Document:

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                  ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1999-C

               6.25% Class A-1 Automobile Receivables-Backed Notes
               6.90% Class A-2 Automobile Receivables-Backed Notes
               7.20% Class A-3 Automobile Receivables-Backed Notes

                                    INDENTURE

                          Dated as of September 1, 1999

                  NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
                     Trustee and Indenture Collateral Agent

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<TABLE>
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                              CROSS REFERENCE TABLE
   TIA                                                                  Indenture
SECTION                                                                 SECTION
-------                                                                 ---------
<S>                                                                     <C>
310(a)(1)...........................................................    6.11
     (a)(2).........................................................    6.11
     (a)(3).........................................................    6.10
     (a)(4).........................................................    N.A.2
     (a)(5).........................................................    6.11
     (b)............................................................    6.08; 6.11
     (c)............................................................    N.A.
311(a)..............................................................    6.12
     (b)............................................................    6.12
     (c)............................................................    N.A.
312(a)..............................................................    7.01
     (b)............................................................    7.02
     (c)............................................................    7.02
313(a)..............................................................    7.04
     (b)(1).........................................................    7.04
     (b)(2).........................................................    7.04
     (c)............................................................    11.05
     (d)............................................................    7.04
314(a)..............................................................    7.03
     (b)............................................................    3.06;
11.15
     (c)(1).........................................................    11.01
     (c)(2).........................................................    11.01
     (c)(3).........................................................    11.01
     (d)............................................................    11.01
     (e)............................................................    11.01
     (f)............................................................    11.01
315(a)..............................................................    6.01
     (b)............................................................    6.05;
11.05
     (c)............................................................    6.01
     (d)............................................................    6.01
     (e)............................................................    5.14
316(a)(last sentence)...............................................    1.01
     (a)(1)(A)......................................................    5.12
     (a)(1)(B)......................................................    5.13
     (a)(2).........................................................    N.A.
     (b)............................................................    5.08
     (c)............................................................    N.A.
317(a)(1)...........................................................    5.03
     (a)(2).........................................................    5.03
     (b)............................................................    3.03
318(a)..............................................................    11.07

</TABLE>

1    Note: This Cross Reference Table shall not, for any purpose, be deemed to
     be part of this Indenture.
2    N.A. means Not Applicable.

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<TABLE>
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                                TABLE OF CONTENTS
                                                                                          Page

ARTICLE I
         <S>                                                                              <C>

         DEFINITIONS AND INCORPORATION BY REFERENCE..........................................3
         SECTION 1.01.  DEFINITIONS..........................................................3
         SECTION 1.02.  INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT...................13
         SECTION 1.03.  RULES OF CONSTRUCTION...............................................13

ARTICLE II

         THE NOTES..........................................................................14
         SECTION 2.01.  FORM................................................................14
         SECTION 2.02.  EXECUTION, AUTHENTICATION AND DELIVERY..............................14
         SECTION 2.03.  TEMPORARY NOTES.....................................................15
         SECTION 2.04.  REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE.................15
         SECTION 2.05.  MUTILATED, DESTROYED, LOST OR STOLEN NOTES..........................17
         SECTION 2.06.  PERSON DEEMED OWNER.................................................17
         SECTION 2.07.  PAYMENT OF PRINCIPAL AND INTEREST...................................18
         SECTION 2.08.  CANCELLATION........................................................19
         SECTION 2.09.  BOOK-ENTRY NOTES....................................................19
         SECTION 2.10.  NOTICES TO DEPOSITORY...............................................20
         SECTION 2.11.  DEFINITIVE NOTES....................................................20

ARTICLE III

         COVENANTS..........................................................................20
         SECTION 3.01.  PAYMENT OF PRINCIPAL, INTEREST AND PREMIUM..........................20
         SECTION 3.02.  MAINTENANCE OF OFFICE OR AGENCY.....................................21
         SECTION 3.03.  MONEY FOR PAYMENTS TO BE HELD IN TRUST..............................21
         SECTION 3.04.  EXISTENCE...........................................................23
         SECTION 3.05.  PROTECTION OF TRUST ESTATE..........................................23
         SECTION 3.06.  OPINIONS AS TO TRUST ESTATE.........................................24
         SECTION 3.07.  PERFORMANCE OF OBLIGATIONS; SERVICING OF RECEIVABLES................24
         SECTION 3.08.  NEGATIVE COVENANTS..................................................25
         SECTION 3.09.  ANNUAL STATEMENT AS TO COMPLIANCE...................................26
         SECTION 3.10.  ISSUER MAY CONSOLIDATE, ETC. ONLY ON CERTAIN TERMS..................26
         SECTION 3.11.  SUCCESSOR OR TRANSFEREE.............................................29
         SECTION 3.12.  NO OTHER BUSINESS...................................................29
         SECTION 3.13.  NO BORROWING........................................................29
         SECTION 3.14.  SERVICER'S OBLIGATIONS..............................................29
         SECTION 3.15.  GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES...................29
         SECTION 3.16.  CAPITAL EXPENDITURES................................................30
         SECTION 3.17.  RESTRICTED PAYMENTS.................................................30
         SECTION 3.18.  NOTICE OF EVENTS OF DEFAULT.........................................30
         SECTION 3.19.  FURTHER INSTRUMENTS AND ACTS........................................30
         SECTION 3.20.  COMPLIANCE WITH LAWS................................................30
         SECTION 3.21.  AMENDMENTS OF SALE AND

                                      - i -
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                  SERVICING AGREEMENT AND TRUST AGREEMENT...................................30
         SECTION 3.22.  REMOVAL OF ADMINISTRATOR............................................30
         SECTION 3.23.  INCOME TAX CHARACTERIZATION.........................................31

ARTICLE IV

         SATISFACTION AND DISCHARGE.........................................................31
         SECTION 4.01.  SATISFACTION AND DISCHARGE OF INDENTURE.............................31
         SECTION 4.02.  APPLICATION OF TRUST MONEY..........................................32
         SECTION 4.03.  REPAYMENT OF MONEYS HELD BY PAYING AGENT............................32
         SECTION 4.04.  RELEASE OF TRUST ESTATE.............................................32

ARTICLE V

         REMEDIES...........................................................................33
         SECTION 5.01.  EVENTS OF DEFAULT...................................................33
         SECTION 5.02.  RIGHTS UPON EVENT OF DEFAULT........................................34
         SECTION 5.03.  COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE;
                  AUTHORITY OF CONTROLLING PARTY............................................35
         SECTION 5.04.  REMEDIES............................................................38
         SECTION 5.05.  OPTIONAL PRESERVATION OF THE RECEIVABLES............................39
         SECTION 5.06.  PRIORITIES..........................................................39
         SECTION 5.07.  LIMITATION OF SUITS.................................................40
         SECTION 5.08.  UNCONDITIONAL RIGHTS OF NOTEHOLDERS
                  TO RECEIVE PRINCIPAL AND INTEREST.........................................41
         SECTION 5.09.  RESTORATION OF RIGHTS AND REMEDIES..................................41
         SECTION 5.10.  RIGHTS AND REMEDIES CUMULATIVE......................................42
         SECTION 5.11.  DELAY OR OMISSION NOT A WAIVER......................................42
         SECTION 5.12.  CONTROL BY NOTEHOLDERS..............................................42
         SECTION 5.13.  WAIVER OF PAST DEFAULTS.............................................43
         SECTION 5.14.  UNDERTAKING FOR COSTS...............................................43
         SECTION 5.15.  WAIVER OF STAY OR EXTENSION LAWS....................................43
         SECTION 5.16.  ACTION ON NOTES.....................................................43
         SECTION 5.17.  PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS..................44
         SECTION 5.18.  CLAIMS UNDER NOTE POLICY............................................45
         SECTION 5.19.  PREFERENCE CLAIMS...................................................46

ARTICLE VI

         THE TRUSTEE AND THE INDENTURE COLLATERAL AGENT.....................................47
         SECTION 6.01.  DUTIES OF TRUSTEE...................................................47
         SECTION 6.02.  RIGHTS OF TRUSTEE...................................................50
         SECTION 6.03.  INDIVIDUAL RIGHTS OF TRUSTEE........................................51
         SECTION 6.04.  TRUSTEE'S DISCLAIMER................................................51
         SECTION 6.05.  NOTICE OF DEFAULTS..................................................51
         SECTION 6.06.  REPORTS BY TRUSTEE TO HOLDERS.......................................52
         SECTION 6.07.  COMPENSATION AND INDEMNITY..........................................52
         SECTION 6.08.  REPLACEMENT OF TRUSTEE..............................................53
         SECTION 6.09.  SUCCESSOR TRUSTEE BY MERGER.........................................54

                                     - ii -
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         SECTION 6.10.  APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.......................55
         SECTION 6.11.  ELIGIBILITY; DISQUALIFICATION.......................................56
         SECTION 6.12.  PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER....................56
         SECTION 6.13.  APPOINTMENT AND POWERS..............................................56
         SECTION 6.14.  PERFORMANCE OF DUTIES...............................................57
         SECTION 6.15.  LIMITATION ON LIABILITY.............................................57
         SECTION 6.16.  RELIANCE UPON DOCUMENTS.............................................57
         SECTION 6.17.  SUCCESSOR INDENTURE COLLATERAL AGENT................................58
         SECTION 6.18.  COMPENSATION AND INDEMNITY..........................................59
         SECTION 6.19.  REPRESENTATIONS AND WARRANTIES OF THE INDENTURE COLLATERAL AGENT....60
         SECTION 6.20.  WAIVER OF SETOFFS...................................................60
         SECTION 6.21.  CONTROL BY THE CONTROLLING PARTY....................................61

ARTICLE VII

         NOTEHOLDERS' LISTS AND REPORTS.....................................................61
         SECTION 7.01.  ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES TO NOTEHOLDERS........61
         SECTION 7.02.  PRESERVATION OF INFORMATION; COMMUNICATIONS TO NOTEHOLDERS..........61
         SECTION 7.03.  REPORTS BY ISSUER...................................................62
         SECTION 7.04.  REPORTS BY TRUSTEE..................................................62

ARTICLE VIII

         ACCOUNTS, DISBURSEMENTS AND RELEASES...............................................62
         SECTION 8.01.  COLLECTION OF MONEY.................................................62
         SECTION 8.02.  TRUST ACCOUNTS......................................................63
         SECTION 8.03.  GENERAL PROVISIONS REGARDING ACCOUNTS...............................64

ARTICLE IX

         SUPPLEMENTAL INDENTURES............................................................64
         SECTION 9.01.  SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS..............64
         SECTION 9.02.  SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS.................65
         SECTION 9.03.  EXECUTION OF SUPPLEMENTAL INDENTURES................................67
         SECTION 9.04.  EFFECT OF SUPPLEMENTAL INDENTURE....................................67
         SECTION 9.05.  CONFORMITY WITH TRUST INDENTURE ACT.................................67
         SECTION 9.06.  REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES.......................68

ARTICLE X

         REDEMPTION OF NOTES................................................................68
         SECTION 10.01.  REDEMPTION.........................................................68
         SECTION 10.02.  FORM OF REDEMPTION NOTICE..........................................69
         SECTION 10.03.  NOTES PAYABLE ON REDEMPTION DATE...................................69

ARTICLE XI

         MISCELLANEOUS......................................................................70
         SECTION 11.01.  COMPLIANCE CERTIFICATES AND OPINIONS, ETC..........................70
         SECTION 11.02.  FORM OF DOCUMENTS DELIVERED TO TRUSTEE.............................72
         SECTION 11.03.  ACTS OF NOTEHOLDERS................................................72
         SECTION 11.04.  NOTICES, ETC., TO TRUSTEE, ISSUER AND RATING AGENCIES..............73
         SECTION 11.05  NOTICES TO NOTEHOLDERS; WAIVER......................................74

                                     - iii -
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         SECTION 11.06.  ALTERNATE PAYMENT AND NOTICE PROVISIONS............................75
         SECTION 11.07.  CONFLICT WITH TRUST INDENTURE ACT..................................75
         SECTION 11.08.  EFFECT OF HEADINGS AND TABLE OF CONTENTS...........................75
         SECTION 11.09.  SUCCESSORS AND ASSIGNS.............................................75
         SECTION 11.10.  SEVERABILITY.......................................................75
         SECTION 11.11.  BENEFITS OF INDENTURE..............................................75
         SECTION 11.12.  LEGAL HOLIDAYS.....................................................76
         SECTION 11.13.  GOVERNING LAW......................................................76
         SECTION 11.14.  COUNTERPARTS.......................................................76
         SECTION 11.15.  RECORDING OF INDENTURE.............................................76
         SECTION 11.16.  TRUST OBLIGATION...................................................76
         SECTION 11.17.  NO PETITION........................................................77
         SECTION 11.18.  INSPECTION.........................................................77
         SECTION 11.19.  LIMITATION OF LIABILITY............................................77
         SECTION 11.20.  NO SUBSTANTIVE REVIEW OF COMPLIANCE DOCUMENTS......................77
</TABLE>

                                     - iv -
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Exhibit A          --      Schedule of Receivables
Exhibit B          --      Form of Depository Agreement
Exhibit C-1        --      Form of Class A-1 Note
Exhibit C-2        --      Form of Class A-2 Note
Exhibit C-3        --      Form of Class A-3 Note
Exhibit D          --      Form of Note Policy
Exhibit E          --      Letter Agreement Between AFL and the Trustee

                                      - vi -
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                  INDENTURE, dated as of September 1, 1999, between ARCADIA
AUTOMOBILE RECEIVABLES TRUST, 1999-C, a Delaware business trust (the "Issuer"),
and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, in its capacities as trustee
(the "Trustee") and as Indenture Collateral Agent (as defined below) and not in
its individual capacity.

                  Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Issuer's 6.25%
Class A-1 Automobile Receivables- Backed Notes (the "Class A-1 Notes"), 6.90%
Class A-2 Automobile Receivables-Backed Notes (the "Class A-2 Notes") and 7.20%
Class A-3 Automobile Receivables-Backed Notes (the "Class A-3 Notes" and,
together with the Class A-1 Notes and the Class A-2 Notes, the "Notes"):

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

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

                  As an inducement to the Security Insurer to issue and deliver
the Note Policy, the Issuer and the Security Insurer have executed and delivered
the Insurance and Indemnity Agreement, dated as of September 22, 1999 (as
amended from time to time, the "Insurance Agreement"), among the Security
Insurer, the Issuer, Arcadia Receivables Finance Corp. and Arcadia Financial
Ltd.

