvals or
consents, or other action by or any notice to or filing with any Person,
including any governmental entity, which have not previously been obtained.

            (d) Noncontravention. The execution and delivery by the Issuer of
the Basic Documents to which it is a party, the consummation of the Transaction
and the satisfaction of the terms and conditions of the Basic Documents do not
and will not:

                  (i) conflict with or result in any breach or violation of any
      provision of the certificate of trust or Trust Agreement of the Issuer or
      any law, rule, regulation, order, writ, judgment, injunction, decree,
      determination or award currently in effect having applicability to either
      the Issuer or any of its properties, including regulations issued by any
      administrative agency or other governmental authority having supervisory
      powers over the Issuer;

                  (ii) constitute a default by the Issuer under, result in the
      acceleration of any obligation under, or breach any material provision of
      any loan agreement, mortgage, indenture or other agreement or instrument
      to which the Issuer either is a party or by which any of its properties
      are or may be bound or affected; or

                  (iii) result in or require the creation of any lien upon or in
      respect of any assets of the Issuer, except as otherwise expressly
      contemplated by the Basic Documents.

            (e) Legal Proceedings. There is no action, proceeding or
investigation by or before any court, governmental or administrative agency or
arbitrator against or affecting the Issuer, any properties or rights of the
Issuer or the Trust Estate pending or, to the Issuer's knowledge, threatened,
which, in any case, if decided adversely to the Issuer, is reasonably likely to
result in a Material Adverse Change with respect to the Issuer.

            (f) Valid and Binding Obligations. The Basic Documents constitute
the legal, valid and binding obligations of the Issuer, enforceable against the
Issuer in accordance with their respective terms, except as such enforceability
may be limited by insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles. The
Class A Notes, when executed, authenticated and delivered in accordance with the
Indenture, will be validly issued and outstanding and entitled to the benefits
of the Indenture.

            (g) Compliance with Law, Etc. No practice, procedure or policy
employed, or proposed to be employed, by the Issuer in the conduct of its
business violates any law,

                                       16
<PAGE>

regulation, judgment, agreement, order or decree applicable to the Issuer, that,
if enforced, is reasonably likely to result in a Material Adverse Change with
respect to the Issuer.

            (h) Accuracy of Information. The information or statements contained
in the Documents furnished to the Insurer by the Issuer, as amended,
supplemented or superseded on or prior to the date hereof, taken as a whole,
does not, if restated at and as of the date hereof, contain any statement of a
material fact or omit to state a material fact necessary to make such
information or statements misleading in any material respect.

            (i) Compliance with Securities Laws. The offer and sale of the Notes
by the Issuer comply in all material respects with all requirements of law,
including all registration requirements of applicable securities laws. Without
limiting the foregoing, the Offering Document does not contain any untrue
statement of a material fact and does not omit to state a material fact
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. Neither the offer nor the sale of
the Notes by the Issuer has been or will be in violation of the Securities Act
or any other federal or state securities laws. The Indenture is not required to
be qualified under the Trust Indenture Act of 1939, as amended. The Issuer is
not required to be registered as an "investment company" under the Investment
Company Act. The Issuer will satisfy the information reporting requirements of
the Securities Exchange Act arising out of the Transaction.

            (j) Solvency; Fraudulent Conveyance. The Issuer is solvent and will
not be rendered insolvent by the Transaction and, after giving effect to the
Transaction, the Issuer will not be left with an unreasonably small amount of
capital with which to engage in its business, and the Issuer does not intend to
incur, nor believes that it has incurred, debts beyond its ability to pay as
they mature. The Issuer does not contemplate the commencement of insolvency,
liquidation or consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official with respect to it or any
of its assets. The Issuer is not pledging the Trust Estate under the Indenture
with any intent to hinder, delay or defraud its creditors.

            (k) Principal Place of Business. The principal place of business of
the Issuer is Wilmington, Delaware and its books and records with respect to the
Loans are located at Wilmington, Delaware, Ripon, Wisconsin and Chicago,
Illinois.

Section 2.9. Affirmative Covenants of the Issuer.

The Issuer hereby makes, to and for the benefit of the Insurer, all of the
covenants of the Issuer set forth in the Basic Documents to which it is a party,
including, but not limited to, Article III of the Indenture. Such covenants are
incorporated herein by this reference, and may not be amended except by an
amendment complying with the terms of Section 6.1. In addition, the Issuer
hereby agrees that during the term of this Insurance Agreement, unless the
Insurer shall otherwise expressly consent in writing:

            (a) Compliance with Agreements and Applicable Laws. It shall comply
with the terms and conditions of and perform its obligations under the Basic
Documents to which it is a party and shall comply with all material requirements
of any law, rule or regulation applicable to it.

                                       17
<PAGE>

            (b) Existence. It shall maintain its existence as a business trust
and shall at all times continue to be duly organized under the laws of the State
of Delaware and duly qualified and duly authorized (as described in subsections
2.8(a), (b) and (c) hereof) and shall conduct its business in accordance with
the terms of its certificate of trust and Trust Agreement and shall conduct its
business in accordance with the terms of its trust agreement and shall maintain
all licenses, permits, charters and registrations which are material to the
conduct of its business.

            (c) Access to Records; Discussions with Officers and Accountants.
Upon reasonable prior written notice of the Insurer, at any time and any event
at least annually, the Issuer shall permit the Insurer or its authorized agents:

                  (i) to inspect the books and records of the Issuer;

                  (ii) to discuss the affairs, finances and accounts of the
      Issuer with the principal executive officer and the principal financial
      officer of the Issuer; and

                  (iii) through independent public accountants designated by the
      Insurer, to discuss the affairs, finances and accounts of the Issuer with
      the Issuer's independent accountants, provided that an officer of the
      Issuer and an officer of Alliance shall have the right to be present
      during such discussions.

Such inspections and discussions shall be conducted during normal business hours
at the cost and expense of the Issuer, subject to Section 3.3(b) hereof, and
shall not unreasonably disrupt the business of the Issuer.

            (d) Notice of Material Events. The Issuer shall be obligated
promptly to inform the Insurer in writing of the occurrence of any of the
following:

                  (i) the submission of any claim or the initiation of any legal
      process, litigation or administrative or judicial investigation, or
      disciplinary proceeding by or against the Issuer that would likely result
      in a Material Adverse Change with respect to the Issuer or the
      promulgation of any proceeding or any proposed or final ruling in
      connection with any such litigation, investigation or proceeding which
      would reasonably likely to result in a Material Adverse Change with
      respect to the Issuer;

                  (ii) not less than thirty (30) days after the date thereof,
      any change in the location of the principal office of the Issuer;

                  (iii) the occurrence of an Event of Default hereunder in
      respect of the Issuer;

                  (iv) the commencement of any proceedings by or against the
      Issuer under any applicable reorganization, liquidation, rehabilitation,
      insolvency or other similar law now or hereafter in effect or of any
      proceeding in which a receiver, liquidator, conservator, trustee or
      similar official shall have been, or may be, appointed or requested for
      such Issuer or any of its assets; or

                  (v) the receipt of written notice that (A) any license,
      permit, charter, registration or approval necessary for the conduct of the
      Issuer's business is to be, or may be, suspended or revoked and such
      suspension or revocation would be reasonably

                                       18
<PAGE>

likely to result in a Material Adverse Change with respect to such Issuer or (B)
the Issuer is to cease and desist any practice, procedure or policy employed by
the Issuer in the conduct of its business, and such cessation would be
reasonably likely to result in a Material Adverse Change with respect to such
Issuer.

            (e) Field Examination by Independent Public Accountants. Upon
reasonable prior written notice of the Insurer at any time, each of the Issuer
shall permit the independent public accountants of the Issuer or, if such
independent public accountants are not acceptable to the Insurer, Independent
Public Accountants designated by the Insurer, annually to conduct a field
examination of the Issuer pursuant to an agreed upon procedures scope attached
in the form of Exhibit B hereto, and in connection therewith shall permit such
independent public accountants or Independent Public Accountants, as the case
may be, without limitation:

                  (i) to inspect the books and records of the Issuer; and

                  (ii) to discuss the affairs, finances and accounts of the
      Issuer with the Issuer's independent accountants, provided that an officer
      of the Issuer shall have the right to be present during such discussions.

Such inspections and discussions shall be conducted during normal business hours
at the cost and expense of such Issuer, subject to Section 3.3(b) hereof, and
shall not unreasonably disrupt the business of the Issuer.

            (f) Exemption from Securities Act Registration. The Issuer shall
take all actions necessary to exempt the sale of the Notes from registration
under the Securities Act and under any applicable securities laws of any state
of the United States where Notes may be offered or sold by the Issuer.

            (g) Financial Reporting. To the extent the Issuer shall otherwise be
preparing the same, the Issuer shall provide or cause to be provided to the
Insurer, as soon as practicable and in any event within 95 days after the end of
each fiscal year of the Issuer annual balance sheets of the Issuer as at the end
of such fiscal year and the notes thereto, and the related statements of income
and cash flows and the respective notes thereto for such fiscal year certified
by the principal financial officer of the Issuer.

            (h) Other Information. The Issuer shall provide to the Insurer such
other information (including non-financial information) in respect of the Loans,
the Transaction and the Basic Documents and such other financial or operating
information in respect of the Issuer, in each case, which the Insurer may from
time to time reasonably request.