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

                                 GRANTING CLAUSE

                  The Issuer hereby Grants to the Indenture Collateral Agent at
the Closing Date, on behalf of and for the benefit of the Issuer Secured Parties
to secure the performance of the respective Issuer Secured Obligations, all of
the Issuer's right, title and interest now owned or hereafter acquired in and to
(a) the Initial Receivables and all moneys paid or payable thereon or

                                      - 1 -
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in respect thereof after the Initial Cutoff Date (including amounts due on or
before the Initial Cutoff Date but received by AFL, the Seller or the Issuer
after the Initial Cutoff Date); (b) the Subsequent Receivables and all moneys
paid or payable thereon or in respect thereof after the related Subsequent
Cutoff Date (including amounts due on or before the related Subsequent Cutoff
Date but received by AFL, the Seller or the Issuer after the related Subsequent
Cutoff Date); (c) an assignment of the security interests of AFL in the Financed
Vehicles; (d) the Insurance Policies and any proceeds from any Insurance
Policies relating to the Receivables, the Obligors or the Financed Vehicles,
including rebates of premiums, all Collateral Insurance and any Force-Placed
Insurance relating to the Receivables; (e) an assignment of the rights of AFL or
the Seller against Dealers with respect to the Receivables under the Dealer
Agreements and the Dealer Assignments, (f) all items contained in the Receivable
Files and any and all other documents that AFL keeps on file in accordance with
its customary procedures relating to the Receivables, the Obligors or the
Financed Vehicles, (g) an assignment of the rights of the Seller under the
Purchase Agreement and each Subsequent Purchase Agreement, (h) property
(including the right to receive future Liquidation Proceeds) that secures a
Receivable and that has been acquired by or on behalf of the Trust pursuant to
liquidation of such Receivable, (i) the Trust Accounts and all funds on deposit
therein from time to time, and in all investments and proceeds thereof
(including all income thereon), (j) the Purchase Agreement and each Subsequent
Purchase Agreement, including the right assigned to the Issuer to cause AFL to
repurchase Receivables from the Seller under certain circumstances, (k) the Sale
and Servicing Agreement and each Subsequent Transfer Agreement (including all
rights of the Seller under the Purchase Agreement and each Subsequent Purchase
Agreement assigned to the Issuer pursuant to the Sale and Servicing Agreement),
and (l) all present and future claims, demands, causes and choses in action in
respect of any or all of the foregoing and all payments on or under and all
proceeds of every kind and nature whatsoever in respect of any or all of the
foregoing, including all proceeds of the conversion, voluntary or involuntary,
into cash or other liquid property, all cash proceeds, accounts, accounts
receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts,
insurance proceeds, condemnation awards, rights to payment of any and every kind
and other forms of obligations and receivables, instruments and other property
which at any time constitute all or part of or are included in the proceeds of
any of the foregoing (collectively, the "Indenture Collateral").

                  The Indenture Collateral Agent, for the benefit of the Trustee
on behalf of the Holders of the Notes and for the benefit of the Security
4Insurer acknowledges such Grant. The Trustee on behalf of the Holders of the
Notes accepts the trusts under this Indenture in accordance with the provisions
of this Indenture and agrees to perform its duties required in this Indenture to
the best of its ability to the end that the interests of the Holders of the
Notes may be adequately and effectively protected.

                                    ARTICLE I

                   DEFINITIONS AND INCORPORATION BY REFERENCE

                                      - 2 -
<PAGE>

                  SECTION 1.01.  DEFINITIONS.

                  (a)      Except as otherwise specified herein or as the
context may otherwise require, the following terms have the respective meanings
set forth below for all purposes of this Indenture.

                  "ACT" has the meaning specified in Section 11.03(a).

                  "ADMINISTRATOR" has the meaning specified therefor in the
Trust Agreement.

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

                  "AUTHORIZED OFFICER" means, with respect to the Issuer, any
officer of the Owner Trustee who is authorized to act for the Owner Trustee in
matters relating to the Issuer and who is identified on the list of Authorized
Officers delivered by the Owner Trustee to the Trustee on the Closing Date (as
such list may be modified or supplemented from time to time thereafter).

                  "BOOK-ENTRY NOTE" means any Note registered in the name of the
Depository or its nominee, ownership of which is reflected on the books of the
Depository or on the books of a person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).

                  "BUSINESS DAY" means any day other than a Saturday, Sunday,
legal holiday or other day on which commercial banking institutions in
Minneapolis, Minnesota, New York, New York, Wilmington, Delaware or any other
location of any successor Servicer, successor Owner Trustee, successor Trustee
or successor Indenture Collateral Agent are authorized or obligated by law,
executive order or governmental decree to remain closed.

                  "CERTIFICATE OF TRUST" means the Certificate of Trust of the
Issuer substantially in the form of Exhibit A to the Trust Agreement.

                  "CLASS A-1 INTEREST RATE" means 6.25% per annum (computed on
the basis of a 360-day year of twelve 30-day months).

                  "CLASS A-2 INTEREST RATE" means 6.90% per annum (computed on
the basis of a 360-day year of twelve 30-day months).

                                      - 3 -
<PAGE>

                  "CLASS A-3 INTEREST RATE" means 7.20% per annum (computed on
the basis of a 360-day year of twelve 30-day months).

                  "CLASS A-1 NOTES" means the 6.25% Class A-1 Automobile
Receivables-Backed Notes substantially in the form of Exhibit C-1.

                  "CLASS A-2 NOTES" means the 6.90% Class A-2 Automobile
Receivables-Backed Notes substantially in the form of Exhibit C-2.

                  "CLASS A-3 NOTES" means the 7.20% Class A-3 Automobile
Receivables-Backed Notes substantially in the form of Exhibit C-3.

                  "CLOSING DATE" means September 22, 1999.

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

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

                  "CORPORATE TRUST OFFICE" means the principal office of the
Trustee at which at any particular time its corporate trust business shall be
administered which office at date of the execution of this Agreement is located
at MAC N9311-161, Sixth Street and Marquette Avenue, Minneapolis, MN 55479,
Attention: Corporate Trust Services--Asset Backed Administration; or at such
other address as the Trustee may designate from time to time by notice to the
Noteholders, the Security Insurer and the Issuer, or the principal corporate
trust office of any successor Trustee (the address of which the successor
Trustee will notify the Noteholders, the Security Insurer and the Issuer).

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

                  "DEFINITIVE NOTES" has the meaning specified in Section 2.09.

                  "DEPOSITORY" means the initial Depository, The Depository
Trust Company, the nominee of which is Cede & Co., as the registered Holder of
$242,000,000 in aggregate principal amount of the Class A-1 Notes, $150,000,000
in aggregate principal amount of the Class A-2 Notes and $208,000,000 in
aggregate principal amount of the Class A-3 Notes as of the Closing Date, and
any permitted successor depository. The Depository shall at all times be a
"clearing corporation" as defined in Section 8-102(3) of the New York UCC.

                                      - 4 -
<PAGE>

                  "DEPOSITORY AGREEMENT" means the agreement among the Issuer,
the Trustee and The Depository Trust Company, as the initial Depository, dated
as of the Closing Date, relating to the Notes substantially in the form of
Exhibit B.

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

                  "EVENT OF DEFAULT" has the meaning specified in Section 5.01.

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

                  "EXECUTIVE OFFICER" means, with respect to any corporation,
the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer,
President, Executive Vice President, any Vice President, any Responsible
Officer, the Secretary or the Treasurer of such corporation; and with respect to
any partnership, any general partner thereof.

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

                  "HOLDER" or "NOTEHOLDER" means the Person in whose name a Note
is registered on the Note Register.

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

                                      - 5 -
<PAGE>

creditor against loss; (g) obligations of such Person secured by any lien on
property or assets of such Person, whether or not the obligations have been
assumed by such Person; or (h) obligations of such Person under any interest
rate or currency exchange agreement.

                  "INDENTURE" means this Indenture as amended or supplemented
from time to time.

                  "INDENTURE COLLATERAL" has the meaning specified in the
Granting Clause of this Indenture.

                  "INDENTURE COLLATERAL AGENT" means, initially, Norwest Bank
Minnesota, National Association, in its capacity as collateral agent on behalf
of the Issuer Secured Parties, including its successors in interest, until and
unless and a successor Person shall have become the Indenture Collateral Agent
pursuant to Section 6.17 hereof, and thereafter "Indenture Collateral Agent"
shall mean such successor Person.

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

                  "INDEPENDENT CERTIFICATE" means a certificate or opinion to be
delivered to the Indenture Collateral Agent under the circumstances described
in, and otherwise complying with, the applicable requirements of Section 11.01,
made by an Independent appraiser or other expert appointed by an Issuer Order
and approved by the Indenture Collateral Agent in the exercise of reasonable
care, and such opinion or certificate shall state that the signer has read the
definition of "Independent" in this Indenture and that the signer is Independent
within the meaning thereof.

                  "INSURANCE AGREEMENT INDENTURE CROSS DEFAULT" has the meaning
specified therefor in the Insurance Agreement.

                  "INSURER ISSUER SECURED OBLIGATIONS" means all amounts and
obligations which the Issuer may at any time owe to or on behalf of the Security
Insurer under this Indenture, the Insurance Agreement or any other Related
Document.

                  "INTEREST RATE" means the Class A-1 Interest Rate, the Class
A-2 Interest Rate and the Class A-3 Interest Rate, as applicable.

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

                                      - 6 -
<PAGE>

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

                  "ISSUER SECURED OBLIGATIONS" means the Insurer Issuer Secured
Obligations and the Trustee Issuer Secured Obligations.

                  "ISSUER SECURED PARTIES" means each of the Trustee in respect
of the Trustee Issuer Secured Obligations and the Security Insurer in respect of
the Insurer Issuer Secured Obligations.

                  "LETTER AGREEMENT" has the meaning specified in Section 6.07.

                  "NOTE" means a Class A-1 Note, Class A-2 Note or Class A-3
Note, as applicable.

                  "NOTE OWNER" means, with respect to a Book-Entry Note, the
Person who is the owner of such Book-Entry Note, as reflected on the books of
the Depository, or on the books of a Person maintaining an account with such
Depository (directly as a Depository participant or as an indirect participant,
in each case in accordance with the rules of such Depository) and with respect
to any Definitive Notes, the Holder.

                  "NOTE POLICY" means the Financial Guaranty Insurance Policy
issued by the Security Insurer with respect to the Notes, including any
endorsements thereto, in the form of Exhibit D.

                  "NOTE POLICY CLAIM AMOUNT" has the meaning specified in
Section 5.18.

                  "NOTE REGISTER" and "NOTE REGISTRAR" have the respective
meanings specified in Section 2.04.

                  "NOTICE OF CLAIM" has the meaning specified in Section 5.18.

                  "OFFICERS' CERTIFICATE" means a certificate signed by any
Authorized Officer of the Issuer, under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.01, and
delivered to, the Trustee. Unless otherwise specified, any reference in this
Indenture to an Officers' Certificate shall be to an Officers' Certificate of
any Authorized Officer of the Issuer.

                  "OPINION OF COUNSEL" means one or more written opinions of
counsel who may, except as otherwise expressly provided in this Indenture, be
employees of or counsel to the Issuer and who shall be satisfactory to the
Trustee and, if addressed to the

                                      - 7 -
<PAGE>

Security Insurer, satisfactory to the Security Insurer, and which shall comply
with any applicable requirements of Section 11.01, and shall be in form and
substance satisfactory to the Trustee, and if addressed to the Security Insurer,
satisfactory to the Security Insurer. Such Opinion of Counsel shall not be at
the expense of the Trustee.

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

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

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

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

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

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

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

                                      - 8 -
<PAGE>

                  "PAYING AGENT" shall initially mean the Trustee or, with
respect to any successor to the Trustee, any other Person that meets the
eligibility standards for the Trustee specified in Section 6.11 and, so long as
no Insurer Default shall have occurred and be continuing, is consented to by the
Security Insurer and is authorized by the Issuer to make the distributions from
the Note Distribution Account, including payment of principal of or interest on
the Notes on behalf of the Issuer.

                  "PAYMENT DATE" means a Distribution Date.

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

                  "PREDECESSOR NOTE" means, with respect to any particular Note,
every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purpose of this definition, any
Note authenticated and delivered under Section 2.05 in lieu of a mutilated,
lost, destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.

                  "PREFERENCE CLAIM" has the meaning specified in Section 5.19.

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

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

                  "RATING AGENCY CONDITION" means, with respect to any action,
that each Rating Agency shall have been given 10 days' prior notice thereof and
that each of the Rating Agencies shall have notified the Seller, the Servicer,
the Security Insurer, the Trustee, the Owner Trustee and the Issuer in writing
that such action will not result in a reduction or withdrawal of the then
current rating of the Notes and will not result in an increased capital charge
to the Security Insurer.

                  "RECORD DATE" means, with respect to a Payment Date or
Redemption Date, the close of business on the last Business Day immediately
preceding such Payment Date or Redemption Date.

                  "REDEMPTION DATE" means (a) in the case of a redemption of the
Notes pursuant to Section 10.01(a) or a payment to Noteholders pursuant to
Section 10.01(c), the Payment Date

                                      - 9 -
<PAGE>

specified by the Servicer or the Issuer pursuant to Section 10.01(a) or
10.01(c), as applicable, or (b) in the case of a redemption of Notes pursuant to
Section 10.01(b), the Payment Date on or immediately following the last day of
the Funding Period.

                  "REDEMPTION PRICE" means (a) in the case of a redemption of
the Notes pursuant to Section 10.01(a), an amount equal to the principal amount
of the Notes redeemed plus accrued and unpaid interest on the principal amount
of each class of Notes at the respective Interest Rate for each such class of
Notes being so redeemed to but excluding the Redemption Date, or (b) in the case
of a payment made to Noteholders pursuant to Section 10.01(c), the amount on
deposit in the Note Distribution Account, but not in excess of the amount
specified in clause (a) above.

                  "REGISTERED HOLDER" means the Person in whose name a Note is
registered on the Note Register on the applicable Record Date.

                  "RELATED DOCUMENTS" means the Trust Agreement, the Notes, the
Purchase Agreements, the Sale and Servicing Agreement, each Subsequent Purchase
Agreement, each Subsequent Transfer Agreement, the Administration Agreement, the
Custodian Agreement, the Note Policy, the Spread Account Agreement, the
Insurance Agreement, the Lockbox Agreement, the Stock Pledge Agreement, the
Depository Agreement and the Underwriting Agreement between the Seller and AFL
and the underwriters of the Notes. The Related Documents executed by any party
are referred to herein as "such party's Related Documents," "its Related
Documents" or by a similar expression.

                  "RESPONSIBLE OFFICER" means, with respect to the Trustee, any
officer assigned to the Corporate Trust Division (or any successor thereto),
including any Vice President, Assistant Vice President, Trust Officer, any
Assistant Secretary, any trust officer or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and having direct responsibility for the administration of
the Trust. When used with respect to any other Person that is not an individual,
the President, any Vice President or Assistant Vice President or the Controller
of such Person, or any other officer or employee having similar functions.

                  "SALE AND SERVICING AGREEMENT" means the Sale and Servicing
Agreement, dated as of September 1, 1999, among the Issuer, the Seller, the
Servicer and the Backup Servicer.

                  "SCHEDULE OF RECEIVABLES" means the listing of the Receivables
set forth in Exhibit A, as supplemented on each Subsequent Transfer Date to
reflect the sale to the Issuer of Subsequent Receivables.

                  "SCHEDULED PAYMENTS" has the meaning specified therefor in the
Note Policy.

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

                                     - 10 -
<PAGE>

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

                  "TRUST ESTATE" means all money, instruments, rights and other
property that are subject or intended to be subject to the lien and security
interest of this Indenture for the benefit of the Noteholders (including,
without limitation, the Indenture Collateral Granted to the Indenture Collateral
Agent), including all proceeds thereof.

                  "TRUST INDENTURE ACT" OR "TIA" means the Trust Indenture Act
of 1939 as in force on the date hereof, unless otherwise specifically provided.
The term "TIA" shall specifically include any amendments or revisions to the
Trust Indenture Act of 1939 which may be enacted from time to time.

                  "TRUSTEE" means Norwest Bank Minnesota, National Association,
a national banking association, as Trustee under this Indenture, or any
successor Trustee under this Indenture.