            (i) Operation of the Issuer. The Issuer shall:

                  (1) be a Delaware business trust whose primary activities are
      restricted pursuant to its Trust Agreement:

                  (2) not be involved in the day-to-day management of Alliance;

                  (3) not incur, assume or guarantee any indebtedness except for
      such indebtedness as may be incurred by the Issuer in connection with the
      issuance of the Notes or as otherwise permitted by the Insurer;

                                       19
<PAGE>

                  (4) not commingle its deposit accounts (and funds therein) or
      other assets with the deposit accounts (and funds therein) or other assets
      of any entity other than the Seller;

                  (5) manage its day-to-day business without the involvement of
      Alliance except pursuant to its obligations as Servicer;

                  (6) maintain a separate office from that of Alliance;

                  (7) not act as an agent of Alliance;

                  (8) not form, or cause to be formed, any subsidiaries;

                  (9) act solely in its own name or in the name of the Seller in
      the conduct of its business, including business correspondence and other
      communications, and shall conduct its business so as not to mislead others
      as to the identity of the entity with which they are concerned;

                  (10) ensure that, to the extent that it shares the same
      officers or other employees as any of its Affiliates (other than the
      Seller), the salaries of and the expenses related to providing benefits to
      such officers and other employees shall be fairly allocated among such
      entities, and each such entity shall bear its fair share of the salary and
      benefit costs associated with all such common officers and employees;

                  (11) ensure that, to the extent that it jointly contracts with
      any of its stockholders or Affiliates (other than the Seller) to do
      business with vendors or service providers or to share overhead expenses,
      the costs incurred in doing so shall be allocated fairly among such
      entities, and each such entity shall bear its fair share of such costs. To
      the extent that the Issuer contracts or does business with vendors or
      service providers when the goods and services provided are partially for
      the benefit of any other Person (other than the Seller), the costs
      incurred in so doing shall be fairly allocated to or among such entities
      for whose benefit the goods and services are provided, and each such
      entity shall bear its fair share of such costs. All material transactions
      between the Seller and its Affiliates (other than the Seller) shall only
      be on an arm's-length basis;

                  (12) require that all full-time employees of the Issuer
      identify themselves as such and not as employees of Alliance (including,
      without limitation, by means of providing appropriate employees with
      business or identification cards identifying such employees as the
      Issuer's employees); and

                  (13) compensate all employees, consultants and agents
      directly, from the Issuer's bank accounts, for services provided to the
      Issuer by such employees, consultants and agents, and, to the extent any
      employee, consultant or agent of the Issuer is also an employee,
      consultant or agent of Alliance, allocate the compensation of such
      employee, consultant or agent between the Issuer and Alliance on a basis
      which reflects the services rendered to the Issuer and Alliance.

                                       20
<PAGE>

Section 2.10. Negative Covenants of the Issuer.

The Issuer hereby agrees that during the term of this Insurance Agreement,
unless the Insurer shall otherwise expressly consent in writing:

            (a) Impairment of Rights. The Issuer shall not take any action, or
fail to take any action, if such action or failure to take action (x) is
reasonably likely to result in a Material Adverse Change or (y) is reasonably
likely to interfere with the enforcement of any rights of the Insurer under or
with respect to any of the Basic Documents. The Issuer shall give the Insurer
written notice of any such action or failure to act promptly prior to the date
of consummation of such action or failure to act. The Issuer shall furnish to
the Insurer all information requested by it that is reasonably necessary to
determine compliance with this paragraph.

            (b) Amendments, Etc. The Issuer shall not modify, amend or waive, or
consent to any modification, amendment or waiver of, any of the terms,
provisions or conditions of the Basic Documents to which it is a party, or any
of its organization documents, including, without limitation, its trust
agreement and certificate of trust and Trust Agreement, without the prior
written consent of the Insurer thereto, but excluding any amendment to the Basic
Documents or Offering Document required by law, provided that the Issuer shall
provide the Insurer with prior written notice of any such amendment and a copy
thereof.

            (c) Limitation on Mergers, Etc. The Issuer shall not consolidate
with or merge with or into any Person or transfer all or substantially all of
its assets to any Person or liquidate or dissolve.

            (d) Operating Expenses. The Issuer shall not permit Alliance to pay
any of the Issuer's operating expenses except pursuant to allocation
arrangements that comply with the requirements of Section 2.9(h)(13) above.

            (e) Certain Other Limitations. The Issuer shall not permit the
Issuer to be named as an insured on the insurance policy covering the property
of Alliance, or enter into an agreement with the holder of such policy whereby
in the event of a loss in connection with such property, proceeds are paid to
the Issuer.

                                   ARTICLE III

                         THE AMBAC POLICY; REIMBURSEMENT

Section 3.1. Issuance of the Ambac Policy.

The Insurer agrees to issue the Ambac Policy on the Closing Date subject to
satisfaction of the conditions precedent set forth below:

            (a) Payment of Initial Premium and Expenses. The applicable parties
shall have been paid their related fees and expenses payable in accordance with
Section 3.2.

            (b) Documents. The conditions to consummation of the transactions
set forth in Section 4.01 and 4.02 of the Purchase Agreement shall have been
satisfied.

                                       21
<PAGE>

            (c) Credit and Collection Policy. The Insurer shall have received a
complete copy of the Credit and Collection Policy then in effect certified by
the principal financial officer of Alliance;

            (d) Representations and Warranties; Certificate. The representations
and warranties of Alliance, the Seller and the Issuer set forth or incorporated
by reference in this Insurance Agreement shall be true and correct on and as of
the Closing Date as if made on the Closing Date, and the Insurer shall have
received a certificate of appropriate officers of Alliance, the Seller and the
Issuer to that effect;

            (e) No Litigation, Etc. No suit, action or other proceeding,
investigation or injunction, or final judgment relating thereto, shall be
pending or, to such party's knowledge, threatened before any court, governmental
or administrative agency or arbitrator in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection with any of the
Basic Documents or the consummation of the Transaction;

            (f) Legality. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any government or governmental or
administrative agency or court that would make the Transaction illegal or
otherwise prevent the consummation thereof;

            (g) No Event of Default. No Event of Default or Early Payout Event
shall have occurred;

            (h) Satisfaction of Conditions of the Note Purchase Agreement. All
conditions in the Note Purchase Agreement relating to the Initial Purchasers'
obligation to purchase the Notes shall have been fulfilled to the satisfaction
of the Insurer, with such satisfaction deemed to have occurred upon issuance of
the Ambac Policy. The Insurer shall have received copies of each of the
documents, and shall be entitled to rely on each of the documents, required to
be delivered to any Initial Purchaser pursuant to the Note Purchase Agreement,
including, without limitation, the items described in clauses (a) through (s) of
Section 7 of the Note Purchase Agreement (other than the opinion of counsel to
the Insurer);

            (i) Issuance of Ratings. The Insurer shall have received
confirmation that the Class A Notes will be rated BBB by S&P and an Baa2 by
Moody's;

            (j) Approvals, Etc. The Insurer shall have received true and correct
copies of all approvals, licenses and consents, if any, required in connection
with the Transaction;

            (k) Additional Items. The Insurer shall have received such other
documents, instruments, approvals or opinions in form and substance reasonably
satisfactory to the Insurer as shall be reasonably requested by the Insurer,
including evidence reasonably satisfactory to the Insurer that the conditions
precedent, if any, in the Basic Documents have been satisfied; and

            (l) Satisfactory Documentation. The Insurer and its counsel shall
have determined that all documents, the Notes and opinions to be delivered in
connection with the Notes conform to the terms of the Indenture, the Offering
Document and this Insurance Agreement.

                                       22
<PAGE>

Section 3.2. Payment of Fees and Premium.

            (a) Legal and Accounting Fees. Seller shall pay or cause to be paid
on the Closing Date all reasonable, out-of-pocket (i.e., excluding internal
legal or accounting expenses) and documented legal fees, auditors' fees and
disbursements incurred by the Insurer in connection with the issuance of the
Ambac Policy and the other Basic Documents through the Closing Date. Additional
fees of the Insurer's counsel or auditors payable in connection with the Basic
Documents incurred after the Closing Date shall be paid by Alliance as provided
in Section 3.3 below.

            (b) Rating Agency Fees. Seller shall promptly pay the initial fees
of the Rating Agencies with respect to the Notes and the transactions
contemplated hereby following receipt of a statement with respect thereto.
Alliance shall pay or cause to be paid any subsequent fees of the Rating
Agencies with respect to, and directly allocable to, the Class A Notes to the
extent that such fees and expenses result from actions of the Rating Agencies
that are requested by Alliance. The Insurer shall not be responsible for any
fees or expenses of the Rating Agencies. The fees for any other rating agency
shall be paid by the party requesting such other agency's rating.

            (c) Premium. In consideration of the issuance by the Insurer of the
Ambac Policy, the Issuer shall pay or cause to be paid the Premiums to the
Insurer as set forth in the Fee Letter in accordance with and from the funds
specified by Section 8.2 of the Indenture, commencing on the day the Ambac
Policy is issued, until the Ambac Policy has terminated in accordance with its
terms. The Premium paid under the Indenture shall be nonrefundable without
regard to whether any Notice is delivered to the Insurer requiring the Insurer
to make any payment under the Ambac Policy or any other circumstances relating
to the Notes or provision being made for payment of the Notes prior to maturity.

Section 3.3. Reimbursement Obligation.

            (a) The Issuer agrees absolutely and unconditionally to reimburse
the Insurer for any amounts paid by the Insurer under the Ambac Policy, plus the
amount of any other due and payable and unpaid Reimbursement Amounts which
reimbursement shall be due and payable on the date that any such amount is paid
thereunder only from amounts available for such payment under the Indenture, in
an amount equal to the amounts so paid and all amounts previously paid that
remain unreimbursed, together (without duplication) with interest on any and all
amounts remaining unreimbursed (to the extent permitted by law, if in respect of
any unreimbursed amounts representing interest) from the date such amounts
became due until paid in full (after as well as before judgment), at a rate of
interest equal to the Late Payment Rate.

            (b) Alliance agrees to pay to the Insurer, promptly, but in no event
later than 30 days after receipt of an invoice, as follows: any and all
documented out-of-pocket (e.g., excluding internal legal or accounting
expenses), charges, fees, costs and expenses that the Insurer may reasonably pay
or incur, including reasonable attorneys' and accountants' fees and expenses, in
connection with (i) the enforcement, defense or preservation of any rights in
respect of any of the Basic Documents, including defending, monitoring or
participating in any litigation or proceeding (including any insolvency
proceeding in respect of any Transaction participant or any affiliate thereof)
relating to any of the Basic Documents, any party to any of the Basic Documents
(in its capacity as such a party) or the Transaction, including without
limitation the costs and fees of inspections by the Insurer or audits or field
examinations by accountants, or

                                       23
<PAGE>

(ii) any amendment, waiver or other similar action with respect to, or related
to, any Basic Document, whether or not executed or completed. Notwithstanding
anything in this Agreement to the contrary, provided that no Event of Default,
Early Payout Event or Servicer Default has occurred and is continuing, the
reimbursable costs and expenses of the Insurer pursuant to Section 2.2(e),
2.2(h), 2.6(c), 2.6(e), 2.9(c) and 2.9(e) shall not exceed $25,000 in any period
of twelve consecutive months.

            (c) Each party agrees to pay to the party to whom such amounts are
owed on demand interest at the Late Payment Rate on any and all amounts
described in Sections 3.3(b) and 3.4 after the date such amounts become due and
payable until payment thereof in full.

Section 3.4. Indemnification.

            (a) In addition to any and all of the Insurer's rights of
reimbursement, indemnification or subrogation, and to any other rights of the
Insurer pursuant hereto or under law or in equity, Alliance agrees to pay, and
to protect, indemnify and save harmless, the Insurer and its officers,
directors, shareholders, employees, agents and each Person, if any, who controls
the Insurer within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act from and against, any and all claims,
losses, liabilities (including penalties), actions, suits, judgments, demands,
damages, costs or expenses (including reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) of any nature
arising out of or relating to the transactions contemplated by the Basic
Documents by reason of:

                  (i) any statement, omission or action (other than of or by the
      Insurer with respect to the Insurer Information as defined in subsection
      (v) below) in connection with the offering, issuance, sale or delivery of
      any of the Notes;

                  (ii) the negligence, bad faith, willful misconduct,
      misfeasance, malfeasance or theft committed by any director, officer,
      employee or agent of Alliance in connection with the Transaction;

                  (iii) the violation by Alliance of any domestic or foreign
      law, rule or regulation, or any judgment, order or decree applicable to
      them;

                  (iv) the breach by Alliance of any representation, warranty or
      covenant under any of the Basic Documents; or

                  (v) any untrue statement or alleged untrue statement of a
      material fact contained in the Offering Document or any omission or
      alleged omission to state therein a material fact required to be stated
      therein or necessary to make the statements therein, in light of the
      circumstances under which they were made, not misleading, except insofar
      as such claims, losses, liabilities (including penalties), actions, suits,
      judgments, demands, damages, costs or expenses (including reasonable fees
      and expenses of attorneys, consultants and auditors and reasonable costs
      of investigations) arise out of or are based upon any untrue statement or
      omission in the Offering Document in the information with respect to the
      Insurer reviewed and approved in writing by the Insurer and included
      (including the financial statements incorporated by reference therein)
      under

                                       24
<PAGE>

      the heading "The Insurer and the Policy - The Insurer" in the Offering
      Document (the "Insurer Information").

            (b) In addition to any and all of the Insurer's rights of
reimbursement, indemnification, subrogation and to any other rights of the
Insurer pursuant hereto or under law or in equity, the Servicer agrees to pay,
and to protect, indemnify and save harmless, the Insurer and its officers,
directors, shareholders, employees, agents and each Person, if any, who controls
the Insurer within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act from and against, any and all claims,
losses, liabilities (including penalties), actions, suits, judgments, demands,
damages, costs or expenses (including reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) of any nature
arising out of or relating to the transactions contemplated by the Basic
Documents by reason of:

                  (i) the negligence, bad faith, willful misconduct,
      misfeasance, malfeasance or theft committed by any director, officer,
      employee or agent of the Servicer in connection with the Transaction;

                  (ii) the violation by the Servicer of any domestic or foreign
      law, rule or regulation, or any judgment, order or decree applicable to
      it;

                  (iii) the breach by the Servicer of any representation,
      warranty or covenant (other than 3.07(i) of the Agreement) under any of
      the Basic Documents; or

                  (iv) the occurrence, in respect of the Servicer, under any of
      the Basic Documents of any Servicer Default or any event which, with the
      giving of notice or the lapse of time or both, would constitute any
      Servicer Default (it being understood that this clause (iv) is not
      intended to cover losses resulting from the occurrence of a Servicer
      Default under Section 8.01(j) or (l) of the Agreement.

            (c) In addition to any and all of the Insurer's rights of
reimbursement, indemnification or subrogation, and to any other rights of the
Insurer pursuant hereto or under law or in equity, the Seller agrees to pay, and
to protect, indemnify and save harmless, the Insurer and its officers,
directors, shareholders, employees, agents and each Person, if any, who controls
the Insurer within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act from and against, any and all claims,
losses, liabilities (including penalties), actions, suits, judgments, demands,
damages, costs or expenses (including reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) of any nature
arising out of or relating to the transactions contemplated by the Basic
Documents by reason of:

                  (i) any statement, omission or action (other than of or by the
      Insurer with respect to the Insurer Information as defined in subsection
      (v) below) in connection with the offering, issuance, sale or delivery of
      any of the Notes;

                  (ii) the negligence, bad faith, willful misconduct,
      misfeasance, malfeasance or theft committed by any director, officer,
      employee or agent of the Seller or the Issuer in connection with the
      Transaction;

                                       25
<PAGE>

                  (iii) the violation by the Seller or the Issuer of any
      domestic or foreign law, rule or regulation, or any judgment, order or
      decree applicable to them;

                  (iv) the breach by the Seller or the Issuer of any
      representation, warranty or covenant under any of the Basic Documents; or

                  (v) any untrue statement or alleged untrue statement of a
      material fact contained in the Offering Document or any omission or
      alleged omission to state therein a material fact required to be stated
      therein or necessary to make the statements therein, in light of the
      circumstances under which they were made, not misleading, except insofar
      as such claims, losses, liabilities (including penalties), actions, suits,
      judgments, demands, damages, costs or expenses (including reasonable fees
      and expenses of attorneys, consultants and auditors and reasonable costs
      of investigations) arise out of or are based upon any untrue statement or
      omission in the Offering Document in the information with respect to the
      Insurer reviewed and approved in writing by the Insurer and included
      (including the financial statements incorporated therein) under the
      heading "The Insurer and the Policy - The Insurer" in the Offering
      Document.

            (d) The Insurer agrees to pay, and to protect, indemnify and save
harmless the Seller, the Issuer and their respective officers, directors,
shareholders, employees, agents and each Person, if any, who controls the Seller
or the Issuer within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act from and against, any and all claims,
losses, liabilities (including penalties), actions, suits, judgments, demands,
damages, costs or expenses (including reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) of any nature
arising out of or by reason of any untrue statement or alleged untrue statement
of a material fact contained in the Insurer Information in any Offering Document
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

            (e) If any action or proceeding (including any governmental
investigation) shall be brought or asserted against any Person (each, an
"Indemnified Party") in respect of which the indemnity provided in Section
3.4(a), (b), (c) or (d) may be sought from another Person (the "Indemnifying
Party") each such Indemnified Party shall promptly notify the Indemnifying Party
in writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel satisfactory to the Indemnified Party and
the payment of all expenses and reasonable legal fees; provided that failure to
notify the Indemnifying Party shall not relieve it from any liability it may
have to such Indemnified Party except to the extent that it shall be actually
prejudiced thereby. The Indemnified Party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof at
the expense of the Indemnified Party and may assume the defense of any such
action or claim in reasonable cooperation with, and with the reasonable
cooperation of, the Indemnifying Party; provided, however, that the fees and
expenses of separate counsel to the Indemnified Party in any such proceeding
shall be at the expense of the Indemnifying Party if (i) the Indemnifying Party
has agreed to pay such fees and expenses, (ii) the Indemnifying Party shall have
failed to assume the defense of such action or proceeding or employ counsel
reasonably satisfactory to the Indemnified Party in any such action or
proceeding within a reasonable time after the commencement of such action or
(iii) the named parties to any such action or proceeding (including any
impleaded parties) include both the Indemnified Party and the Indemnifying

                                       26
<PAGE>

Party, and the Indemnified Party shall have been advised by counsel that there
may be one or more legal defenses available to it which are different from or
additional to those available to the Indemnifying Party (in which case, if the
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of such action
or proceeding on behalf of such Indemnified Party, it being understood, however,
that the Indemnifying Party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for the Indemnified Parties, which
firm shall be designated in writing by the Indemnified Party). Unless it shall
be in default of its obligations hereunder, the Indemnifying Party shall not be
liable for any settlement of any such action or proceeding effected without its
written consent to the extent that any such settlement shall be prejudicial to
the Indemnifying Party, which consent shall not be unreasonably withheld or
delayed, but, if settled with its written consent, or if there is a final
judgment for the plaintiff in any such action or proceeding with respect to
which the Indemnifying Party shall have received notice in accordance with this
subsection (e), the Indemnifying Party agrees to indemnify and hold the
Indemnified Parties harmless from and against any loss or liability by reason of
such settlement or judgment.