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

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

                  (b)      Except as otherwise specified herein or as the
context may otherwise require, the following terms have the respective meanings
set forth in the Sale and Servicing Agreement as in effect on the Closing Date
for all purposes of this Indenture, and the definitions of such terms are
equally applicable both to the singular and plural forms of such terms:

<TABLE>
<CAPTION>
                                                                                        Section of Sale and
TERM                                                                                    SERVICING AGREEMENT
<S>                                                                                     <C>
AFL...............................................................................        Section 1.1
Aggregate Principal Balance.......................................................        Section 1.1
APR...............................................................................        Section 1.1
Available Funds...................................................................        Section 1.1
Backup Servicer...................................................................        Section 1.1
Class A-1 Final Scheduled Distribution Date.......................................        Section 1.1
Class A-2 Final Scheduled Distribution Date.......................................        Section 1.1
Class A-3 Final Scheduled Distribution Date.......................................        Section 1.1
Class A-1 Prepayment Amount.......................................................        Section 1.1
Class A-2 Prepayment Amount.......................................................        Section 1.1

                                     - 11 -
<PAGE>

Class A-3 Prepayment Amount.......................................................        Section 1.1
Class A-1 Prepayment Premium......................................................        Section 1.1
Class A-2 Prepayment Premium......................................................        Section 1.1
Class A-3 Prepayment Premium......................................................        Section 1.1
Collateral Agent..................................................................        Section 1.1
Collateral Insurance..............................................................        Section 1.1
Collection Account................................................................        Section 1.1
Custodian.........................................................................        Section 1.1
Dealer............................................................................        Section 1.1
Dealer Agreement..................................................................        Section 1.1
Dealer Assignment.................................................................        Section 1.1
Distribution Date.................................................................        Section 1.1
Draw Date.........................................................................        Section 1.1
Eligible Account..................................................................        Section 1.1
Eligible Investments..............................................................        Section 1.1
Financed Vehicle..................................................................        Section 1.1
Force-Placed Insurance............................................................        Section 1.1
Funding Period....................................................................        Section 1.1
Initial Receivables...............................................................        Section 1.1
Insurance Agreement...............................................................        Section 1.1
Insurance Agreement Event of Default..............................................        Section 1.1
Insurer Default...................................................................        Section 1.1
Liquidation Proceeds..............................................................        Section 1.1
Lockbox Bank......................................................................        Section 1.1
Monthly Period....................................................................        Section 1.1
Moody's...........................................................................        Section 1.1
Note Distribution Account.........................................................        Section 1.1
Note Majority.....................................................................        Section 1.1
Noteholders' Interest Distributable Amount........................................        Section 1.1
Noteholders' Principal Distributable Amount.......................................        Section 1.1
Obligor...........................................................................        Section 1.1
Pre-Funded Amount.................................................................        Section 1.1
Pre-Funding Account...............................................................        Section 4.1
Purchase Agreements...............................................................        Section 1.1
Purchased Receivable..............................................................        Section 1.1
Receivable........................................................................        Section 1.1
Reserve Account...................................................................        Section 1.1
Security Insurer..................................................................        Section 1.1

                                     - 12 -
<PAGE>

Seller............................................................................        Section 1.1
Servicer..........................................................................        Section 1.1
Servicer Termination Event........................................................        Section 1.1
Spread Account Agreement..........................................................        Section 1.1
Standard & Poor's.................................................................        Section 1.1
Subsequent Receivables............................................................        Section 1.1
Subsequent Transfer Date..........................................................        Section 1.1
Trust Accounts....................................................................        Section 1.1
Trust Agreement...................................................................        Section 1.1

</TABLE>

                  SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE
ACT. Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:

         "Commission" means the Securities and Exchange Commission.

         "indenture securities" means the Notes.

         "indenture security holder" means a Noteholder.

         "indenture to be qualified" means this Indenture.

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

         "obligor" on the indenture securities means the Issuer and any other
         obligor on the indenture securities.

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

                  SECTION 1.03. RULES OF CONSTRUCTION. Unless otherwise
specified:

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

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

                  (iii)    "or" is not exclusive;

                  (iv)     "including" means including without limitation;

                                     - 13 -
<PAGE>

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

                  (vi)     references to Sections, Subsections, Schedules and
Exhibits shall refer to such portions of this Indenture.

                                   ARTICLE II

                                    THE NOTES

                  SECTION 2.01. FORM. The Class A-1 Notes, the Class A-2 Notes
and the Class A-3 Notes, in each case together with the Trustee's certificate of
authentication, shall be in substantially the forms set forth in Exhibits C-1,
C-2 and C-3, respectively, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may, consistently herewith,
be determined by the officers executing such Notes, as evidenced by their
execution of the Notes. Any portion of the text of any Note may be set forth on
the reverse thereof, with an appropriate reference thereto on the face of the
Note.

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

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

                  SECTION 2.02. EXECUTION, AUTHENTICATION AND DELIVERY. The
Notes shall be executed on behalf of the Issuer by any of its Authorized
Officers. The signature of any such Authorized Officer on the Notes may be
manual or facsimile.

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

                  The Trustee shall upon receipt of the Note Policy and Issuer
Order authenticate and deliver Class A-1 Notes for original issue in an
aggregate principal amount of $242,000,000, Class A-2 Notes for original issue
in an aggregate principal amount of $150,000,000 and Class A-3 Notes for
original issue in an aggregate principal amount of $208,000,000. The aggregate
principal amount of the Class A-1 Notes, the Class A-2 Notes and the Class A-3
Notes outstanding at any time may not exceed that amount except as provided in
Section 2.05.

                                     - 14 -
<PAGE>

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

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

                  SECTION 2.03. TEMPORARY NOTES. Pending the preparation of
definitive Notes, the Issuer may execute, and upon receipt of an Issuer Order
the Trustee shall authenticate and deliver, temporary Notes which are printed,
lithographed, typewritten, mimeographed or otherwise produced, of the tenor of
the definitive Notes in lieu of which they are issued and with such variations
not inconsistent with the terms of this Indenture as the officers executing such
Notes may determine, as evidenced by their execution of such Notes.

                  If temporary Notes are issued, the Issuer will cause
definitive Notes to be prepared without unreasonable delay. After the
preparation of definitive Notes, the temporary Notes shall be exchangeable for
definitive Notes upon surrender of the temporary Notes at the office or agency
of the Issuer to be maintained as provided in Section 3.02, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary Notes,
the Issuer shall execute and the Trustee shall authenticate and deliver in
exchange therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes.

                  SECTION 2.04. REGISTRATION; REGISTRATION OF TRANSFER AND
EXCHANGE. The Issuer shall cause to be kept a register (the "Note Register") in
which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of Notes and the registration of transfers of
Notes. The Trustee shall be "Note Registrar" for the purpose of registering
Notes and transfers of Notes as herein provided. Upon any resignation of any
Note Registrar, the Issuer shall promptly appoint a successor or, if it elects
not to make such an appointment, assume the duties of Note Registrar.

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

                                     - 15 -
<PAGE>

                  Upon surrender for registration of transfer of any Note at the
office or agency of the Issuer to be maintained as provided in Section 3.02, the
Issuer shall execute, and the Trustee shall authenticate and the Noteholder
shall obtain from the Trustee, in the name of the designated transferee or
transferees, one or more new Notes in any authorized denominations, of a like
aggregate principal amount.

                  At the option of the Holder, Notes may be exchanged for other
Notes in any authorized denominations, of a like aggregate principal amount,
upon surrender of the Notes to be exchanged at such office or agency. Whenever
any Notes are so surrendered for exchange, the Issuer shall execute, and the
Trustee shall authenticate and the Noteholder shall obtain from the Trustee, the
Notes which the Noteholder making the exchange is entitled to receive.

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

                  Every Note presented or surrendered for registration of
transfer or exchange shall be duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by a commercial bank or trust company located, or having a
correspondent located, in The City of New York or the city in which the
Corporate Trust Office is located, or by a member firm of a national securities
exchange, and such other documents as the Trustee may require.

                  No service charge shall be made to a Holder for any
registration of transfer or exchange of Notes, but the Issuer or the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to Section 2.03 or 9.06 not
involving any transfer.

                  The preceding provisions of this section notwithstanding, the
Issuer shall not be required to make and the Note Registrar need not register
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to the
Note.
                  SECTION 2.05. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If
(i) any mutilated Note is surrendered to the Trustee, or the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any Note, and
(ii) there is delivered to the Trustee and the Security Insurer (unless an
Insurer Default shall have occurred and be continuing) such security or
indemnity as may be required by them to hold the Issuer, the Trustee and the
Security Insurer harmless, then, in the absence of notice to the Issuer, the
Note Registrar or the Trustee that such Note has been acquired by a bona fide
purchaser, the Issuer shall execute and upon its request the Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed,

                                     - 16 -
<PAGE>

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

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

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

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

                  SECTION 2.06. PERSON DEEMED OWNER. Prior to due presentment
for registration of transfer of any Note, the Issuer, the Trustee, the Security
Insurer and any agent of the Issuer, the Trustee or the Security Insurer may
treat the Person in whose name any Note is registered (as of the day of
determination) as the owner of such Note for the purpose of receiving payments
of principal of and interest, if any, on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and none of the Issuer, the
Security Insurer, the Trustee nor any agent of the Issuer or the Trustee shall
be affected by notice to the contrary.

                  SECTION 2.07.  PAYMENT OF PRINCIPAL AND INTEREST

                  (a)      The Notes shall accrue interest as provided in the
forms of the Class A-1 Note, the Class A-2 Note and the Class A-3 Note set forth
in Exhibits C-1, C-2 and C-3, respectively, and such interest shall be payable
on each Payment Date as specified therein,

                                     - 17 -
<PAGE>

subject to Section 3.01. Any installment of interest or principal, if any,
payable on any Note which is punctually paid or duly provided for by the Issuer
on the applicable Payment Date shall be paid to the Person in whose name such
Note (or one or more Predecessor Notes) is registered on the Record Date, by
check mailed first-class, postage prepaid to such Person's address as it appears
on the Note Register on such Record Date, except that, unless Definitive Notes
have been issued pursuant to Section 2.11, with respect to Notes registered on
the Record Date in the name of the nominee of the Depository, payment will be
made by wire transfer in immediately available funds to the account designated
by such nominee and except for (i) the final installment of principal payable
with respect to such Note on a Payment Date and (ii) the Redemption Price for
any Note called for redemption pursuant to Section 10.01(a), which shall be
payable as provided below. The funds represented by any such checks returned
undelivered shall be held in accordance with Section 3.03.

                  (b)      The principal of each Note shall be payable in
installments on each Payment Date as provided in the forms of the Class A-1
Note, the Class A-2 Note and the Class A-3 Note set forth in Exhibits C-1, C-2
and C-3, respectively. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes shall be due and payable, if not previously paid,
on the date on which an Event of Default shall have occurred and be continuing,
so long as an Insurer Default shall not have occurred and be continuing or, if
an Insurer Default shall have occurred and be continuing, on the date on which
an Event of Default shall have occurred and be continuing and the Trustee or a
Note Majority have declared the Notes to be immediately due and payable in the
manner provided in Section 5.02. All principal payments on a class of Notes
shall be made pro rata to the Noteholders of such Class entitled thereto. The
Trustee shall notify the Person in whose name a Note is registered at the close
of business on the Record Date preceding the Payment Date for which the Trustee
has received notice from the Issuer that the Issuer expects that the final
installment of principal of and interest on such Note will be paid. Such notice
shall be mailed no later than five days prior to such final Payment Date and
shall specify that such final installment will be payable only upon presentation
and surrender of such Note and shall specify the place where such Note may be
presented and surrendered for payment of such installment. Notices in connection
with redemptions of Notes shall be mailed to Noteholders as provided in Section
10.02.

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

                  SECTION 2.08. CANCELLATION. Subject to Section 2.07(c), all
Notes surrendered for payment, registration of transfer, exchange or redemption
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee and shall be promptly canceled by the Trustee. Subject to Section
2.07(c), the Issuer may at any time deliver to the Trustee for cancellation any
Notes previously authenticated and delivered hereunder which the Issuer may have
acquired in

                                     - 18 -
<PAGE>

any manner whatsoever, and all Notes so delivered shall be promptly canceled by
the Trustee. No Notes shall be authenticated in lieu of or in exchange for any
Notes canceled as provided in this Section, except as expressly permitted by
this Indenture. Subject to Section 2.07(c), all canceled Notes may be held or
disposed of by the Trustee in accordance with its standard retention or disposal
policy as in effect at the time unless the Issuer shall direct by an Issuer
Order that they be destroyed or returned to it, provided that such Issuer Order
is timely and the Notes have not been previously disposed of by the Trustee.

                  SECTION 2.09. BOOK-ENTRY NOTES. The Notes, upon original
issuance, will be issued in the form of a typewritten Note or Notes representing
the Book-Entry Notes, to be delivered to The Depository Trust Company, the
initial Depository, by, or on behalf of, the Issuer. Such Note shall initially
be registered on the Note Register in the name of Cede & Co., the nominee of the
initial Depository, and no Note Owner will receive a Definitive Note
representing such Note Owner's interest in such Note, except as provided in
Section 2.11. Unless and until definitive, fully registered Notes (the
"Definitive Notes") have been issued to Note Owners pursuant to Section 2.11:

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

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

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

                  (iv)     the rights of Note Owners shall be exercised only
         through the Depository and shall be limited to those established by law
         and agreements between such Note Owners and the Depository and/or the
         Depository Participants. Pursuant to the Depository Agreement, unless
         and until Definitive Notes are issued pursuant to Section 2.11, the
         initial Depository will make book-entry transfers among the Depository
         Participants and receive and transmit payments of principal of and
         interest on the Notes to such Depository Participants;

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

                                     - 19 -
<PAGE>

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

                  SECTION 2.10. NOTICES TO DEPOSITORY. Whenever a notice or
other communication to the Noteholders is required under this Indenture, unless
and until Definitive Notes shall have been issued to Note Owners pursuant to
Section 2.11, the Trustee shall give all such notices and communications
specified herein to be given to Holders of the Notes to the Depository and shall
have no obligation to the Note Owners.

                  SECTION 2.11. DEFINITIVE NOTES. If (i) the Administrator
advises the Trustee in writing that the Depository is no longer willing or able
properly to discharge its responsibilities with respect to the Notes, and the
Administrator is unable to locate a qualified successor, (ii) the Administrator
at its option advises the Trustee in writing that it elects to terminate the
book-entry system through the Depository or (iii) after the occurrence of an
Event of Default, a Note Majority advises the Depository in writing that the
continuation of a book-entry system through the Depository is no longer in the
best interests of the Note Owners, then the Depository shall notify all Note
Owners and the Trustee of the occurrence of any such event and of the
availability of Definitive Notes to Note Owners requesting the same. Upon
surrender to the Trustee of the Note or Notes representing the Book-Entry Notes
by the Depository, accompanied by registration instructions, the Issuer shall
execute and the Trustee shall authenticate the Definitive Notes in accordance
with the instructions of the Depository. None of the Issuer, the Note Registrar
or the Trustee shall be liable for any delay in delivery of such instructions
and may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive Notes, the Trustee shall recognize
the Holders of the Definitive Notes as Noteholders.

                                   ARTICLE III

                                    COVENANTS

                  SECTION 3.01. PAYMENT OF PRINCIPAL, INTEREST AND PREMIUM. The
Issuer will duly and punctually pay the principal, interest and premium, if any,
on the Notes in accordance with the terms of the Notes and this Indenture.
Without limiting the foregoing, the Issuer will cause to be distributed all
amounts on deposit in the Note Distribution Account on a Payment Date in
accordance with Section 8.02(b). Amounts properly withheld under the Code by any
Person from a payment to any Noteholder of interest and/or principal shall be
considered as having been paid by the Issuer to such Noteholder for all purposes
of this Indenture.

                  SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will
maintain in the City of New York, an office or agency where Notes may be
surrendered for registration of transfer or exchange, and where notices and
demands to or upon the Issuer in respect of the

                                     - 20 -
<PAGE>

Notes and this Indenture may be served. The Issuer hereby initially appoints the
Trustee to serve as its agent for the foregoing purposes. The Issuer will give
prompt written notice to the Trustee of the location, and of any change in the
location, of any such office or agency. If at any time the Issuer shall fail to
maintain any such office or agency or shall fail to furnish the Trustee with the
address thereof, such surrenders, notices and demands may be made or served at
the Corporate Trust Office, and the Issuer hereby appoints the Trustee as its
agent to receive all such surrenders, notices and demands.