            (f) To provide for just and equitable contribution if the
indemnification provided by the Indemnifying Party is determined to be
unavailable or insufficient to hold harmless any Indemnified Party (other than
due to application of this Section), each Indemnifying Party shall contribute to
the losses incurred by the Indemnified Party on the basis of the relative fault
of the Indemnifying Party, on the one hand, and the Indemnified Party, on the
other hand. The relative fault of each Indemnifying Party, on the one hand, and
each Indemnified Party, on the other, shall be determined by reference to, among
other things, whether the breach or alleged breach is within the control of, the
Indemnifying Party or the Indemnified Party, and the parties relative intent,
knowledge, access to information and opportunity to correct or prevent such
breach. No Person guilty of fraudulent misrepresentation (within the meaning of
Section (11)f of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.

Section 3.5. Payment Procedure.

In the event of any payment by the Insurer for which reimbursement is sought
under Section 3.3, the Issuer, Alliance and the Seller agree to accept the
voucher or other evidence of payment as prima facie evidence of the propriety
thereof and the liability, if any, described in Section 3.3 therefor to the
Insurer. All payments to be made to the Insurer under this Insurance Agreement
shall be made to the Insurer in lawful currency of the United States of America
in immediately available funds at the notice address for the Insurer as
specified in the Indenture by no later than 5:00 P.M. (New York time) or as the
Insurer shall otherwise direct by written notice to the other parties hereto on
the date when due. In the event that the date of any payment to the Insurer or
the expiration of any time period hereunder occurs on a day that is not a
Business Day, then such payment or expiration of time period shall be made or
occur on the next succeeding Business Day with the same force and effect as if
such payment was made or time period expired on the scheduled date of payment or
expiration date.

                                       27
<PAGE>

Section 3.6. Subrogation.

The parties hereto acknowledge that, to the extent of any payment made by the
Insurer pursuant to the Policy, the Insurer shall be fully subrogated to the
extent of such payment and any interest due thereon, to the rights of the Class
A Noteholders to any moneys paid or payable in respect of the Class A Notes
under the Basic Documents or otherwise subject to applicable law. The parties
hereto agree to such subrogation and further agree to execute such instruments
and to take such actions as, in the sole and reasonable judgment of the Insurer,
are necessary to evidence such subrogation and to perfect the rights of the
Insurer to receive any such moneys paid or payable in respect of the Class A
Notes under the Basic Documents or otherwise.

                                   ARTICLE IV

                               FURTHER AGREEMENTS

Section 4.1. Effective Date; Term of the Insurance Agreement.

This Insurance Agreement shall take effect on the Closing Date and shall remain
in effect until the later of (a) such time as the Insurer is no longer subject
to a claim under the Ambac Policy and the Ambac Policy shall have been
surrendered to the Insurer for cancellation and (b) such time as all amounts
payable to the Insurer by the Issuer, the Seller or Alliance (each, together
with any affiliates thereof, a "Company Party" and collectively, the "Company
Parties") hereunder or under the Basic Documents and the Class A Notes shall
have been irrevocably paid and redeemed in full and such Notes shall have been
cancelled; provided, however, that the provisions of Sections 3.2, 3.3 and 3.4
hereof shall survive any termination of this Insurance Agreement.

Section 4.2. Further Assurances and Corrective Instruments.

            (a) Except at such times as a Insurer Default shall exist or shall
have occurred, neither Alliance, the Seller, the Issuer nor the Indenture
Trustee shall grant any waiver of rights under any of the Basic Documents to
which any of them is a party without the prior written consent of the Insurer
and any such waiver without prior written consent of the Insurer shall be null
and void and of no force or effect.

            (b) Each of the parties hereto agrees that it will, from time to
time, execute, acknowledge and deliver, or cause to be executed, acknowledged
and delivered, such supplements hereto and such further instruments as the
Insurer may reasonably request and as may be required in the Insurer's
reasonable judgment to effectuate the intent and purpose of this Insurance
Agreement and the other Basic Documents. Without limiting the foregoing, each of
the Company Parties which is a party to any of the Basic Documents hereby
authorizes the Indenture Trustee and the Controlling Party, at the expense of
the Issuer, to execute and file financing statements covering the assets covered
by any Assignment or owned by the Issuer in such jurisdictions as may be
required to confirm title thereto and perfect and maintain the lien thereon,
including, without limitation, filings required to maintain perfection pursuant
to revised Article 9 of the Uniform Commercial Code, provided, however, that
prior to a Default or Event of Default, any filings intended solely to perfect a
lien on Exempt Collateral shall be at the expense of the party effecting such
filing. In addition, each of the parties hereto agrees to cooperate with the
Rating Agencies in connection with any review of the Transaction conducted
during normal business hours and in a manner that does not unreasonably disrupt
the business

                                       28
<PAGE>

of Alliance, the Seller or the Issuer, that may be undertaken by the Rating
Agencies after the date hereof upon prior written notice.

            (c) The Seller shall not cause or permit the Issuer to issue any
notes or other evidences of indebtedness, or to otherwise incur any
indebtedness, other than the indebtedness represented by the Notes. (d)
Alliance, as Servicer, and the Indenture Trustee shall provide the Insurer with
copies of all notices required to be delivered pursuant to the Lockbox
Agreement.

Section 4.3. Obligations Absolute.

            (a) The obligations of Company Parties hereunder shall be absolute
and unconditional and shall be paid or performed strictly in accordance with
this Insurance Agreement and the other Basic Documents under all circumstances
irrespective of:

                  (i) any lack of validity or enforceability of, or any
      amendment or other modifications of, or waiver with respect to, any of the
      Basic Documents or the Notes;

                  (ii) any exchange or release of any other obligations
      hereunder;

                  (iii) the existence of any claim, setoff, defense, reduction,
      abatement or other right that a Company Party which is a party to any of
      the Basic Documents may have at any time against the Insurer or any other
      Person;

                  (iv) any document presented in connection with the Ambac
      Policy proving to be forged, fraudulent, invalid or insufficient in any
      respect or any statement therein being untrue or inaccurate in any
      respect;

                  (v) any payment by the Insurer under the Ambac Policy against
      presentation of a certificate or other document that does not strictly
      comply with the terms of the Ambac Policy;

                  (vi) any failure of the Company Parties to receive the
      proceeds from the sale of the Notes; and

                  (vii) any other circumstances, other than payment in full,
      that might otherwise constitute a defense available to, or discharge of,
      such party in respect of any Basic Document.

            (b) The Company Parties and any and all others who are now or may
become liable for all or any part of the obligations of the Company Parties
under this Insurance Agreement agree to be bound by this Insurance Agreement and
(i) to the extent permitted by law, waive and renounce any and all redemption
and exemption rights and the benefit of all valuation and appraisement
privileges against the indebtedness and obligations evidenced by any Basic
Document or by any extension or renewal thereof; (ii) waive presentment and
demand for payment, notices of nonpayment and of dishonor, protest of dishonor
and notice of protest; (iii) waive all notices in connection with the delivery
and acceptance hereof and all other notices in connection with the performance,
default or enforcement of any payment hereunder, except as

                                       29
<PAGE>

required by the Basic Documents; (iv) waive all rights of abatement, diminution,
postponement or deduction, all defenses, other than payment, and all rights of
setoff or recoupment arising out of any breach under any of the Basic Documents,
by any party thereto or any beneficiary thereof, or out of any obligation at any
time owing to any of the Company Parties; (v) agree that their liabilities
hereunder shall be unconditional and without regard to any setoff, counterclaim
or the liability of any other Persons for the payment hereof; (vi) agree that
any consent, waiver or forbearance hereunder with respect to an event shall
operate only for such event and not for any subsequent event; (vii) consent to
any and all extensions of time that may be granted by the Insurer with respect
to any payment hereunder or other provisions hereof and to the release of any
security at any time given for any payment hereunder, or any part thereof, with
or without substitution, and to the release of any Person or entity liable for
any such payment; and (viii) consent to the addition of any and all other
makers, endorsers, guarantors and other obligors for any payment hereunder, and
to the acceptance of any and all other security for any payment hereunder, and
agree that the addition of any such obligors or security shall not affect the
liability of the parties hereto for any payment hereunder.