                  SECTION 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST. As
provided in Section 8.02, all payments of amounts due and payable with respect
to any Notes that are to be made from amounts withdrawn from the Note
Distribution Account pursuant to Section 8.02(b) shall be made on behalf of the
Issuer by the Trustee or by another Paying Agent in accordance with written
instructions from the Issuer upon which the Trustee may rely, and no amounts so
withdrawn from the Note Distribution Account for payments of Notes shall be paid
over to the Issuer.

                  On or before each Payment Date and Redemption Date, the Issuer
shall deposit or cause to be deposited in the Note Distribution Account an
aggregate sum sufficient to pay the amounts then becoming due, such sum to be
held in trust for the benefit of the Persons entitled thereto and (unless the
Paying Agent is the Trustee) shall promptly notify the Trustee in writing of its
action or failure so to act.

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

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

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

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

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

                                     - 21 -
<PAGE>

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

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

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

                  SECTION 3.04. EXISTENCE. The Issuer will keep in full effect
its existence, rights and franchises as a business trust under the laws of the
State of Delaware (unless it becomes, or any successor Issuer hereunder is or
becomes, organized under the laws of any other state or of the United States of
America, in which case the Issuer will keep in full effect its existence, rights
and franchises under the laws of such other jurisdiction) and will obtain and
preserve its

                                     - 22 -
<PAGE>

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

                  SECTION 3.05. PROTECTION OF TRUST ESTATE. The Issuer intends
the security interest Granted pursuant to this Indenture in favor of the Issuer
Secured Parties to be prior to all other liens in respect of the Trust Estate,
and the Issuer shall take all actions necessary to obtain and maintain, in favor
of the Indenture Collateral Agent, for the benefit of the Issuer Secured
Parties, a first lien on and a first priority, perfected security interest in
the Trust Estate. The Issuer will from time to time execute and deliver all such
supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
all as prepared by the Servicer and delivered to the Issuer, and will take such
other action necessary or advisable to:

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

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

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

                  (iv)     enforce any of the Indenture Collateral;

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

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

The Issuer hereby designates the Indenture Collateral Agent its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required by the Indenture Collateral Agent pursuant to this
Section; PROVIDED, HOWEVER, that the Servicer shall be responsible for filing
any such financing statement or continuation statement.

                  SECTION 3.06.  OPINIONS AS TO TRUST ESTATE.

                  (a)      On the Closing Date and on each Subsequent Transfer
Date, the Issuer shall furnish to the Trustee, the Indenture Collateral Agent
and the Security Insurer an Opinion of Counsel either stating that, in the
opinion of such counsel, such action has been taken with respect to the
recording and filing of this Indenture, any indentures supplemental hereto, and
any other requisite documents, and with respect to the execution and filing of
any financing statements and continuation statements, as are necessary to
perfect and make effective the first

                                     - 23 -
<PAGE>

priority lien and security interest in favor of the Indenture Collateral Agent,
for the benefit of the Issuer Secured Parties, created by this Indenture and
reciting the details of such action, or stating that, in the opinion of such
counsel, no such action is necessary to make such lien and security interest
effective.

                  (b)      On or before April 30 in each calendar year,
beginning in 2000, the Issuer shall furnish to the Trustee, the Indenture
Collateral Agent and the Security Insurer an Opinion of Counsel with respect to
each jurisdiction in which the Receivables are located or a Uniform Commercial
Code financing statement has been filed by the Issuer either stating that, in
the opinion of such counsel, such action has been taken with respect to the
recording, filing, rerecording and refiling of this Indenture, any indentures
supplemental hereto and any other requisite documents and with respect to the
execution and filing of any financing statements and continuation statements as
is necessary to maintain the first priority lien and security interest created
by this Indenture and reciting the details of such action or stating that in the
opinion of such counsel no such action is necessary to maintain such lien and
security interest. Such Opinion of Counsel shall also describe the recording,
filing, re-recording and refiling of this Indenture, any indentures supplemental
hereto and any other requisite documents and the execution and filing of any
financing statements and continuation statements that will, in the opinion of
such counsel, be required to maintain the lien and security interest of this
Indenture until April 30 in the following calendar year.

                  SECTION 3.07. PERFORMANCE OF OBLIGATIONS; SERVICING OF
RECEIVABLES.

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

                  (b) The Issuer may contract with other Persons acceptable to
the Security Insurer (so long as no Insurer Default shall have occurred and be
continuing) to assist it in performing its duties under this Indenture, and any
performance of such duties by a Person identified to the Trustee and the
Security Insurer in an Officers' Certificate of the Issuer shall be deemed to be
action taken by the Issuer. Initially, the Issuer has contracted with the
Servicer and the Administrator to assist the Issuer in performing its duties
under this Indenture. The Owner Trustee shall not be responsible for the action
or inaction of the Servicer or the Administrator.

                  (c)      The Issuer will punctually perform and observe all of
its obligations and agreements contained in this Indenture, the Related
Documents and in the instruments and agreements included in the Trust Estate,
including but not limited to filing or causing to be filed all UCC financing
statements and continuation statements required to be filed by the terms of

                                     - 24 -
<PAGE>

this Indenture and the Sale and Servicing Agreement in accordance with and
within the time periods provided for herein and therein.

                  (d)      If the Issuer shall have knowledge of the occurrence
of a Servicer Termination Event under the Sale and Servicing Agreement, the
Issuer shall promptly in writing notify the Trustee, the Security Insurer and
the Rating Agencies thereof, and shall specify in such notice the action, if
any, the Issuer is taking with respect of such default. If a Servicer
Termination Event shall arise from the failure of the Servicer to perform any of
its duties or obligations under the Sale and Servicing Agreement with respect to
the Receivables, the Issuer shall take all reasonable steps available to it to
remedy such failure.

                  (e)      If an Insurer Default shall have occurred and be
continuing and if the Issuer has given notice of termination to the Servicer of
the Servicer's rights and powers pursuant to Section 8.2 of the Sale and
Servicing Agreement, as promptly as possible thereafter, the Issuer shall
appoint a successor servicer in accordance with Section 8.3 of the Sale and
Servicing Agreement.

                  (f)      Upon any termination of the Servicer's rights and
powers pursuant to the Sale and Servicing Agreement, the Issuer shall promptly
notify the Trustee. As soon as a successor Servicer is appointed, the Issuer
shall notify the Trustee of such appointment, specifying in such notice the name
and address of such successor Servicer.

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

                  SECTION 3.08. NEGATIVE COVENANTS. Until the Termination Date,
the Issuer shall not:

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

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

                  (iii)    (A) permit the validity or effectiveness of this
         Indenture to be impaired, or permit the lien in favor of the Indenture
         Collateral Agent created by this Indenture to be

                                     - 25 -
<PAGE>

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

                  SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer
will deliver to the Trustee and the Security Insurer, within 120 days after the
end of each fiscal year of the Issuer (commencing with the fiscal year ending
December 31, 1999), an Officers' Certificate stating, as to the Authorized
Officer signing such Officer's Certificate, that

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

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

                  SECTION 3.10. ISSUER MAY CONSOLIDATE, ETC. ONLY ON CERTAIN
TERMS.

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

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

                                     - 26 -
<PAGE>

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

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

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

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

                  (vi)     the Issuer, at its own expense, shall have delivered
         to the Trustee an Officers' Certificate and an Opinion of Counsel
         (which shall describe the actions taken as required by clause (a)(v) of
         this Section 3.10 or that no such actions will be taken) each stating
         that such consolidation or merger and such supplemental indenture
         comply with this Article III and that all conditions precedent herein
         provided for relating to such transaction have been compiled with
         (including any filing required by the Exchange Act); and

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

                  (b)      The Issuer shall not convey or transfer all or
substantially all of its properties or assets, including those included in the
Trust Estate, to any Person (except as expressly permitted by the Indenture, the
Purchase Agreement or the Sale and Servicing Agreement), unless:

                  (i)      the Person that acquires by conveyance or transfer
         the properties and assets of the Issuer shall (A) be a United States
         citizen or a Person organized and existing under the laws of the United
         States of America or any State, (B) expressly assume, by an indenture
         supplemental hereto, executed and delivered to the Trustee, in form and
         substance satisfactory to the Trustee and the Security Insurer (so long
         as no Insurer Default shall have occurred and be continuing), the due
         and punctual payment of the

                                     - 27 -
<PAGE>

         principal of and interest on all Notes and the performance or
         observance of every agreement and covenant of this Indenture and each
         Related Document on the part of the Issuer to be performed or
         observed, all as provided herein, (C) expressly agree by means of such
         supplemental indenture that all right, title and interest so conveyed
         or transferred shall be subject and subordinate to the rights of
         Holders of the Notes, (D) unless otherwise provided in such
         supplemental indenture, expressly agree to indemnify, defend and hold
         harmless the Issuer against and from any loss, liability or expense
         arising under or related to this Indenture and the Notes and (E)
         expressly agree by means of such supplemental indenture that such
         Person (or if a group of Persons, then one specified Person) shall
         make all filings with the Commission (and any other appropriate
         Person) required by the Exchange Act in connection with the Notes;

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

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

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

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

                  (vi)     the Issuer shall have delivered to the Trustee an
         Officers' Certificate and an Opinion of Counsel (which shall describe
         the actions taken as required by clause (b)(v) of this Section 3.10 or
         that no such actions will be taken) each stating that such conveyance
         or transfer and such supplemental indenture comply with this Article
         III and that all conditions precedent herein provided for relating to
         such transaction have been complied with (including any filing required
         by the Exchange Act); and

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

                                     - 28 -
<PAGE>

                  SECTION 3.11.  SUCCESSOR OR TRANSFEREE.

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

                  (b)      Upon a conveyance or transfer of all the assets and
properties of the Issuer pursuant to Section 3.10(b), Arcadia Automobile
Receivables Trust, 1999-C will be released from every covenant and agreement of
this Indenture to be observed or performed on the part of the Issuer with
respect to the Notes immediately upon the delivery of written notice to the
Trustee stating that Arcadia Automobile Receivables Trust, 1999-C is to be so
released.

                  SECTION 3.12. NO OTHER BUSINESS. The Issuer shall not engage
in any business other than financing, purchasing, owning, selling and managing
the Receivables in the manner contemplated by this Indenture and the Related
Documents and activities incidental thereto. After the Funding Period, the
Issuer shall not fund the purchase of any new Receivables.

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

                  SECTION 3.14. SERVICER'S OBLIGATIONS. The Issuer shall cause
the Servicer to comply with Sections 3.9, 3.10, 3.11 and 4.9(a) of the Sale and
Servicing Agreement.

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

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

                                     - 29 -
<PAGE>

                  SECTION 3.17. RESTRICTED PAYMENTS. Except as expressly
permitted by this Indenture or the Sale and Servicing Agreement, the Issuer
shall not, directly or indirectly, (i) make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose. The
Issuer will not, directly or indirectly, make payments to or distributions from
the Collection Account except in accordance with this Indenture and the Related
Documents.

                  SECTION 3.18. NOTICE OF EVENTS OF DEFAULT. The Issuer agrees
to give the Trustee, the Security Insurer and the Rating Agencies prompt written
notice of each Event of Default hereunder, each default on the part of the
Servicer or the Seller of its obligations under the Sale and Servicing Agreement
and each default on the part of AFL of its obligations under the Purchase
Agreements.

                  SECTION 3.19. FURTHER INSTRUMENTS AND ACTS. Upon request of
the Trustee or the Security Insurer, the Issuer will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.

                  SECTION 3.20. COMPLIANCE WITH LAWS. The Issuer shall comply
with the requirements of all applicable laws, the non-compliance with which
would, individually or in the aggregate, materially and adversely affect the
ability of the Issuer to perform its obligations under the Notes, this Indenture
or any Related Document.

                  SECTION 3.21. AMENDMENTS OF SALE AND SERVICING AGREEMENT AND
TRUST AGREEMENT. The Issuer shall not agree to any amendment to Section 10.1 of
the Sale and Servicing Agreement or Section 10.1 of the Trust Agreement to
eliminate the requirements thereunder that the Trustee or the Holders of the
Notes consent to amendments thereto as provided therein.

                  SECTION 3.22. REMOVAL OF ADMINISTRATOR. If an Insurer Default
shall have occurred and be continuing, so long as any Notes are issued and
outstanding, the Issuer shall not remove the Administrator without cause unless
the Rating Agency Condition shall have been satisfied in connection with such
removal.

                  SECTION 3.23. INCOME TAX CHARACTERIZATION. For purposes of
federal income, state and local income and franchise and any other income taxes,
the Issuer will treat the Notes as indebtedness.

                                   ARTICLE IV

                                     - 30 -
<PAGE>

                           SATISFACTION AND DISCHARGE

                  SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE. This
Indenture shall cease to be of further effect with respect to the Notes except
as to (i) rights of registration of transfer and exchange, (ii) substitution of
mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to
receive payments of principal, interest and premium, if any, thereon, (iv)
Sections 3.03, 3.04, 3.05, 3.07, 3.08, 3.10, 3.12, 3.13, 3.20, 3.21 and 3.23,
(v) the rights, obligations and immunities of the Trustee hereunder (including
the rights of the Trustee under Section 6.07 and the obligations of the Trustee
under Section 4.02) and (vi) the rights of Noteholders as beneficiaries hereof
with respect to the property so deposited with the Trustee payable to all or any
of them, and the Trustee, on demand of and at the expense of the Issuer, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture with respect to the Notes, when

                  (A)      either

                           (1)      all Notes theretofore authenticated and
         delivered (other than (i) Notes that have been destroyed, lost or
         stolen and that have been replaced or paid as provided in Section 2.05
         and (ii) Notes for whose payment money has theretofore been deposited
         in trust or segregated and held in trust by the Issuer and thereafter
         repaid to the Issuer or discharged from such trust, as provided in
         Section 3.03) have been delivered to the Trustee for cancellation and
         the Note Policy has expired and been returned to the Security Insurer
         for cancellation; or

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

                                    (i)     have become due and payable, or

                                    (ii)     will become due and payable at the
                  Final Scheduled Distribution Date within one year, or

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

                                     - 31 -
<PAGE>

         Date or Redemption Date (if Notes shall have been called for redemption
         pursuant to Section 10.01(a)), as the case may be;

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

                  (C)      the Issuer has delivered to the Trustee, the
         Indenture Collateral Agent and the Security Insurer an Officers'
         Certificate, an Opinion of Counsel and (if required by the TIA, the
         Trustee, the Indenture Collateral Agent and the Security Insurer) an
         Independent Certificate from a firm of certified public accountants,
         each meeting the applicable requirements of Section 11.01(a) and each
         stating that all conditions precedent herein provided for relating to
         the satisfaction and discharge of this Indenture have been complied
         with and the Rating Agency Condition has been satisfied.

                  SECTION 4.02. APPLICATION OF TRUST MONEY. All moneys deposited
with the Trustee pursuant to Section 4.01 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Trustee may determine, to the Holders of the particular Notes for the payment or
redemption of which such moneys have been deposited with the Trustee, of all
sums due and to become due thereon for principal and interest; but such moneys
need not be segregated from other funds except to the extent required herein or
in the Sale and Servicing Agreement or required by law.

                  SECTION 4.03. REPAYMENT OF MONEYS HELD BY PAYING AGENT. In
connection with the satisfaction and discharge of this Indenture with respect to
the Notes, all moneys then held by any Paying Agent other than the Trustee under
the provisions of this Indenture with respect to such Notes shall, upon written
demand of the Issuer, be paid to the Trustee to be held and applied according to
Section 3.03 and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.

                  SECTION 4.04. RELEASE OF TRUST ESTATE. The Indenture
Collateral Agent shall, on or after the Termination Date, release any remaining
portion of the Trust Estate from the lien created by this Indenture and deposit
in the Collection Account any funds then on deposit in any other Trust Account.
The Indenture Collateral Agent shall release property from the lien created by
this Indenture pursuant to this Section 4.04 only upon receipt of an Issuer
Request accompanied by an Officer's Certificate, an Opinion of Counsel and (if
required by the TIA) Independent Certificates in accordance with TIA Sections
314(c) and 314(d)(1) meeting the applicable requirements of Section 11.01.