            (c) Nothing herein shall be construed as prohibiting any party
hereto from pursuing any rights or remedies it may have against any Person in a
separate legal proceeding.

Section 4.4. Assignments; Reinsurance; Third-Party Rights.

            (a) This Insurance Agreement shall be a continuing obligation of the
parties hereto and shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. None of the
Company Parties may assign its rights under this Insurance Agreement, or
delegate any of its duties hereunder, without the prior written consent of the
Insurer. Any assignments made in violation of this Insurance Agreement shall be
null and void.

            (b) The Insurer shall have the right to give participations in its
rights under this Insurance Agreement and to enter into contracts of reinsurance
with respect to the Ambac Policy upon such terms and conditions as the Insurer
may in its discretion determine; provided, however, that no such participation
or reinsurance agreement or arrangement shall relieve the Insurer of any of its
obligations hereunder or under the Ambac Policy, and provided further that any
reinsurer or participant will not have any rights against the Company Parties,
the Noteholders or the Indenture Trustee and that the Company Parties, the
Noteholders and the Indenture Trustee shall have no obligation to have any
communication or relationship with any reinsurer or participant in order to
enforce the obligations of the Insurer hereunder and under the Ambac Policy.

            (c) In addition, the Insurer shall be entitled to assign or pledge
to any bank, other lender or reinsurer providing liquidity or credit with
respect to Transaction or the obligations of the Insurer in connection
therewith, any rights of the Insurer under the Basic Documents or with respect
to any real or personal property or other interests pledged to the Insurer or in
which the Insurer has a security interest, in connection with the Transaction,
subject in each case to the liens granted pursuant to the Basic Documents,
provided, that no such bank or other lender shall thereby obtain any direct
right against Company Parties, the Noteholders or the Indenture Trustee, and
further provided, that no such assignment or pledge shall give any assignee the
right to exercise any discretionary authority that the Basic Documents provide
shall be

                                       30
<PAGE>

exercisable by the Insurer or relieve the Insurer of any of its obligations
hereunder or under the Ambac Policy.

            (d) Except as provided herein with respect to participants and
reinsurers, nothing in this Insurance Agreement shall confer any right, remedy
or claim, express or implied, upon any Person not a party hereto, including,
particularly, any Noteholders, other than the rights of the Insurer against the
Company Parties and all the terms, covenants, conditions, promises and
agreements contained herein shall be for the sole and exclusive benefit of the
parties hereto and their successors and permitted assigns. Neither the Indenture
Trustee nor any Noteholders shall have any right to payment from any Premiums
paid or payable hereunder or under the Indenture or from any amounts paid by the
Issuer, the Seller or Alliance pursuant to Sections 3.3 or 3.4 hereof.

Section 4.5. Liability of the Insurer.

Neither the Insurer nor any of its officers, directors or employees shall be
liable or responsible for: (a) the use that may be made of the Ambac Policy by
the Indenture Trustee or for any acts or omissions of the Indenture Trustee in
connection therewith; or (b) the validity, sufficiency, accuracy or genuineness
of documents delivered to the Insurer in connection with any claim under the
Ambac Policy, or of any signatures thereon, even if such documents or signatures
should in fact prove to be in any or all respects invalid, insufficient,
fraudulent or forged (unless the Insurer shall have actual knowledge thereof).
In furtherance and not in limitation of the foregoing, the Insurer may accept
documents that appear on their face to be in order, without responsibility for
further investigation.

Section 4.6. Annual Servicing Audit and Certification.

If an Event of Default, Servicer Default or Early Payout Event shall have
occurred and be continuing, the annual servicing audit required pursuant to
Section 4.02 of the Agreement shall be performed by Independent Public
Accountants acceptable to the Insurer at the cost of Alliance. The Insurer
confirms that each of the Independent Public Accountants (other than
PricewaterhouseCoopers) is an acceptable Independent Public Accountant until the
Insurer otherwise notifies Alliance in writing.

                                    ARTICLE V

                              DEFAULTS AND REMEDIES

Section 5.1. Defaults.

The occurrence of any of the following events shall constitute an "Event of
Default" hereunder:

            (a) Any representation or warranty made by any of the Company
Parties hereunder or under the Basic Documents, or in any certificate furnished
hereunder or under the Basic Documents, shall prove to be untrue or misleading
in any material respect; provided, however, that if such Company Party
effectively cures any such defect in any representation or warranty under any
Basic Document or certificate or report furnished under any Basic Document,
within the time period specified in the related document as the cure period
therefor, such defect shall not in and of itself constitute an Event of Default;

                                       31
<PAGE>

            (b) Alliance or the Issuer shall fail to pay or deposit when due any
amount required to be paid or deposited by it hereunder or under any other Basic
Document, or (ii) a legislative body has enacted any law that declares or a
court of competent jurisdiction shall find or rule that this Insurance Agreement
or the Indenture is not valid and binding on the Company Parties hereto or
thereto;

            (c) The occurrence and continuance of a Servicer Default under the
Agreement or an Event of Default under the Indenture;

            (d) Any failure on the part of any Company Party duly to observe or
perform in any material respect any other of the covenants or agreements on the
part of such Company Party contained in this Insurance Agreement or in any other
Basic Document which continues unremedied beyond any cure period provided
therein, or, in the case of this Insurance Agreement, for a period of 30 days
after the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to Alliance by the Insurer (with a copy to the
Indenture Trustee) or by the Indenture Trustee (with a copy to the Insurer);

            (e) The entry of a decree or order by a court or agency or
supervisory authority having jurisdiction in the premises for appointment of a
conservator, receiver or liquidator or similar official for any Company Party
which is a party to any Basic Document in any bankruptcy, insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings or for the winding up or liquidation of their respective affairs,
and the continuance of any such decree or order unstayed and in effect for a
period of 60 consecutive days;

            (f) The consent by any Company Party which is a party to any Basic
Document to the appointment of a conservator or receiver or liquidator or
similar official in any bankruptcy, insolvency, readjustment of debt, marshaling
of assets and liabilities, or similar proceedings of or relating to such Company
Party or of relating to substantially all of their respective property; or any
such Company Party shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable bankruptcy, insolvency or reorganization statute, make an assignment
for the benefit of its creditors or voluntarily suspend payment of its
obligations;

provided, however, that to the extent that any event described in clause (a),
(b) or (d) above in respect of any Company Party shall be based solely on breach
of a representation and warranty or covenant of such Company Party made in any
Basic Document (other than this Insurance Agreement) which breach shall also be
the basis for an Event of Default under the Indenture or a Servicer Default,
then such event shall not constitute an Event of Default hereunder unless it
shall also constitute such Event of Default under the Indenture or a Servicer
Default.

Section 5.2. Remedies; No Remedy Exclusive.

            (a) Upon the occurrence of an Event of Default hereunder, the
Insurer may take whatever action at law or in equity as may appear necessary or
desirable in its judgment to collect the amounts, if any, then due under this
Insurance Agreement, the Purchase Agreement, the Agreement, the Indenture or any
other Basic Document or to enforce performance and observance of any obligation,
agreement or covenant of the Company Parties under this Insurance Agreement, the
Purchase Agreement, the Agreement, the Indenture or any other Basic Document,
either in its own capacity or in its capacity as Controlling Party.

                                       32
<PAGE>

            (b) Unless otherwise expressly provided, no remedy herein conferred
or reserved is intended to be exclusive of any other available remedy, but each
remedy shall be cumulative and shall be in addition to other remedies given
under this Insurance Agreement, the Purchase Agreement, the Agreement, the
Indenture or any other Basic Document, or existing at law or in equity. No delay
or omission to exercise any right or power accruing under this Insurance
Agreement, the Purchase Agreement, the Agreement, the Indenture or any other
Basic Document upon the happening of any event set forth in Section 5.1 shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised from time to time and as often as may
be deemed expedient. In order to entitle Insurer to exercise any remedy reserved
to the Insurer in this Article, it shall not be necessary to give any notice,
other than such notice as may be required by this Article.

Section 5.3. Waivers.

            (a) No failure by the Insurer to exercise, and no delay by the
Insurer in exercising, any right hereunder shall operate as a waiver thereof.
The exercise by the Insurer of any right hereunder shall not preclude the
exercise of any other right, and the remedies provided herein to the Insurer are
declared in every case to be cumulative and not exclusive of any remedies
provided by law or equity.

            (b) The Insurer shall have the right, to be exercised in its
complete discretion, to waive any Event of Default hereunder, by a writing
setting forth the terms, conditions and extent of such waiver signed by the
Insurer and delivered to Alliance and the Indenture Trustee. Unless such writing
expressly provides to the contrary, any waiver so granted shall extend only to
the specific event or occurrence which gave rise to the Event of Default so
waived and not to any other similar event or occurrence which occurs subsequent
to the date of such waiver.

                                   ARTICLE VI

                                  MISCELLANEOUS

Section 6.1. Amendments, Etc.