                                    ARTICLE V

                                    REMEDIES

                                     - 32 -
<PAGE>

                  SECTION 5.01. EVENTS OF DEFAULT. "Event of Default," wherever
used herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):

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

                  (ii)     default in the payment of the principal of or any
         installment of the principal of any Note when the same becomes due and
         payable (solely for purposes of this clause, a payment on the Notes
         funded by the Security Insurer or the Collateral Agent pursuant to the
         Spread Account Agreement, shall be deemed to be a payment made by the
         Issuer); or

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

                  (iv) so long as an Insurer Default shall have occurred and be
         continuing, default in the observance or performance of any covenant or
         agreement of the Issuer made in this Indenture (other than a covenant
         or agreement, a default in the observance or performance of which is
         elsewhere in this Section specifically dealt with), or any
         representation or warranty of the Issuer made in this Indenture or in
         any certificate or other writing delivered pursuant hereto or in
         connection herewith proving to have been incorrect in any material
         respect as of the time when the same shall have been made, and such
         default shall continue or not be cured, or the circumstance or
         condition in respect of which such misrepresentation or warranty was
         incorrect shall not have been eliminated or otherwise cured, for a
         period of 30 days after there shall have been given, by registered,
         express or certified mail, to the Issuer by the Trustee or to the
         Issuer and the Trustee by the Holders of at least 25% of the
         Outstanding Amount of the Notes, a written notice specifying such
         default or incorrect representation or warranty and requiring it to be
         remedied and stating that such notice is a "Notice of Default"
         hereunder; or

                  (v)      so long as an Insurer Default shall have occurred and
         be continuing, the commencement of an involuntary case against the
         Issuer under any applicable Federal or state bankruptcy, insolvency or
         other similar law now or hereafter in effect, and such case is not
         dismissed within 60 days; or

                  (vi)     so long as an Insurer Default shall have occurred and
         be continuing, (A) the commencement by the Issuer of a voluntary case
         under any applicable Federal or

                                     - 33 -
<PAGE>

         state bankruptcy, insolvency or other similar law now or hereafter in
         effect, (B) the entry of an order for relief in an involuntary case
         against the Issuer under any such law, (C) the consent by the Issuer
         to the entry of any such order for relief, (D) the consent by the
         Issuer to the appointment or taking possession by a receiver,
         liquidator, assignee, custodian, trustee, sequestrator or similar
         official of the Issuer or for any substantial part of the Trust
         Estate, (E) the making by the Issuer of any general assignment for the
         benefit of creditors, (F) the failure by the Issuer generally to pay
         its debts as such debts become due, or (G) the taking of action by the
         Issuer in furtherance of any of the foregoing.

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

                  SECTION 5.02.  RIGHTS UPON EVENT OF DEFAULT.

                  (a)      If an Insurer Default shall not have occurred and be
continuing and an Event of Default shall have occurred and be continuing, the
Notes shall become immediately due and payable at par, together with accrued
interest thereon. If an Event of Default shall have occurred and be continuing,
the Controlling Party may exercise any of the remedies specified in Section
5.04(a). In the event of any acceleration of any Notes by operation of this
Section 5.02, the Trustee shall continue to be entitled to make claims under the
Note Policy pursuant to Section 5.18 hereof for Scheduled Payments on the Notes.
Payments under the Note Policy following acceleration of any Notes shall be
applied by the Trustee:

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

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

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

                                     - 34 -
<PAGE>

any date or dates following such acceleration as the Security Insurer, in its
sole discretion, shall elect.

                  (c)      If an Insurer Default shall have occurred and be
continuing and an Event of Default shall have occurred and be continuing, the
Trustee in its discretion may, or if so requested in writing by Holders holding
Notes representing at least 66-2/3% of the aggregate outstanding principal
amount of the Notes shall, upon prior written notice to the Rating Agencies,
declare by written notice to the Issuer that the Notes become, whereupon they
shall become, immediately due and payable at par, together with accrued interest
thereon. Notwithstanding anything to the contrary in this paragraph (c), if an
Event of Default specified in Section 5.01(v) or (vi) shall occur and be
continuing when an Insurer Default has occurred and is continuing, the Notes
shall become immediately due and payable at par, together with accrued interest
thereon.

                  SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY TRUSTEE; AUTHORITY OF CONTROLLING PARTY.

                  (a)      The Issuer covenants that if any Notes are
accelerated following the occurrence of an Event of Default, the Issuer will,
upon demand of the Trustee, pay to it, for the benefit of the Holders of such
Notes, the whole amount then due and payable on such Notes for principal and
interest, with interest upon the overdue principal, and, to the extent payment
at such rate of interest shall be legally enforceable, upon overdue installments
of interest, at the applicable Interest Rate and in addition thereto such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements,
indemnified amounts and advances of the Trustee and its agents and counsel.

                  (b)      Each Issuer Secured Party hereby irrevocably and
unconditionally appoints the Controlling Party as the true and lawful
attorney-in-fact of such Issuer Secured Party for so long as such Issuer Secured
Party is not the Controlling Party, with full power of substitution, to execute,
acknowledge and deliver any notice, document, certificate, paper, pleading or
instrument and to do in the name of the Controlling Party as well as in the
name, place and stead of such Issuer Secured Party such acts, things and deeds
for or on behalf of and in the name of such Issuer Secured Party under this
Indenture (including specifically under Section 5.04) and under the Related
Documents which such Issuer Secured Party could or might do or which may be
necessary, desirable or convenient in such Controlling Party's sole discretion
to effect the purposes contemplated hereunder and under the Related Documents
and, without limitation, following the occurrence of an Event of Default,
exercise full right, power and authority to take, or defer from taking, any and
all acts with respect to the administration, maintenance or disposition of the
Trust Estate.

                  (c) If an Event of Default occurs and is continuing, the
Trustee may in its discretion but with the consent of the Controlling Party
(except as provided in Section 5.03(d) below), proceed to protect and enforce
its rights and the rights of the Noteholders, by such

                                     - 35 -
<PAGE>

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

                  (d) Notwithstanding anything to the contrary contained in this
Indenture (including without limitation Sections 5.04(a), 5.12, 5.13 and 5.17)
and regardless of whether an Insurer Default shall have occurred and be
continuing, if the Issuer fails to perform its obligations under Section
10.01(b) hereof when and as due, the Trustee may in its discretion (and without
the consent of the Controlling Party) proceed to protect and enforce its rights
and the rights of the Noteholders by such appropriate Proceedings as the Trustee
shall deem most effective to protect and enforce any such rights, whether for
specific performance of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy
or legal or equitable right vested in the Trustee by this Indenture or by law;
provided that the Trustee shall only be entitled to take any such actions
without the consent of the Controlling Party to the extent such actions (x) are
taken only to enforce to Issuer's obligations to redeem the principal amount of
Notes and make payment of the Noteholders' Prepayment Premium required under
Section 10.01(b) and (y) are taken only against the portion of the Indenture
Collateral, if any, consisting of the Pre-Funding Account, the Reserve Account,
any investments therein and any proceeds thereof.

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

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

                                     - 36 -
<PAGE>

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

                  (iii)    to collect and receive any moneys or other property
         payable or deliverable on any such claims and to distribute all amounts
         received with respect to the claims of the Noteholders and of the
         Trustee on their behalf; and

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

and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Trustee, and, in the event that the Trustee shall consent to the
making of payments directly to such Noteholders, to pay to the Trustee such
amounts as shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and counsel, and
all other expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence or bad
faith.

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

                  (g)      All rights of action and of asserting claims under
this Indenture, the Spread Account Agreement, or under any of the Notes, may be
enforced by the Trustee without the possession of any of the Notes or the
production thereof in any trial or other Proceedings relative thereto, and any
such action or Proceedings instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment, subject to
the payment of the expenses, disbursements and compensation of the Trustee, each
predecessor Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.

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

                  SECTION 5.04. REMEDIES. (a) If an Event of Default shall have
occurred and be continuing, the Controlling Party may (subject to Section 5.05):

                                     - 37 -
<PAGE>

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

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

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

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

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

                                    (I)      such Insurance Agreement Indenture
                           Cross Default arises from a claim being made on the
                           Note Policy or from the insolvency of the Trust or
                           the Seller, or

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

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

                                    (I)      such Event of Default is of the
                           type described in Section 5.01(i) or (ii), or

                                    (II)    either

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

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

                                     - 38 -
<PAGE>

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

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

                  SECTION 5.05. OPTIONAL PRESERVATION OF THE RECEIVABLES. If the
Trustee is Controlling Party and if any Notes have been declared to be due and
payable under Section 5.02 following an Event of Default and such declaration
and its consequences have not been rescinded and annulled, the Trustee may, but
need not, elect to maintain possession of the Trust Estate. It is the desire of
the parties hereto and the Noteholders that there be at all times sufficient
funds for the payment of principal of and interest on the Notes, and the Trustee
shall take such desire into account when determining whether or not to maintain
possession of the Trust Estate. In determining whether to maintain possession of
the Trust Estate, the Trustee may, but need not, obtain and rely upon an opinion
of an Independent investment banking or accounting firm of national reputation
as to the feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose.

                  SECTION 5.06.  PRIORITIES.

                  (a) If the Trustee collects any money or property pursuant to
this Article V (excluding any payments made under the Note Policy), or if the
Indenture Collateral Agent delivers any money or property in respect of
liquidation of the Trust Estate to the Trustee pursuant to Section 5.04(a)(iv),
the Trustee shall pay as promptly as practicable out the money or property in
the following order:

                  FIRST: amounts due and owing and required to be distributed to
         the Servicer, the Owner Trustee, the Administrator, the Trustee, the
         Lockbox Bank, the Custodian, the Backup Servicer, the Collateral Agent
         and the Indenture Collateral Agent, respectively, pursuant to
         priorities (i), (ii) and (iii) of Section 4.6 of the Sale and Servicing
         Agreement and not previously distributed, in the order of such
         priorities and without preference or priority of any kind within such
         priorities;

                                     - 39 -
<PAGE>

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

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

                  FOURTH: amounts due and owing and required to be distributed
         to the Security Insurer pursuant to priority (vi) of Section 4.6 of the
         Sale and Servicing Agreement and not previously distributed; and

                  FIFTH: to the Collateral Agent to be applied as provided in
         the Spread Account Agreement;

provided that any amounts collected from the Pre-Funding Account or the Reserve
Account shall be paid, FIRST, for amounts due and unpaid on the Notes for
principal and premium, if any, for distribution to Noteholders in accordance
with Section 10.01(b) and, SECOND, in accordance with priorities ONE through
FIFTH above; PROVIDED, HOWEVER, that the Issuer's obligation to pay the Class
A-1 Prepayment Premium, the Class A-2 Prepayment Premium or the Class A-3
Prepayment Premium shall, as set forth in Section 2.4(d) of the Sale and
Servicing Agreement, be limited solely to funds which are received by the Issuer
from AFL pursuant to Section 6.2 of the Purchase Agreement as liquidated damages
for the failure of AFL to deliver Subsequent Receivables and no other assets of
the Issuer will be available to pay the Class A-1 Prepayment Premium, the Class
A-2 Prepayment Premium or the Class A-3 Prepayment Premium under the
circumstances.

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

                  SECTION 5.07. LIMITATION OF SUITS. No Holder of any Note shall
have any right to institute any Proceeding, judicial or otherwise, with respect
to this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:

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

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

                                     - 40 -
<PAGE>

                  (iii)    such Holder or Holders have offered to the Trustee
         reasonable indemnity against the costs, expenses and liabilities to be
         incurred in complying with such request;

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

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

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

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

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

                  SECTION 5.08. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE
PRINCIPAL AND INTEREST. Notwithstanding any other provisions in this Indenture,
the Holder of any Note shall have the right, which is absolute and
unconditional, to receive payment of the principal of and interest on such Note
on or after the respective due dates thereof expressed in such Note or in this
Indenture (or, in the case of redemption, on or after the Redemption Date) and
to institute suit for the enforcement of any such payment, and such right shall
not be impaired without the consent of such Holder; PROVIDED, HOWEVER, that so
long as an Insurer Default shall not have occurred and be continuing, no such
suit shall be instituted.

                  SECTION 5.09. RESTORATION OF RIGHTS AND REMEDIES. If the
Controlling Party or any Noteholder has instituted any Proceeding to enforce any
right or remedy under this Indenture and such Proceeding has been discontinued
or abandoned for any reason or has been determined adversely to the Trustee or
to such Noteholder, then and in every such case the Issuer, the Trustee and the
Noteholders shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Noteholders shall continue as
though no such Proceeding had been instituted.

                  SECTION 5.10. RIGHTS AND REMEDIES CUMULATIVE. No right or
remedy herein conferred upon or reserved to the Controlling Party or to the
Noteholders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted

                                     - 41 -
<PAGE>

by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.

                  SECTION 5.11. DELAY OR OMISSION NOT A WAIVER. No delay or
omission of the Controlling Party or any Holder of any Note to exercise any
right or remedy accruing upon any Default or Event of Default shall impair any
such right or remedy or constitute a waiver of any such Default or Event of
Default or an acquiescence therein. Every right and remedy given by this Article
V or by law to the Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the
Noteholders, as the case may be.

                  SECTION 5.12. CONTROL BY NOTEHOLDERS. If the Trustee is the
Controlling Party, the Holders of a majority of the Outstanding Amount of the
Notes shall have the right to direct the time, method and place of conducting
any Proceeding for any remedy available to the Trustee with respect to the Notes
or exercising any trust or power conferred on the Trustee; provided that

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

                  (ii)     subject to the express terms of Section 5.04, any
         direction to the Trustee to sell or liquidate all or any portion of the
         Trust Estate shall be by the Holders of Notes representing not less
         than 100% of the Outstanding Amount of the Notes;

                  (iii)    if the conditions set forth in Section 5.05 have been
         satisfied and the Trustee elects to retain the Trust Estate pursuant to
         such Section, then any direction to the Trustee by Holders of Notes
         representing less than 100% of the Outstanding Amount of the Notes to
         sell or liquidate all or any portion of the Trust Estate shall be of no
         force and effect; and

                  (iv)     the Trustee may take any other action deemed proper
         by the Trustee that is not inconsistent with such direction; PROVIDED,
         HOWEVER, that, subject to Section 6.01, the Trustee need not take any
         action that it determines might involve it in liability or might
         materially and adversely affect the rights of any Noteholders not
         consenting to such action.

                  SECTION 5.13.  WAIVER OF PAST DEFAULTS.

                  If an Insurer Default shall have occurred and be continuing,
the Holders of Notes of not less than a majority of the Outstanding Amount of
the Notes may waive any past Default or Event of Default and its consequences
except a Default (a) in payment of principal of or interest on any of the Notes
or (b) in respect of a covenant or provision hereof which cannot be modified or
amended without the consent of the Holder of each Note. In the case of any such

                                     - 42 -
<PAGE>

waiver, the Issuer, the Trustee and the Holders of the Notes shall be restored
to their former positions and rights hereunder, respectively; but no such waiver
shall extend to any subsequent or other Default or impair any right consequent
thereto.

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

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

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

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

                  SECTION 5.17. PERFORMANCE AND ENFORCEMENT OF CERTAIN
OBLIGATIONS.