This Insurance Agreement may be amended, modified, supplemented or terminated
only by written instrument or written instruments signed by the parties hereto.
No consent of any reinsurer or participant contracted with by the Insurer
pursuant to Section 4.4(b) hereof shall be required for any amendment,
modification, supplement or termination hereof. Alliance agrees to provide a
copy of any amendment to this Insurance Agreement promptly to the Indenture
Trustee and the Rating Agencies. No act or course of dealing shall be deemed to
constitute an amendment, modification, supplement or termination hereof. The
other Basic Documents may be amended only with the prior written consent of the
Insurer.

Section 6.2. Notices.

All demands, notices and other communications to be given hereunder shall be in
writing (except as otherwise specifically provided herein) and shall be (i)
mailed by prepaid registered or certified mail, return receipt requested, or
(ii) personally delivered by messenger or overnight courier (with confirmation
of receipt) and in either case telecopied to the recipient as follows:

      (a)         To the Insurer:

                                       33
<PAGE>

                  Ambac Assurance Corporation
                  One State Street Plaza
                  New York, New York 10004
                  Attention: Structured Finance Department - ABS
                  Telecopy No.: 212-208-3547
                  Confirmation: 212-668-0340

                  (in each case in which notice or other communication to the
                  Insurer refers to Servicer Default, an Event of Default
                  (hereunder or under the Indenture), an Early Payout Event, a
                  claim on the Ambac Policy or any event 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 shall also be sent to the
                  attention of the general counsel of each of the Insurer and
                  the Indenture Trustee and shall be marked to indicate "URGENT
                  MATERIAL ENCLOSED.")

      (b)         To Alliance:
                  Alliance Laundry Systems LLC
                  Shepard Street
                  P.O. Box 990
                  Ripon, WI 54971-0990
                  Attention: Chief Financial Officer
                  Telecopy No.:
                  Confirmation No.:

      (c)   To the Issuer:

                  Alliance Laundry Equipment Receivables Trust 2000-A
                  c/o Wilmington Trust Company, as Owner Trustee
                  Rodney Square North
                  1100 North Market Street CFS, Ninth Floor
                  Wilmington, Delaware 19890
                  Attention:
                  Telecopy No.:
                  Confirmation No.:

                                       34
<PAGE>

                  With a copy to Alliance at the address set forth in clause
                  (b) above

      (d)         To the Seller:
                  Alliance Laundry Equipment Receivables LLC
                  Shepard Street
                  P.O. Box 990
                  Ripon, WI 54971-0990
                  Attention: Chief Financial Officer
                  Telecopy No.:
                  Confirmation No.:

                  With a copy to Alliance at the address set forth in clause
                  (b) above

      (e)         To the Indenture Trustee:
                  The Bank of New York
                  One Wall Street
                  New York, New York 10286
                  Attention: Corporate Trust Administration
                  Telecopy No.:
                  Confirmation No.:

A party may specify an additional or different address or addresses by writing
mailed or delivered to the other parties as aforesaid. All such notices and
other communications shall be effective upon receipt.

Section 6.3. Severability.

In the event that any provision of this Insurance Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction, the parties
hereto agree that such holding shall not invalidate or render unenforceable any
other provision hereof. The parties hereto further agree that the holding by any
court of competent jurisdiction that any remedy pursued by any party hereto is
unavailable or unenforceable shall not affect in any way the ability of such
party to pursue any other remedy available to it.

Section 6.4. Governing Law.

This Insurance Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to conflicts of laws
provisions.

Section 6.5. Consent to Jurisdiction.

            (a) THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION
OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND
ANY COURT IN THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK,
AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION, SUIT OR PROCEEDING
BROUGHT AGAINST IT AND TO OR IN CONNECTION WITH ANY OF THE BASIC DOCUMENTS OR
THE TRANSACTION OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT RELATING
THERETO, AND THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE
THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING SHALL BE HEARD OR
DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN
SUCH FEDERAL COURT. THE PARTIES AGREE THAT A FINAL NONAPPEALABLE JUDGMENT IN ANY
SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY WAIVE AND AGREE NOT
TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION
OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION
OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR

                                       35
<PAGE>

PROCEEDING IS IMPROPER OR THAT THE RELATED DOCUMENTS OR THE SUBJECT MATTER
THEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS.

            (b) To the extent permitted by applicable law, the parties shall not
seek and hereby waive the right to any review of the judgment of any such court
by any court of any other nation or jurisdiction which may be called upon to
grant an enforcement of such judgment.

            (c) Service on any party hereto may be made by mailing or delivering
copies of the summons and complaint and other process which may be served in any
suit, action or proceeding to such party at its address listed in Section 6.2(b)
herein. Such address may be changed by the applicable party or parties by
written notice to each of the other parties hereto.

            (d) Nothing contained in this Insurance Agreement shall limit or
affect any party's right to serve process in any other manner permitted by law
or to start legal proceedings relating to any of the Basic Documents against any
other party or its properties in the courts of any jurisdiction.

Section 6.6. Consent of the Insurer.

In the event that the consent of the Insurer is required under any of the Basic
Documents, the determination whether to grant or withhold such consent shall be
made by the Insurer in its sole discretion without any implied duty towards any
other Person, except to the extent a different standard may apply as expressly
provided therein.

Section 6.7. Counterparts.

This Insurance Agreement may be executed in counterparts by the parties hereto,
and all such counterparts shall constitute one and the same instrument.

Section 6.8. Headings.

The headings of Articles and Sections and the Table of Contents contained in
this Insurance Agreement are provided for convenience only. They form no part of
this Insurance Agreement and shall not affect its construction or
interpretation.

Section 6.9. Trial by Jury Waived.

Each party hereby waives, to the fullest extent permitted by law, any right to a
trial by jury in respect of any litigation arising directly or indirectly out
of, under or in connection with any of the Basic Documents or any of the
transactions contemplated thereunder. Each party hereto (A) certifies that no
representative, agent or attorney of any party hereto has represented, expressly
or otherwise, that it would not, in the event of litigation, seek to enforce the
foregoing waiver and (B) acknowledges that it has been induced to enter into the
Basic Documents to which it is a party by, among other things, this waiver.

Section 6.10. Limited Liability.

No recourse under any Basic Document shall be had against, and no personal
liability shall attach to, any officer, employee, director, affiliate or
shareholder of any party hereto, as such, by the enforcement of any assessment
or by any legal or equitable proceeding, by virtue of any statute or otherwise
in respect of any of the Basic Documents, the Class A Notes or the Ambac Policy,
it being expressly agreed and understood that each Basic Document is solely a
corporate

                                       36
<PAGE>

obligation of each party hereto, and that any and all personal liability, either
at common law or in equity, or by statute or constitution, of every such
officer, employee, director, affiliate or shareholder for breaches of any party
hereto of any obligations under any Basic Document is hereby expressly waived as
a condition of and in consideration for the execution and delivery of this
Insurance Agreement.

Section 6.11. Entire Agreement; Facsimile Signatures.

This Insurance Agreement, the Fee Letter and the Ambac Policy set forth the
entire agreement between the parties with respect to the subject matter hereof
and thereof, and supersede and replace any agreement or understanding that may
have existed between the parties prior to the date hereof in respect of such
subject matter. Execution and delivery of this Insurance Agreement by facsimile
signature shall constitute execution and delivery of this Insurance Agreement
for all purposes hereof with the same force and effect as execution and delivery
of a manually signed copy hereof.

Section 6.12. Indenture Trustee.

The Indenture Trustee hereby acknowledges and agrees to perform all its
obligations and duties pursuant to the Basic Documents to which it is a party
thereto.

Section 6.13. Third-Party Beneficiary.

Each of the parties hereto agrees that the Insurer shall have all rights of an
intended third-party beneficiary in respect of each of the Basic Documents.

Section 6.14. No Proceedings.

Each of the parties hereto agrees that it will not institute against the Issuer
or Seller any involuntary proceeding or otherwise institute any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding or other
proceeding under any federal or state bankruptcy or similar law until the date
which is one year and one day since the last day on which any Notes shall have
been outstanding.

Section 6.15. Limited Recourse.

Each of the parties hereto agrees that any obligation of the Issuer hereunder or
under any of the other Basic Documents will be payable by the Issuer solely from
funds when, if and to the extent available for such purpose pursuant to the
Indenture and that any amount in excess of the amount so available shall not
constitute a current claim against the Issuer therefor.

                                       37
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement, all as of
the day and year first above mentioned.

                              AMBAC ASSURANCE CORPORATION,
                                as Insurer

                              By:  _________________________________
                                  Name:
                                  Title:

                              ALLIANCE LAUNDRY SYSTEMS LLC

                              By:  _________________________________
                                  Name:
                                  Title:

                              ALLIANCE LAUNDRY EQUIPMENT RECEIVABLES
                                 TRUST 2000-A, as Issuer

                              By:  _________________________________
                                  Name:
                                  Title:

                                Signature Page 1
                        Insurance and Indemnity Agreement

                                       38
<PAGE>

                              ALLIANCE LAUNDRY EQUIPMENT RECEIVABLES LLC,
                                as Seller

                              By:  _________________________________
                                  Name:
                                  Title:

                              THE BANK OF NEW YORK,
                                not in its individual capacity, but solely
                                as Indenture Trustee

                              By:  _________________________________
                                  Name:
                                  Title:

                                Signature Page 2
                        Insurance and Indemnity Agreement

                                       39
<PAGE>

                                    EXHIBIT A
                              FORM OF AMBAC POLICY
<PAGE>

                                    EXHIBIT B
                             AGREED UPON PROCEDURES
          (Can be amended with mutual agreement of Ambac and Alliance)

1.    Independent Public Accountants reasonably acceptable to the Note Insurer
      ("Auditor") will compare the aggregate amount of all Collections received
      by the Servicer during three Collection Periods selected by Auditor per
      year (each such Collection Period referred to herein as a "Review Period")
      against the amounts reported in the monthly Servicer Reports and to the
      aggregate amount of Collections indicated on the Servicer's or Alliance
      Laundry System's ("Alliance") accounting system or a "tape" derived from
      the accounting system ("Accounting Systems") noting any exceptions.

2.    Auditor will select a total of 50 (25 from Pool #1 and 25 from Pool #2)
      individual cash receipts posted to the Lockbox Account during the Review
      Periods (each such cash receipt being a "Selected Receipt"). Auditor will
      compare the amount of loan payments included on a copy of the check and
      the remittance advice relating to such Selected Receipts to against the
      amounts reflected on the Accounting Systems, noting any exceptions.

3.    For each of the Selected Receipts, Auditor will compare the amount of the
      loan payment posted to the Accounting Systems to the amount of the loan
      payment indicated in the relevant Contract and Files maintained by
      Alliance or the Servicer noting any exceptions.

4.    For any of the Selected Receipts which indicate a remittance of sales tax,
      the Auditor will trace such sales tax remittances prepared by the
      management of Alliance or the Servicer (the "Management Schedule")
      detailing tax payments received by tax jurisdiction noting any exceptions.
      Auditor will also trace the sales tax remittance to the supporting
      schedules included in the applicable sales tax return noting any
      exceptions. Auditor will recalculate the summation amounts on three of the
      ten largest sales tax returns and additionally verify that the dates on
      Alliance's or the Servicer's checks remitting payment to the respective
      states is within the required filing period.

5.    Auditor will recalculate the interest expense prepared by the Servicer for
      one Review Period by using (i) the outstanding Note balance at the
      beginning of the period as set forth in the related Servicer Report and
      (ii) the amount shown as the Note rate relating to such Review Period. The
      amount of interest expense so recalculated will be compared against the
      information provided in the monthly Servicer Report, noting any
      exceptions.

6.    Auditor will confirm the amount of early pay-offs received during each of
      the Review Periods based on a comparison of the information contained in
      the relevant Servicer Reports to the information contained in the
      Accounting Systems.

7.    Management will provide a list of all early pay-off Contracts during each
      of the Review Periods. Auditor will select a total of five Contracts
      listed as "early pay-offs" from the pay-off schedule. For each Contract so
      selected, Auditor will compare the amount deposited into the Lock-Box
      Account or the Collection Account in respect of such Contract with the
      amount of early pay-off specified in the pay-off schedule, noting any
      exceptions.
<PAGE>

8.    Using the dates reflected on the copy of the check (or top portion of the
      check) and remittance advice, Auditor will verify that the respective
      Selected Receipt posting or effective date related to the underlying loan
      transaction in the Accounting Systems was in the same month as reflected
      on the copy of the check (or top portion of the check) and the remittance
      advice noting any exceptions.

9.    Auditor will obtain from management a schedule of Contracts which have
      become Defaulted Contracts during each Review Period and will compare the
      Note Balance of each Defaulted Contract to the information on the
      Accounting Systems and on a total basis to the related Servicer Report,
      noting any exceptions.

10.   Auditor will select 10 Defaulted Contracts from each Review Period and
      trace Recoveries for each of those contracts recorded on the Accounting
      System to the related Servicer Reports, noting any exceptions.

11.   Auditor will select one monthly bank reconciliation for one Lockbox
      Account. Auditor will verify the mathematical accuracy of the bank
      reconciliation. Auditor will trace the balance per the bank to the bank
      statement, the book balance to the general ledger and the amounts listed
      as reconciling items in the bank reconciliation to the Servicer Report, as
      applicable.

12.   Auditor will select one monthly bank reconciliation for the Collection
      Account. Auditor will verify the mathematical accuracy of the bank
      reconciliation. Auditor will trace the balance per the bank to the bank
      statement, the book balance to the general ledger and the amounts listed
      as reconciling items in the bank reconciliation to the Servicer Report, as
      applicable.

13.   Auditor will verify whether the Servicer has procedures in place to
      monitor and make or cause to be made UCC financing or continuation
      statements based on reasonable details provided by the Servicer.

14.   The Servicer will conduct a mailing verification of 50 contracts
      requesting confirmation as of each fiscal year end of: (i) loan schedule
      number (if appropriate); (ii) whether the loan is still in existence;
      (iii) remaining payments; and (iv) payment amount. Auditor will compare
      responses received to such information to the information in the
      Accounting Systems, noting any exceptions.

15.   Auditor will compare the Aggregate Loan Balances and the balance for each
      Note at the close of business on the last day of each Review Period as
      reported in the Servicer Report to the information indicated in the
      Accounting Systems, noting any exceptions.

16.   For the Selected Receipts, Auditor will verify whether the Accounting
      Systems correctly identify ownership interest in the related receivables
      for the Selected Receipts.

17.   For each Review Period, Auditor will recalculate the Delinquency Ratio,
      Defaulted Ratio, and Cummulative Trigger, as defined in the Agreement set
      forth in the Servicer's records and the related Servicer Report. Auditors
      will compare such information with the numeric information used in such
      calculations in the Accounting Systems or Alliance's General Ledger, as
      applicable, noting any exceptions, and will verify the mathematical
      accuracy of the calculations.
<PAGE>

18.   Auditor will compare 10 Contracts included in the Servicer Report by
      delinquency category against the information in the Accounting Systems for
      accuracy of the aging, noting any exceptions.

19.   For each Review Period, Auditor will compare information obtained from the
      Accounting System and provided by Management to recalculate the "Pool
      Criteria", as defined in the Servicing Agreement, to information indicated
      in the related Servicer Reports, noting any exceptions.<PAGE>

                                                                    EXHIBIT 10.2

                            Household International
                        Corporate Executive Bonus Plan
                                     2000

Summary

The Household International Executive Bonus Plan is a short-term, annual
incentive plan.  The purpose of the annual bonus is to place a significant part
of pay at risk and reward executives for the achievements of individual,
business unit and corporate financial and operational goals.  Performance goals
and award opportunities will be communicated to plan participants at the
beginning of each calendar year.

Participation

Participation in the Plan will be restricted to key line and staff executives.
For purposes of the Plan, participants will be divided into groups.  (See
attached list).

Any changes in the group of executives participating in the Plan will be made by
the Chief Executive Officer, subject to the approval of the Compensation
Committee in the case of any participant whose base salary must be determined by
the Committee.

Level of Awards

The corporate measurement of performance is company-wide earnings per share,
return on equity, core receivables growth, revenue growth, equity to managed
assets ratio and products per customer ratio. Household's performance will be
measured against pre-established minimum, target and maximum levels.

Individual performance is also measured and the percentage attributed to any
particular performance objective varies by executive and may change from year-
to-year as circumstances warrant.  Management may reduce bonus awards in light
of overall business conditions or other exceptional circumstances.
<PAGE>

Target/Maximum Awards

Target awards will be paid for fully satisfactory financial and individual
performance in a given year.  The target award percentage for each group will
approximate the guideline percentage shown below of the executive's base salary
at the end of the plan year.

            Guideline % of Annual Base Salary Determined by

            Group              Target Bonus   Maximum Bonus
          ---------------------------------------------------

                A                     100%            200%
                B                     100%            125%
                C                      75%            150%
                D                      75%            125%
                E                 $62,500        $125,000
                F                      50%            100%
                G                 $50,000        $100,000
                H                      40%             80%
                I                 $40,000        $ 80,000
                J                      40%             60%
                K                 $37,500        $ 93,750
                L                      30%             60%
                M                      30%             50%
                N                      25%             50%
                O                 $25,000        $ 50,000
                P                      20%             50%
                Q                      20%             40%
                R                      20%             30%

      Detailed information relating to the assignment and weighing of goals is
      available by individual and is maintained by the business unit and/or
      corporate.

Determination of Awards
-----------------------

A.   Financial Performance Awards

     A portion of each executive's annual bonus will be determined by meeting
     specific financial performance objectives.  An award will be paid out if
     achieved results are at the pre-established minimum, target or maximum
     financial results levels.

B.   Individual Performance Awards

     Early in each plan year, goals for individual performance for that year
     will be established for each participant.  The goals should require the
     level of performance that is expected of a

                                       2
<PAGE>

     fully satisfactory incumbent and must be agreed to by the immediate
     superior. The Compensation Committee of the Board of Directors must approve
     the goals for those executives whose salaries are determined by the
     Committee. These goals will be the primary criteria for measuring
     individual performance and determining the individual performance portion
     of the bonus for that year.

     The Chief Executive Officer will recommend the awards for participants
     whose salaries are determined by the Compensation Committee of the Board of
     Directors.  The Compensation Committee will then determine the awards for
     all such participants.