                                     - 43 -
<PAGE>

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

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

                  (c)      Promptly following a request from the Trustee to do
so and at the Seller's expense, the Issuer agrees to take all such lawful action
as the Trustee may request to compel or secure the performance and observance by
AFL of each of its obligations to the Seller under or in connection with the
Purchase Agreement in accordance with the terms thereof, and to exercise any and
all rights, remedies, powers and privileges lawfully available to the Issuer
under or in connection with the Purchase Agreement to the extent and in the
manner directed by the Trustee, including the transmission of notices of default
on the part of the Seller thereunder and the institution of legal or
administrative actions or proceedings to compel or secure performance by AFL of
each of its obligations under the Purchase Agreement.

                  (d) If the Trustee is Controlling Party and if an Event of
Default has occurred and is continuing the Trustee may, and at the direction
(which direction shall be in writing, including facsimile) of the Holders of
66-2/3% of the Outstanding Amount of the Notes shall, upon the receipt of such
indemnity as the Trustee may reasonably request, exercise all rights, remedies,
powers, privileges and claims of the Seller against AFL under or in connection
with the Purchase Agreement, including the right or power to take any action to
compel or secure performance or observance by AFL of each of its obligations to
the Seller hereunder and to give any consent, request, notice, direction,
approval, extension or waiver under the Purchase Agreement, and any right of the
Seller to take such action shall be suspended.

                                     - 44 -
<PAGE>

                  SECTION 5.18.  CLAIMS UNDER NOTE POLICY.

                  (a)      In the event that the Trustee has delivered a
Deficiency Notice with respect to any Determination Date pursuant to Section 5.2
of the Sale and Servicing Agreement, the Trustee shall on the related Draw Date
determine the Note Policy Claim Amount (as defined below) for the related
Payment Date. If the Note Policy Claim Amount for such Payment Date is greater
than zero, the Trustee shall furnish to the Security Insurer no later than 12:00
noon New York City time on the related Draw Date a completed Notice of Claim in
the amount of the Note Policy Claim Amount. Amounts paid by the Security Insurer
pursuant to a claim submitted under this Section 5.18(a) shall be deposited by
the Trustee into the Note Distribution Account for payment to Noteholders on the
related Payment Date. The "Note Policy Claim Amount" for any Payment Date other
than the Class A-1 Final Scheduled Distribution Date shall equal the lesser of
(i) the sum of the Noteholders' Interest Distributable Amount and the
Noteholders' Principal Distributable Amount for such Payment Date, and (ii) the
excess, if any, of the amount required to be distributed pursuant to clauses (i)
- (v) of Section 4.6 of the Sale and Servicing Agreement (without giving effect
to the limitation of the Distribution Amount specified in each such clause) over
the Distribution Amount with respect to such Payment Date. The "Note Policy
Claim Amount" with respect to the Class A-1 Final Scheduled Distribution Date
shall equal the excess, if any, of (i) the amount required to be distributed
pursuant to clauses (i) - (v) of Section 4.6 of the Sale and Servicing Agreement
(without giving effect to the limitation of the Distribution Amount specified in
each such clause) over (ii) the sum of (A) the Distribution Amount with respect
to such Payment Date, plus (B) the amount, if any, withdrawn from the Class A-1
Holdback Subaccount and deposited in the Note Distribution Account pursuant to
Section 5.1(b) of the Sale and Servicing Agreement.

                  (b)      Any notice delivered by the Trustee to the Security
Insurer pursuant to subsection 5.18(a) shall specify the Note Policy Claim
Amount claimed under the Note Policy and shall constitute a "Notice of Claim"
under the Note Policy. In accordance with the provisions of the Note Policy, the
Security Insurer is required to pay to the Trustee the Note Policy Claim Amount
properly claimed thereunder by 12:00 noon, New York City time, on the later of
(i) the third Business Day following receipt on a Business Day of the Notice of
Claim, and (ii) the applicable Payment Date. Any payment made by the Security
Insurer under the Note Policy shall be applied solely to the payment of the
Notes, and for no other purpose.

                  (c) The Trustee shall (i) receive as attorney-in-fact of each
Noteholder any Note Policy Claim Amount from the Security Insurer and (ii)
deposit the same in the Note Distribution Account for distribution to
Noteholders as provided in Section 3.01 or Section 5.02 of this Indenture. Any
and all Note Policy Claim Amounts disbursed by the Trustee from claims made
under the Note Policy shall not be considered payment by the Trust or from the
Spread Account with respect to such Notes, and shall not discharge the
obligations of the Trust with respect thereto. The Security Insurer shall, to
the extent it makes any payment with respect to the Notes, become subrogated to
the rights of the recipients of such payments to the extent of such payments.
Subject to and conditioned upon any payment with respect to the Notes by or on

                                     - 45 -
<PAGE>

behalf of the Security Insurer, the Trustee shall assign to the Security Insurer
all rights to the payment of interest or principal with respect to the Notes
which are then due for payment to the extent of all payments made by the
Security Insurer, and the Security Insurer may exercise any option, vote, right,
power or the like with respect to the Notes to the extent that it has made
payment pursuant to the Note Policy. To evidence such subrogation, the Note
Registrar shall note the Security Insurer's rights as subrogee upon the register
of Noteholders upon receipt from the Security Insurer of proof of payment by the
Security Insurer of any Noteholders' Interest Distributable Amount or
Noteholders' Principal Distributable Amount. The foregoing subrogation shall in
all cases be subject to the rights of the Noteholders to receive all Scheduled
Payments in respect of the Notes.

                  (d)      The Trustee shall keep a complete and accurate record
of all funds deposited by the Security Insurer into the Collection Account and
the allocation of such funds to payment of interest on and principal paid in
respect of any Note. The Security Insurer shall have the right to inspect such
records at reasonable times upon one Business Day's prior notice to the Trustee.

                  (e)      The Trustee shall be entitled to enforce on behalf of
the Noteholders the obligations of the Security Insurer under the Note Policy.
Notwithstanding any other provision of this Agreement or any Related Document,
the Noteholders are not entitled to institute proceedings directly against the
Security Insurer.

                  SECTION 5.19.  PREFERENCE CLAIMS.

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

                                     - 46 -
<PAGE>

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

                                   ARTICLE VI

                 THE TRUSTEE AND THE INDENTURE COLLATERAL AGENT

                  SECTION 6.01.  DUTIES OF TRUSTEE.

                  (a)      If an Event of Default of which a Responsible Officer
of the Trustee shall have actual knowledge has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this Indenture and
in the same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.

                  (b)      Except during the continuance of an Event of Default
of which a Responsible Officer of the Trustee shall have actual knowledge:

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

                  (ii)     prior to the occurrence of a Event of Default of
         which a Responsible Officer of the Trustee shall have actual knowledge,
         and after the curing of all such Events of Default which may have
         occurred, (A) the duties and obligations of the Trustee shall be
         determined solely by the express provisions of this Agreement, (B) the
         Trustee shall not be liable except for the performance of such duties
         and obligations as are specifically

                                     - 47 -
<PAGE>

         set forth in this Agreement, (C) no implied covenants or obligations
         shall be read into this Agreement against the Trustee and (D) in the
         absence of bad faith on its part, the Trustee may conclusively rely,
         as to the truth of the statements and the correctness of the opinions
         expressed therein, upon all resolutions, statements, reports,
         documents, orders, certificates or opinions furnished to the Trustee
         and conforming to the requirements of this Indenture; PROVIDED,
         HOWEVER, that the Trustee shall examine the certificates and opinions
         to determine whether or not they conform to the requirements of this
         Indenture and, if applicable, the Spread Account Agreement and the
         Trustee's other Related Documents. If any such instrument is found not
         to conform in any material respect to the requirements of this
         Agreement, the Trustee shall notify the Noteholders of such instrument
         in the event the Trustee, after so requesting, does not receive a
         satisfactorily corrected document.

                  (c)      The Trustee may not be relieved from liability in its
individual capacity from liability to the Noteholders for its willful
misconduct, negligence or bad faith in connection with the distribution of
amounts from the Note Distribution Account in accordance with the terms hereof,
or for its willful misconduct, negligence or bad faith in the performance of its
duties as Trustee hereunder, except that:

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

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

                  (iii)    the Trustee shall not be liable with respect to any
         action it takes or omits to take in good faith in accordance with a
         direction received by it pursuant to Section 5.12 or relating to the
         time, method and place of conducting any proceeding for any remedy
         available to the Trustee, or executing or omitting to execute any power
         conferred upon the Trustee, under this Agreement.

                  (d)      Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (a), (b) and (c) of this
Section.

                  (e)      The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with the Issuer.

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

                  (g)      No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur financial liability
in the performance of any of its duties

                                     - 48 -
<PAGE>

hereunder or in the exercise of any of its rights or powers, if it shall have
reasonable grounds to believe that repayments of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.

                  (h)      Every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.

                  (i)      The Trustee shall, upon one Business Day's prior
notice to the Trustee, permit any representative of the Security Insurer, during
the Trustee's normal business hours, to examine all books of account, records,
reports and other papers of the Trustee relating to the Notes, to make copies
and extracts therefrom and to discuss the Trustee's affairs and actions, as such
affairs and actions relate to the Trustee's duties with respect to the Notes,
with the Trustee's officers and employees responsible for carrying out the
Trustee's duties with respect to the Notes.

                  (j)      In no event shall the Trustee be required to perform,
or be responsible for the manner of performance of, any of the obligations of
the Servicer, or any other party, under the Sale and Servicing Agreement, except
during such time, if any, as the Backup Servicer shall be the successor to, and
be vested with the rights, powers, duties and privileges of the Servicer in
accordance with the terms of, the Sale and Servicing Agreement.

                  (k)      The Trustee shall, and hereby agrees that it will,
perform all of the obligations and duties required of it under the Sale and
Servicing Agreement.

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

                  (m) Without limiting the generality of this Section 6.01, the
Trustee shall have no duty (i) to see to any recording, filing or depositing of
this Indenture or any agreement referred to herein or any financing statement
evidencing a security interest in the Financed Vehicles, or to see to the
maintenance of any such recording or filing or depositing or to any recording,
refiling or redepositing of any thereof, (ii) to see to any insurance of the
Financed Vehicles or Obligors or to effect or maintain any such insurance, (iii)
to see to the payment or discharge of any tax, assessment or other governmental
charge or any Lien or encumbrance of any kind owing with respect to, assessed or
levied against any part of the Trust, (iv) to confirm or verify the contents of
any reports or certificates delivered to the Trustee pursuant to this Indenture
or the Sale and Servicing Agreement believed by the Trustee to be genuine and to
have been signed or presented by the proper party or parties, or (v) to inspect
the Financed Vehicles at any time or ascertain or inquire as to the performance
of observance of any of the Issuer's, the Seller's or the Servicer's
representations, warranties or covenants or the Servicer's duties and
obligations as Servicer and as custodian of the Receivable Files under the
Agreement.

                                     - 49 -
<PAGE>

                  (n)      The Trustee shall not be required to take notice or
be deemed to have notice or knowledge of an Event of Default or any other
default under this Agreement unless a Responsible Officer of the Trustee shall
have received written notice thereof. In the absence of receipt of such notice,
the Trustee may conclusively assume that there is no Event of Default or other
such default.

                  SECTION 6.02.  RIGHTS OF TRUSTEE.

                  (a)      The Trustee may rely and shall be protected in acting
or refraining from acting upon any document believed by it to be genuine and to
have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.

                  (b)      Other than with respect to actions required to be
taken by the Trustee pursuant to Section 5.18 and 5.19, before the Trustee acts
or refrains from acting, it may require an Officers' Certificate (with respect
to factual matters) or an Opinion of Counsel, as applicable, which shall not be
at the expense of the Trustee. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on the Officers' Certificate or
Opinion of Counsel, as applicable, or as directed by the requisite amount of
Note Owners as provided herein.

                  (c)      The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Trustee shall not be
responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.

                  (d)      The Trustee shall not be liable for any action it
takes or omits to take in good faith which it believes to be authorized or
within its rights or powers; PROVIDED, HOWEVER, that the Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.

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

                  (f)     The Trustee shall be under no obligation to institute,
conduct or defend any litigation under this Indenture or in relation to this
Indenture, at the request, order or direction of any of the Holders of Notes or
the Controlling Party, pursuant to the provisions of this Indenture, unless such
Holders of Notes or the Controlling Party shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby; PROVIDED, HOWEVER, that the Trustee
shall, upon the occurrence of an

                                     - 50 -
<PAGE>

Event of Default (that has not been cured), exercise the rights and powers
vested in it by this Indenture with reasonable care and skill.

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

                  (h)      The right of the Trustee to perform any discretionary
act enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence or willful
misconduct in the performance of such act.

                  (i)      The Trustee shall not be required to give any bond or
surety in respect of the execution of the Trust or the Trust Estate created
hereby or the powers granted hereunder.

                  SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Trustee. Any Paying Agent, Note Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Trustee is required to comply with Sections 6.11 and 6.12.

                  SECTION 6.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture, the Trust Estate or the Notes, it shall not be accountable for
the Issuer's use of the proceeds from the Notes, and it shall not be responsible
for any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Trustee's
certificate of authentication.

                  SECTION 6.05. NOTICE OF DEFAULTS. If a Default occurs and is
continuing and if it is known to a Responsible Officer of the Trustee, the
Trustee shall mail to each Noteholder and the Security Insurer notice of the
Default within 90 days after it occurs. Except in the case of a Default in
payment of principal of or interest on any Note (including payments pursuant to
the mandatory redemption provisions of such Note), the Trustee may withhold the
notice if and so

                                     - 51 -
<PAGE>

long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of Noteholders.

                  SECTION 6.06. REPORTS BY TRUSTEE TO HOLDERS. The Trustee shall
deliver to each Noteholder such information as may be required to enable such
holder to prepare its federal and state income tax returns.

                  SECTION 6.07.  COMPENSATION AND INDEMNITY.

                  (a)      AFL in a separate letter agreement (the "Letter
Agreement") has covenanted and agreed to pay to the Trustee, and the Trustee
shall be entitled to, certain annual fees, which shall not be limited by any law
on compensation of a trustee of an express trust. In the Letter Agreement, AFL
has also agreed to reimburse the Trustee for all reasonable out-of-pocket
expenses incurred or made by it, including costs of collection, in addition to
the compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and experts. AFL has also agreed to indemnify the Trustee
and any director, officer, employee or agent of the Trustee against any and all
loss, liability or expense (including attorneys' fees) incurred by it in
connection with the administration of this trust and the performance of its
duties hereunder.

                  (b)      If notwithstanding the provisions of the Letter
Agreement, AFL fails to pay any fee, expense or indemnified amount due to the
Trustee pursuant to the terms of the Letter Agreement, the Trustee shall be
entitled to a distribution in respect of such amount pursuant of Section 4.6(ii)
of the Sale and Servicing Agreement. If notwithstanding the provisions of the
Letter Agreement, AFL fails to make any payment or reimbursement due to the
Trustee for any expense or claim for indemnification to which the Trustee is
entitled pursuant to the terms of the Letter Agreement, the Trustee shall be
entitled to a distribution in respect of such amount pursuant to priority SIXTH
of Section 3.03(b) of the Spread Account Agreement. The Issuer's payment
obligations to the Trustee pursuant to this Section shall survive the discharge
of this Indenture. When the Trustee incurs expenses after the occurrence of a
Default specified in Section 5.01(v) or (vi) with respect to the Issuer, the
expenses are intended to constitute expenses of administration under Title 11 of
the United States Code or any other applicable Federal or state bankruptcy,
insolvency or similar law. Notwithstanding anything else set forth in this
Indenture or the Related Documents, the Trustee agrees that the obligations of
the Issuer (but not AFL) to the Trustee hereunder and under the Related
Documents shall be recourse to the Trust Estate only. In addition, the Trustee
agrees that its recourse to the Issuer, the Trust Estate, the Seller and amounts
held pursuant of the Spread Account Agreement shall be limited to the right to
receive the distributions referred to in the first two sentences of this Section
6.07(b).