     The Chief Executive Officer will determine the awards for all participants
     whose salaries are not determined by the Compensation Committee.  The CEO's
     direct reports, in consultation with their appropriate subordinates, will
     recommend to the Chief Executive Officer the awards for all other
     participants.

Payment of Awards

Awards will be paid as soon as practical at the end of the plan period, subject
to all required tax withholdings.  Awards may be paid in cash, shares of
Household common stock, or some combination thereof.  Neither eligible
participation in the plan, nor award payments thereunder shall guarantee an
employee, any right to continued employment.  The plan does not give any
employee right or claim to an award under the program.  Management reserves the
right to change or discontinue the plan at any time.

Administrative Matters

A.   Promotions/New Plan Participants

     Normally awards will be pro-rated according to the portion of the plan year
     that an incumbent is eligible for the bonus.

B.   Effect on Benefits

     Payments made under this plan shall be included in an employee's income for
     purposes of determining pension benefits, life insurance, long-term
     disability, and participation in the TRIP plan.

C.   Termination of Employment

     Normally awards will be pro-rated in the case of death, permanent and total
     disability, or retirement under one of the Corporation's pension plans
     during a plan year.  If a participant terminates employment for any other
     reason prior to the last working day of a plan year, he will normally
     forfeit any right to an award for the plan year.

                                       3
<PAGE>

                           The Goal Setting Process

Before the beginning of the plan year, the manager and subordinate will meet in
a goal setting session.  The purpose of the session is to discuss areas where
goals will be established and agree on their priority and establish the number
of points that will be earned based upon various levels of achievement during
the plan period.

                   Preparation for the Goal Setting Meeting

To prepare for the goal setting session with the bonus eligible subordinate, the
manager should have a clear idea of function or department goals and objectives
for the plan year, priorities for the subordinate's unit or area, and three or
four possible objectives to suggest as appropriate.  During the session, the
manager's role will be to direct the discussion and ensure that its results are
jointly understood.

The subordinate will prepare for the session by establishing a list of
priorities for the unit or area during the plan year, and developing four to
eight potential goals for discussion.  The subordinate's role during the session
will be to actively discuss goals and expected levels of achievement with the
manager. This is to ensure that the final agreement is realistic and achievable
and that there is a clear understanding of expected performance and the amount
of bonus associated with various levels of achievement.

                         Guidelines for Setting Goals

For the purpose of establishing goals for the plan year, the following criteria
should apply:

  .  Goals should be consistent and supportive of goals reflected in the
     Company's strategic business plans.

  .  Goals should be primarily job or task oriented.  They must be realistic and
     achievable yet challenging with built in "stretch" to test individual
     capabilities.  They should clearly specify action, tasks or results to be
     accomplished as well as a clear understanding of how the accomplishment
     will be evaluated.

  .  Goals must be understood and agreed to by both the manager and the
     subordinate.

Setting goals for staff positions is somewhat more difficult than for line-type
positions because staff performance is usually not measured numerically and
rarely lends itself to quantitative measurement.  Staff responsibilities tend to
be contributory, interpretive and are more easily measured qualitatively.
Frequently, the goals may include completion of specific projects.  Non-
quantitative goals should clearly state the criteria that will be used for
evaluating successful achievement.

The results of the goal setting process will be documented in the format of the
Executive Bonus Plan Goal Setting Form and approved by the appropriate level of
management.

                                       4
<PAGE>

GROUP/TITLE
--------------------------------------

Group A - 100%/200%
-------------------
Director Personal Bank
Group Director-Business Development
Managing Director CEO HAF
Managing Director, HFCPS
Managing Director-HFS
Managing Director, Consumer Finance Sales
Regional General Manager

Group B - 100%/125%
-------------------
National Sales Director

Group C - 75%/150%
------------------
Managing Director-CEO HRS USA
Managing Director-Operations

Group D - 75%/125%
------------------
Managing Director-Canada

Group E - $62,500/$125,000
--------------------------
VP-Collections

Group F - 50%/100%
------------------
Chief Credit Officer
Director-Sales HH Direct
Division General Manager
Group Director of Sales - HIG
Group Director-Business Development & Marketing
Managing Director - Commercial Finance
Managing Director-HTMI
Managing Director Equipment Finance
National Director, Sales Finance
National Director-Business Development & Client Relations
President - Decision One
Senior VP - Credit
Senior VP - Finance
Senior VP Systems
Senior VP-Loan Production
Senior VP-Operations
VP- Lending
VP-Marketing
VP-Secondary Marketing & Acquisitions

Group G - $50,000/$100,000
--------------------------
VP, Wholesale Servicing

Group H - 40%/80%
-----------------
Group Director Sales & Telemarketing
Managing Director-Controller HI
VP-Corporate Finance
VP-Treasurer

                                       5
<PAGE>

Group I - $40,000/$80,000
-------------------------
Director, Collections
VP - Flow Business

Group J - 40%/60%
-----------------
Assistant General Counsel-Litigation
Chief Financial & Credit Policy Officer
Chief Financial Officer-HAF
Chief Financial Officer-HFC
Chief Credit Officer (Group Director)
Deputy Managing Director-COO (HRS)
Group Director Asset Management
Group Director Risk Management
Group Director, Operations RCS
Group Director-Collections
Household Direct
Managing Director - HIG
Managing Director/CFO
Managing Director of Marketing (HCS)
Managing Director Credit Policy & Risk Control
Managing Director-Operations
Managing Director-Networked Systems
Managing Director-Strategic Initiatives
National Director-Financial Control
National Director-Portfolio Management
Senior Vice President & CFO
VP Data Center Operations
VP Portfolio Management
VP-Applications Systems
VP-Corporate Law & Assistant Secretary
VP-Credit Policy
VP-Government Relations
VP-Human Resources (HFC)
VP-Investor Relations
VP-Money & Capital Markets
VP-Taxes

Group K - $37,500/$93,750
-------------------------
Assistant to the Group Executive

Group L - 30%/60%
-----------------
Regional Director - Sales

Group M - 30%/50%
-----------------
Assistant Controller
Assistant General Counsel-Employee Relations
Chief Financial Officer-UK
Director Sales Support/MIS
Director Asset Backed Financing
Director of Operations UK
Director/Special Project Consultant
Director-Fraud/Operations
Director-Processing Services-Canada

                                       6
<PAGE>

Group M - 30%/50% (continued)
-----------------------------
Group Director-Customer Relations Management
Group Director-HCS Marketing
Group Director-Risk Control
Group General Counsel
Group Director-Information Management
National Director-Credit Policy, Pricing ,Profitability
National Director-Customer Service
VP-Audit
VP-Items Processing
VP-Portfolio Management
VP-Specialty Finance

Group N - 25%/50%
-----------------
Director  Acquisitions & Relations Management
Director-Credit Policy Administration
Director-Credit Policy (#1)
Group Director-Client Services & Collections

Group O - $25,000/$50,000
-------------------------
Director-Wholesale Acquisition

Group P - 20%/50%
-----------------
Director, REN Risk Control

Group Q - 20%/40%
-----------------
Chief Financial Officer/Direct
Controller
Controller-HH Direct
Director-ALM
Director-Credit Operations
Director-Credit Policy (#2)
Director-Customer Management Strategy
Director-Marketing
Director-Project Control
Director-Strategy & Development
General Counsel

Group Q - 20%/40% (continued)
-----------------------------
Group Director Marketing Strategy
Group Director - Marketing
VP Data Architecture & System
VP Human Resources
VP-Benefits & Policy
VP-Chief Financial Officer-HTS
VP-Compensation & HR Administration
VP-Facilities Management
VP-Finance-Specialty Finance HFC
VP-Networked Systems
VP-Service Delivery
VP-Training & Development & Communications

                                       7
<PAGE>

Group R - 20%/30%
-----------------
Actuarial Director
Controller-HCS
Controller-HRSI
Director Information & Decision Analysis
Director Reconciliation & Financial Information Systems
Director Government. Relations & Regulatory Issues
Director-Business Analysis HCS
Director-Business Unit Accounting
Director-Communications & Distributed Services
Director-Compliance Administration
Director-Data Center Operations
Director Cash Operations
Director, Corporate & Treasury Accounting
Director/Special Project Consultant
Director-ALG Systems & Loan Processes
Director-Business Systems
Director-Business Treasury
Director-Corporate Purchasing
Director-Customer Relations
Director-Customer Service
Director-Federal Tax Audit
Director-HCS Marketing
Director-Investor Relations
Director-Item Processing
Director-Operations Services
Director-Regulatory Reporting
Director-Tax Planning & Tax Counsel
Director-Telephone Services
Director-Federal & State Tax Compliance
Director-HFC Policy & Compliance Support
Director-Information Technology
Director-Insurance Taxation & Counsel
Director-Inter-corporate Risk & Compliance
Director-Operations Support

Group R - 20%/30% (continued)
-----------------------------
Group Director-Credit Operations
Group Director-Customer Service
Group Director-Profitability
VP Property Management
VP, Technical Services
VP-Finance & Administration
VP-Financial Control
VP-HFC Operation Support
VP-Insurance & Risk Finance
VP-Sales & Marketing

                                       8

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