                  SECTION 6.08. REPLACEMENT OF TRUSTEE. The Trustee may resign
at any time by so notifying the Issuer and the Security Insurer. The Issuer may,
with the consent of the Security Insurer, and, at the request of the Security
Insurer shall, remove the Trustee, unless an Insurer Default shall have occurred
and be continuing) if:

                                     - 52 -
<PAGE>

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

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

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

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

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

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

                  If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Issuer shall promptly appoint a
successor Trustee acceptable to the Security Insurer (so long as an Insurer
Default shall not have occurred and be continuing). If the Issuer fails to
appoint such a successor Trustee, the Security Insurer may appoint a successor
Trustee.

                  A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Thereupon the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to

                                     - 53 -
<PAGE>

Noteholders. The retiring Trustee shall promptly transfer all property held by
it as Trustee to the successor Trustee.

                  If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Security Insurer (provided that no Insurer Default shall have occurred and be
continuing), the Issuer or the Holders of a majority in Outstanding Amount of
the Notes may petition any court of competent jurisdiction for the appointment
of a successor Trustee.

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

                  Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor Trustee
pursuant to this Section and payment of all fees and expenses owed to the
outgoing Trustee. Notwithstanding the replacement of the Trustee pursuant to
this Section, the retiring Trustee shall be entitled to payment or reimbursement
of such amounts as such Person is entitled pursuant to Section 6.07.

                  SECTION 6.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee. The Trustee shall provide the Rating
Agencies prompt notice of any such transaction.

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

                  SECTION 6.10.  APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.

                  (a)      Notwithstanding any other provisions of this
Indenture, at any time, for the purpose of meeting any legal requirement of any
jurisdiction in which any part of the Trust may at the time be located, the
Trustee, with the consent of the Security Insurer (so long as an Insurer Default
shall not have occurred and be continuing), shall have the power and may execute
and deliver all instruments to appoint one or more Persons to act as a
co-trustee or co-trustees, or

                                     - 54 -
<PAGE>

separate trustee or separate trustees, of all or any part of the Trust, and to
vest in such Person or Persons, in such capacity and for the benefit of the
Noteholders, such title to the Trust, or any part hereof, and, subject to the
other provisions of this Section, such powers, duties, obligations, rights and
trusts as the Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor Trustee under Section 6.11 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 6.08 hereof.

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

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

                  (ii)     no trustee hereunder shall be personally liable by
         reason of any act or omission of any other trustee hereunder; and

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

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

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

                                     - 55 -
<PAGE>

its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.

                  SECTION 6.11. ELIGIBILITY; DISQUALIFICATION. The Trustee shall
at all times satisfy the requirements of TIA Section 310(a). The Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall provide
copies of such reports to the Security Insurer upon request. The Trustee shall
comply with TIA Section 310(b), including the optional provision permitted by
the second sentence of TIA Section 310(b)(9); provided, however, that there
shall be excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities of the Issuer are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.

                  SECTION 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST
ISSUER. The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.

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

                  SECTION 6.14. PERFORMANCE OF DUTIES. The Indenture Collateral
Agent shall have no duties or responsibilities except those expressly set forth
in this Indenture and the other Related Documents to which the Indenture
Collateral Agent is a party or as directed by the Controlling Party in
accordance with this Indenture. The Indenture Collateral Agent shall not be

                                     - 56 -
<PAGE>

required to take any discretionary actions hereunder except at the written
direction and with the indemnification of the Controlling Party. The Indenture
Collateral Agent shall, and hereby agrees that it will, perform all of the
duties and obligations required of it under the Sale and Servicing Agreement.

                  SECTION 6.15. LIMITATION ON LIABILITY. Neither the Indenture
Collateral Agent nor any of its directors, officers or employees shall be liable
for any action taken or omitted to be taken by it or them hereunder, or in
connection herewith, except that the Indenture Collateral Agent shall be liable
for its negligence, bad faith or willful misconduct; nor shall the Indenture
Collateral Agent be responsible for the validity, effectiveness, value,
sufficiency or enforceability against the Issuer of this Indenture or any of the
Indenture Collateral (or any part thereof). Notwithstanding any term or
provision of this Indenture, the Indenture Collateral Agent shall incur no
liability to the Issuer or the Issuer Secured Parties for any action taken or
omitted by the Indenture Collateral Agent in connection with the Indenture
Collateral, except for the negligence or willful misconduct on the part of the
Indenture Collateral Agent, and, further, shall incur no liability to the Issuer
Secured Parties except for negligence or willful misconduct in carrying out its
duties to the Issuer Secured Parties. Subject to Section 6.16, the Indenture
Collateral Agent shall be protected and shall incur no liability to any such
party in relying upon the accuracy, acting in reliance upon the contents, and
assuming the genuineness of any notice, demand, certificate, signature,
instrument or other document reasonably believed by the Indenture Collateral
Agent to be genuine and to have been duly executed by the appropriate signatory,
and (absent actual knowledge to the contrary) the Indenture Collateral Agent
shall not be required to make any independent investigation with respect
thereto. The Indenture Collateral Agent shall at all times be free independently
to establish to its reasonable satisfaction, but shall have no duty to
independently verify, the existence or nonexistence of facts that are a
condition to the exercise or enforcement of any right or remedy hereunder or
under any of the Related Documents. The Indenture Collateral Agent may consult
with counsel, and shall not be liable for any action taken or omitted to be
taken by it hereunder in good faith and in accordance with the written advice of
such counsel. The Indenture Collateral Agent shall not be under any obligation
to exercise any of the remedial rights or powers vested in it by this Indenture
or to follow any direction from the Controlling Party unless it shall have
received reasonable security or indemnity satisfactory to the Indenture
Collateral Agent against the costs, expenses and liabilities which might be
incurred by it.

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

                  SECTION 6.17.  SUCCESSOR INDENTURE COLLATERAL AGENT.

                                     - 57 -
<PAGE>

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

                  (b)      RESIGNATION. The Indenture Collateral Agent and any
successor Indenture Collateral Agent may resign at any time by so notifying the
Issuer and the Security Insurer.

                  (c)      REMOVAL. The Indenture Collateral Agent may be
removed by the Controlling Party at any time, with or without cause, by an
instrument or concurrent instruments in writing delivered to the Indenture
Collateral Agent, the other Issuer Secured Party and the Issuer. A temporary
successor may be removed at any time to allow a successor Indenture Collateral
Agent to be appointed pursuant to subsection (d) below. Any removal pursuant to
the provisions of this subsection (c) shall take effect only upon the date which
is the latest of (i) the effective date of the appointment of a successor
Indenture Collateral Agent and the acceptance in writing by such successor
Indenture Collateral Agent of such appointment and of its obligation to perform
its duties hereunder in accordance with the provisions hereof, and (ii) receipt
by the Controlling Party of an Opinion of Counsel to the effect described in
Section 3.06.

                  (d)      ACCEPTANCE BY SUCCESSOR. The Controlling Party shall
have the sole right to appoint each successor Indenture Collateral Agent. Every
temporary or permanent successor Indenture Collateral Agent appointed hereunder
shall execute, acknowledge and deliver to its predecessor and to the Trustee,
each Issuer Secured Party and the Issuer an instrument in writing accepting such
appointment hereunder and the relevant predecessor shall execute, acknowledge
and deliver such other documents and instruments as will effectuate the delivery
of all Indenture Collateral to the successor Indenture Collateral Agent,
whereupon such successor, without any further act, deed or conveyance, shall
become fully vested with all the estates, properties, rights, powers, duties and
obligations of its predecessor. Such predecessor shall, nevertheless, on the
written request of either Issuer Secured Party or the Issuer, execute and
deliver an instrument transferring to such successor all the estates,
properties, rights and powers of such predecessor hereunder. In the event that
any instrument in writing from the Issuer or an Issuer Secured Party is
reasonably required by a successor Indenture Collateral Agent to more fully and
certainly vest in such successor the estates, properties, rights, powers, duties
and obligations vested or intended to be vested hereunder in the Indenture
Collateral Agent, any and all such written instruments shall, at the request of
the temporary or permanent successor Indenture Collateral Agent, be

                                     - 58 -
<PAGE>

forthwith executed, acknowledged and delivered by the Trustee or the Issuer, as
the case may be. The designation of any successor Indenture Collateral Agent and
the instrument or instruments removing any Indenture Collateral Agent and
appointing a successor hereunder, together with all other instruments provided
for herein, shall be maintained with the records relating to the Indenture
Collateral and, to the extent required by applicable law, filed or recorded by
the successor Indenture Collateral Agent in each place where such filing or
recording is necessary to effect the transfer of the Indenture Collateral to the
successor Indenture Collateral Agent or to protect or continue the perfection of
the security interests granted hereunder.

                  SECTION 6.18. COMPENSATION AND INDEMNITY.

                  (a)      AFL in a separate Letter Agreement has covenanted and
agreed to pay to the Indenture Collateral Agent, and the Indenture Collateral
Agent shall be entitled to, certain annual fees, which shall not be limited by
any law on compensation of an Indenture Collateral Agent of an express trust. In
such Letter Agreement, AFL has also agreed to reimburse the Indenture Collateral
Agent for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements, indemnified amounts and advances of the Indenture Collateral
Agent's agents, counsel, accountants and experts. AFL has also agreed to
indemnify the Indenture Collateral Agent and any director, officer, employee or
agent of the Indenture Collateral Agent against any and all loss, liability or
expense (including attorneys' fees) incurred by it in connection with the
administration of this trust and the performance of its duties hereunder.

                  (b)      If notwithstanding the provisions of the Letter
Agreement or this Agreement, AFL fails to pay any fee expense or indemnified
amount due to the Indenture Collateral Agent pursuant to the terms of the Letter
Agreement or this Agreement, the Indenture Collateral Agent shall be entitled to
a distribution in respect of such amount pursuant to Section 4.6(ii) of the Sale
and Servicing Agreement. If notwithstanding the provisions of the Letter
Agreement or this Agreement, AFL fails to make any payment or reimbursement due
to the Indenture Collateral Agent for any expense or claim for indemnification
to which the Indenture Collateral Agent is entitled pursuant to the terms of the
Letter Agreement or this Agreement, the Indenture Collateral Agent shall be
entitled to a distribution in respect of such amount pursuant to priority SIXTH
of Section 3.03(b) of the Spread Account Agreement. The Issuer's payment
obligations to the Indenture Collateral Agent pursuant to this Section shall
survive the discharge of this Indenture. When the Indenture Collateral Agent
incurs expenses after the occurrence of a Default specified in Section 5.01(v)
or (vi) with respect to the Issuer, the expenses are intended to constitute
expenses of administration under Title 11 of the United States Code or any other
applicable Federal or state bankruptcy, insolvency or similar law.
Notwithstanding anything else set forth in this Indenture or the Related
Documents, the Indenture Collateral Agent agrees that the obligations of the
Issuer to the Indenture Collateral Agent hereunder and under the Related
Documents shall be recourse to the Trust Estate only. In addition, the Indenture
Collateral Agent agrees that its recourse to the Issuer, the Trust Estate, the
Seller and amounts held pursuant to the

                                     - 59 -
<PAGE>

Spread Account Agreement shall be limited to the right to receive the
distributions referred to in the first two sentences of this Section 6.18.

                  SECTION 6.19. REPRESENTATIONS AND WARRANTIES OF THE INDENTURE
COLLATERAL AGENT. The Indenture Collateral Agent represents and warrants to the
Issuer and to each Issuer Secured Party as follows:

                  (a)      DUE ORGANIZATION. The Indenture Collateral Agent is a
national banking association duly organized, validly existing and in good
standing under the laws of the State of Minnesota and is duly authorized and
licensed under applicable law to conduct its business as presently conducted.

                  (b)      CORPORATE POWER. The Indenture Collateral Agent has
all requisite right, power and authority to execute and deliver this Indenture
and to perform all of its duties as Indenture Collateral Agent hereunder.

                  (c)      DUE AUTHORIZATION. The execution and delivery by the
Indenture Collateral Agent of this Indenture and the other Transaction Documents
to which it is a party, and the performance by the Indenture Collateral Agent of
its duties hereunder and thereunder, have been duly authorized by all necessary
corporate proceedings and no further approvals or filings, including any
governmental approvals, are required for the valid execution and delivery by the
Indenture Collateral Agent, or the performance by the Indenture Collateral
Agent, of this Indenture and such other Related Documents.

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

                                     - 60 -
<PAGE>

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

                  SECTION 6.21. CONTROL BY THE CONTROLLING PARTY. The Indenture
Collateral Agent shall comply with notices and instructions given by the Issuer
only if accompanied by the written consent of the Controlling Party, except that
if any Event of Default shall have occurred and be continuing, the Indenture
Collateral Agent shall act upon and comply with notices and instructions given
by the Controlling Party alone in the place and stead of the Issuer.

                                   ARTICLE VII

                         NOTEHOLDERS' LISTS AND REPORTS

                  SECTION 7.01. ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES TO
NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the Trustee (a)
not more than five days after the earlier of (i) each Record Date and (ii) three
months after the last Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders of Notes as of
such Record Date, (b) at such other times as the Trustee may request in writing,
within 30 days after receipt by the Issuer of any such request, a list of
similar form and content as of a date not more than 10 days prior to the time
such list is furnished; PROVIDED, HOWEVER, that so long as the Trustee is the
Note Registrar, no such list shall be required to be furnished. The Trustee or,
if the Trustee is not the Note Registrar, the Issuer shall furnish to the
Security Insurer in writing on an annual basis on each March 31 and at such
other times as the Security Insurer may request a copy of the list.

                  SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO
NOTEHOLDERS.

                  (a)      The Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Trustee as provided in
Section 7.01 and the names and addresses of Holders of Notes received by the
Trustee in its capacity as Note Registrar. The Trustee may destroy any list
furnished to it as provided in such Section 7.01 upon receipt of a new list so
furnished.

                  (b)      Noteholders may communicate pursuant to TIA Section
312(b) with other Noteholders with respect to their rights under this Indenture
or under the Notes.

                  (c)      The Issuer, the Trustee and the Note Registrar shall
have the protection of TIA Section 312(c).

                  SECTION 7.03.  REPORTS BY ISSUER.

                  (a)      The Issuer shall:

<PAGE>

                  (i)      file with the Trustee, within 15 days after the
         Issuer is required to file the same with the Commission, copies of the
         annual reports and of the information, documents and other reports (or
         copies of such portions of any of the foregoing as the Commission may
         from time to time by rules and regulations prescribe), which the Issuer
         may be required to file with the Commission pursuant to Section 13 or
         15(d) of the Exchange Act;

                  (ii)     file with the Trustee and the Commission in
         accordance with rules and regulations prescribed from time to time by
         the Commission such additional information, documents and reports with
         respect to compliance by the Issuer with the conditions and covenants
         of this Indenture as may be required from time to time by such rules
         and regulations; and

                  (iii)    supply to the Trustee (and the Trustee shall transmit
         by mail to all Noteholders described in TIA Section 313(c)) such
         summaries of any information, documents and reports required to be
         filed by the Issuer pursuant to clauses (i) and (ii) of this Section
         7.03(a) as may be required by rules and regulations prescribed from
         time to time by the Commission.

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

                  SECTION 7.04. REPORTS BY TRUSTEE. If required by TIA Section
313(a), within 60 days after each March 31, beginning with March 31, 2000, the
Trustee shall mail to the Security Insurer and each Noteholder as required by
TIA Section 313(c) a brief report dated as of such date that complies with TIA
Section 313(a). The Trustee also shall comply with TIA Section 313(b).

                  A copy of each report at the time of its mailing to
Noteholders shall be filed by the Trustee with the Commission and each stock
exchange, if any, on which the Notes are listed. The Issuer shall notify the
Trustee if and when the Notes are listed on any stock exchange.

                                  ARTICLE VIII

                      ACCOUNTS, DISBURSEMENTS AND RELEASES

                  SECTION 8.01. COLLECTION OF MONEY. Except as otherwise
expressly provided herein, the Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable by the Trustee pursuant to this Indenture as instructed in writing
by the Servicer. The Trustee shall apply all such money received by it as
provided in this Indenture. Except as otherwise expressly provided in this
Indenture, if any default occurs in the making of any payment or performance
under any agreement or instrument that is part of this Indenture or the Notes,
the Trustee may take such action as may be appropriate to enforce such

<PAGE>

payment or performance, including the institution and prosecution of appropriate
Proceedings. Any such action shall be without prejudice to any right to claim a
Default or Event of Default under this Indenture and any right to proceed
thereafter as provided in Article V.

                  SECTION 8.02.  TRUST ACCOUNTS.

                  (a)      On or prior to the Closing Date, the Issuer shall
cause the Servicer to establish and maintain, in the name of the Trustee, for
the benefit of the Noteholders, the Trust Accounts as provided in Section 4.1 of
the Sale and Servicing Agreement.

                  (b)      On each Payment Date and Redemption Date, the Trustee
shall distribute all amounts on deposit in the Note Distribution Account to
Noteholders in respect of the Notes to the extent of amounts due and unpaid on
the Notes for principal, interest and premium, if any, first to pay all accrued
and unpaid interest, and then to pay principal and premium, if any, on the Notes
in the following amounts and in the following order of priority as directed in
writing by the Servicer (except as otherwise provided in Section 5.06):

                  (i)      accrued and unpaid interest on the Notes, provided
         that if funds in the Note Distribution Account are not sufficient to
         pay the entire amount of accrued but unpaid interest on each class of
         Notes, the amount in the Note Distribution Account shall be applied to
         the payment of such interest on each class of Notes pro rata on the
         basis of the amount of accrued and unpaid interest on each class of
         Notes;

                  (ii)     any amounts deposited in the Note Distribution
         Account with respect to the Class A-1 Prepayment Amount, the Class A-2
         Prepayment Amount and the Class A-3 Prepayment Amount or the Class A-1
         Prepayment Premium, the Class A-2 Prepayment Premium and the Class A-3
         Prepayment Premium shall be distributed to the Holders of the Class A-1
         Notes, the Class A-2 Notes and the Class A-3 Notes, respectively;

                  (iii)    to the Holders of the Class A-1 Notes in reduction of
         the Outstanding Amount of the Class A-1 Notes until the Outstanding
         Amount of the Class A-1 Notes is reduced to zero;

                  (iv)     to the Holders of the Class A-2 Notes in reduction of
         the Outstanding Amount of the Class A-2 Notes until the Outstanding
         Amount of the Class A-2 Notes is reduced to zero; and

                  (v)      to the Holders of the Class A-3 Notes in reduction of
         the Outstanding Amount of the Class A-3 Notes until the Outstanding
         Amount of the Class A-3 Notes is reduced to zero.

                  SECTION 8.03.  GENERAL PROVISIONS REGARDING ACCOUNTS.

<PAGE>

                  (a)      So long as no Default or Event of Default shall have
occurred and be continuing, all or a portion of the funds in the Trust Accounts
shall be invested and reinvested in Eligible Investments in accordance with the
provisions of Section 4.1(e) of the Sale and Servicing Agreement.

                  (b)      Subject to Section 6.01(c), the Trustee shall not in
any way be held liable by reason of any insufficiency in any of the Trust
Accounts resulting from any loss on any Eligible Investment included therein
except for losses attributable to the Trustee's failure to make payments on such
Eligible Investments issued by the Trustee, in its commercial capacity as
principal obligor and not as Trustee, in accordance with their terms.

                                   ARTICLE IX

                             SUPPLEMENTAL INDENTURES

                  SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
NOTEHOLDERS.

                  (a)      Without the consent of the Holders of any Notes but
with the consent of the Security Insurer (unless an Insurer Default shall have
occurred and be continuing) and with prior notice to the Rating Agencies, the
Issuer and the Trustee, when authorized by an Issuer Order, at any time and from
time to time, may enter into one or more indentures supplemental hereto (which
shall conform to the provisions of the Trust Indenture Act as in force at the
date of the execution thereof), in form satisfactory to the Trustee, for any of
the following purposes:

                  (i)      to correct or amplify the description of any property
         at any time subject to the lien of this Indenture, or better to assure,
         convey and confirm unto the Indenture Collateral Agent any property
         subject or required to be subjected to the lien created by this
         Indenture, or to subject to the lien created by this Indenture
         additional property;

                  (ii)     to evidence the succession, in compliance with the
         applicable provisions hereof, of another Person to the Issuer, and the
         assumption by any such successor of the covenants of the Issuer herein
         and in the Notes contained;

                  (iii)    to add to the covenants of the Issuer, for the
         benefit of the Holders of the Notes, or to surrender any right or power
         herein conferred upon the Issuer;

                  (iv)     to convey, transfer, assign, mortgage or pledge any
         property to or with the Indenture Collateral Agent;

                  (v)      to cure any ambiguity, to correct or supplement any
         provision herein or in any supplemental indenture which may be
         inconsistent with any other provision herein or in any supplemental
         indenture or to make any other provisions with respect to matters or
         questions arising under this Indenture or in any supplemental
         indenture; PROVIDED that such action shall not adversely affect the
         interests of the Holders of the Notes;

<PAGE>

                  (vi)     to evidence and provide for the acceptance of the
         appointment hereunder by a successor trustee with respect to the Notes
         and to add to or change any of the provisions of this Indenture as
         shall be necessary to facilitate the administration of the trusts
         hereunder by more than one trustee, pursuant to the requirements of
         Article VI; or

                  (vii)    to modify, eliminate or add to the provisions of this
         Indenture to such extent as shall be necessary to effect the
         qualification of this Indenture under the TIA or under any similar
         Federal statute hereafter enacted and to add to this Indenture such
         other provisions as may be expressly required by the TIA.

                  The Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.

                  (b)      The Issuer and the Trustee, when authorized by an
Issuer Order, may, also without the consent of any of the Holders of the Notes
but with the consent of the Security Insurer (unless an Insurer Default shall
have occurred and be continuing) and with prior notice to the Rating Agencies,
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; PROVIDED, HOWEVER, that such action
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Noteholder.

                  SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF
NOTEHOLDERS. The Issuer and the Trustee, when authorized by an Issuer Order,
also may, with prior notice to the Rating Agencies, with the consent of the
Security Insurer (unless an Insurer Default shall have occurred and be
continuing) and with the consent of the Holders of not less than a majority of
the Outstanding Amount of the Notes, by Act of such Holders delivered to the
Issuer and the Trustee, enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Holders of the Notes under this Indenture; PROVIDED,
HOWEVER, that, subject to the express rights of the Security Insurer under the
Related Documents, including its rights to agree to certain modifications of the
Receivables pursuant to Section 3.2 of the Sale and Servicing Agreement and its
rights referred to in Section 5.02(c), no such supplemental indenture shall,
without the consent of the Holder of each Outstanding Note affected thereby:

                  (i)      change the date of payment of any installment of
         principal of or interest on any Note, or reduce the principal amount
         thereof, the interest rate thereon or the Redemption Price with respect
         thereto, change the provision of this Indenture relating to the
         application of collections on, or the proceeds of the sale of, the
         Trust Estate to payment of principal of or interest on the Notes, or
         change any place of payment where, or the coin or currency in which,
         any Note or the interest thereon is payable, or impair the right to
         institute suit for the enforcement of the provisions of this Indenture
         requiring the application of funds available therefor, as provided in
         Article V, to the payment of any

<PAGE>

         such amount due on the Notes on or after the respective due dates
         thereof (or, in the case of redemption, on or after the Redemption
         Date);

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

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

                  (iv)     reduce the percentage of the Outstanding Amount of
         the Notes required to direct the Trustee to direct the Issuer to sell
         or liquidate the Trust Estate pursuant to Section 5.04;

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

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

                  (vii)    permit the creation of any lien ranking prior to or
         on a parity with the lien created by this Indenture with respect to any
         part of the Trust Estate or, except as otherwise permitted or
         contemplated herein or in the Spread Account Agreement, terminate the
         lien created by this Indenture on any property at any time subject
         hereto or deprive the Holder of any Note of the security provided by
         the lien created by this Indenture.

                  The Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture, and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Trustee
shall not be liable for any such determination made in good faith.

                  It shall not be necessary for any Act of Noteholders under
this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.

                  Promptly after the execution by the Issuer and the Trustee of
any supplemental indenture pursuant to this Section, the Trustee shall mail to
the Holders of the Notes to which

<PAGE>

such amendment or supplemental indenture relates a notice setting forth in
general terms the substance of such supplemental indenture. Any failure of the
Trustee to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.

                  SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In
executing, or permitting the additional trusts created by, any supplemental
indenture permitted by this Article IX or the modifications thereby of the
trusts created by this Indenture, the Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02 shall be fully protected in relying upon, an
Opinion of Counsel (which shall not be at the expense of the Trustee) stating
that the execution of such supplemental indenture is authorized or permitted by
this Indenture. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture that affects the Trustee's own rights, duties,
liabilities or immunities under this Indenture or otherwise.

                  SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the
execution of any supplemental indenture pursuant to the provisions hereof, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith with respect to the Notes affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Trustee, the Issuer and the Holders of the Notes shall
thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.

                  SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every
amendment of this Indenture and every supplemental indenture executed pursuant
to this Article IX shall conform to the requirements of the Trust Indenture Act
as then in effect so long as this Indenture shall then be qualified under the
Trust Indenture Act.

                  SECTION 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article IX may, and if required by the Trustee shall,
bear a notation in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Issuer or the Trustee shall so determine,
new notes so modified as to conform, in the opinion of the Trustee and the
Issuer, to any such supplemental indenture may be prepared and executed by the
Issuer and authenticated and delivered by the Trustee in exchange for
Outstanding Notes.

                                    ARTICLE X

                               REDEMPTION OF NOTES

                  SECTION 10.01.  REDEMPTION.

                  (a)      In the event that the Seller or the Servicer pursuant
to Section 9.1(a) of the Sale and Servicing Agreement purchases the corpus of
the Trust, the Notes are subject to redemption in whole, but not in part, on the
Payment Date on which such repurchase occurs, for

<PAGE>

a purchase price equal to the Redemption Price; PROVIDED, HOWEVER, that the
Issuer has available funds sufficient to pay the Redemption Price. The Seller,
the Servicer or the Issuer shall furnish the Trustee, Owner Trustee, Security
Insurer and the Rating Agencies with written notice of such redemption. If the
Notes are to be redeemed pursuant to this Section 10.01(a), the Servicer or the
Issuer shall furnish notice of such election to the Trustee not later than 25
days prior to the Redemption Date, and the Issuer shall deposit with the Trustee
in the Note Distribution Account the Redemption Price of the Notes to be
redeemed, whereupon all such Notes shall be due and payable on the Redemption
Date upon the furnishing of a notice complying with Section 10.02 to each Holder
of the Notes.

                  (b)      In the event that on the Payment Date on or
immediately following the last day of the Funding Period, if the Pre-Funded
Amount remaining on deposit in the Pre-Funding Account exceeds $100,000 after
giving effect to the purchase of all Subsequent Receivables, including any such
purchase on such Redemption Date, each class of Notes will be redeemed in part,
on a pro rata basis, in an aggregate principal amount equal to the Class A-1
Prepayment Amount, the Class A-2 Prepayment Amount and the Class A-3 Prepayment
Amount, as applicable.

                  If the Pre-Funded Amount at the end of the Pre-Funding Period
exceeds $100,000, the Issuer shall also pay to the Holders of each class of
Notes, on a pro rata basis, on the Redemption Date the Class A-1 Prepayment
Premium, the Class A-2 Prepayment Premium and the Class A-3 Prepayment Premium,
as applicable; PROVIDED, HOWEVER, that the Issuer's obligation to pay the Class
A-1 Prepayment Premium, the Class A-2 Prepayment Premium or the Class A-3
Prepayment Premium shall, as set forth in Section 2.4(d) of the Sale and
Servicing Agreement, be limited solely to funds which are received by the Issuer
from AFL pursuant to Section 6.2 of the Purchase Agreement as liquidated damages
for the failure of AFL to deliver Subsequent Receivables and no other assets of
the Issuer will be available to pay the Class A-1 Prepayment Premium, the Class
A-2 Prepayment Premium or the Class A-3 Prepayment Premium, under any
circumstances.

                  (c)      In the event that the assets of the Trust are sold
pursuant to Section 8.2 of the Trust Agreement, the proceeds of such sale shall
be distributed as provided in Section 5.06. If amounts are to be paid to
Noteholders pursuant to this Section 10.01(c), the Servicer or the Issuer shall,
to the extent practicable, furnish written notice of such event to the Trustee
and the Owner Trustee not later than 25 days prior to the Redemption Date
whereupon all such amounts shall be payable on the Redemption Date.

                  SECTION 10.02.  FORM OF REDEMPTION NOTICE.

                  (a)      Notice of redemption under Section 10.01(a) shall be
given by the Trustee by first-class mail, postage prepaid, mailed not less than
five days prior to the applicable Redemption Date to each Holder of Notes, as of
the close of business on the Record Date with respect to the Payment Date
immediately preceding the applicable Redemption Date, at such Holder's address
appearing in the Note Register.

<PAGE>

                  All notices of redemption shall state:

                  (i)      the Redemption Date;

                  (ii)     the Redemption Price; and

                  (iii)    the place where such Notes are to be surrendered for
         payment of the Redemption Price (which shall be the office or agency of
         the Issuer to be maintained as provided in Section 3.02).

                  Notice of redemption of the Notes shall be given by the
Trustee in the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect therein, to any Holder of any Note shall not impair or
affect the validity of the redemption of any other Note.

                  (b)      Prior notice of redemption under Sections 10.01(b)
and 10.01(c) is not required to be given to Noteholders.

                  SECTION 10.03. NOTES PAYABLE ON REDEMPTION DATE. The Notes or
portions thereof to be redeemed shall, following notice of redemption (if any)
as required by Section 10.02, on the Redemption Date become due and payable at
the Redemption Price and (unless the Issuer shall default in the payment of the
Redemption Price) no interest shall accrue on the Redemption Price for any
period after the date to which accrued interest is calculated for purposes of
calculating the Redemption Price.

                                   ARTICLE XI

                                  MISCELLANEOUS

                  SECTION 11.01.  COMPLIANCE CERTIFICATES AND OPINIONS, ETC.

                  (a)      Upon any application or request by the Issuer to the
Trustee or the Indenture Collateral Agent to take any action under any provision
of this Indenture, the Issuer shall furnish to the Trustee or the Indenture
Collateral Agent, as the case may be, and to the Security Insurer if the
application or request is made to the Indenture Collateral Agent (i) an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with,
(ii) an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with and (iii) (if required by
the TIA) an Independent Certificate from a firm of certified public accountants
meeting the applicable requirements of this Section, except that, in the case of
any such application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture, no additional
certificate or opinion need be furnished.

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

<PAGE>

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

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

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

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

                  (b)      (i) Prior to the deposit of any Indenture Collateral
or other property or securities with the Indenture Collateral Agent that is to
be made the basis for the release of any property subject to the lien created by
this Indenture, the Issuer shall, in addition to any obligation imposed in
Section 11.01(a) or elsewhere in this Indenture, furnish to the Indenture
Collateral Agent and the Security Insurer (so long as no Insurer Default shall
have occurred and be continuing) an Officers' Certificate certifying or stating
the opinion of each person signing such certificate as to the fair value (within
90 days of such deposit) to the Issuer of the Indenture Collateral or other
property or securities to be so deposited.

                  (ii)     Whenever the Issuer is required to furnish to the
         Indenture Collateral Agent and the Security Insurer an Officers'
         Certificate certifying or stating the opinion of any signer thereof as
         to the matters described in clause (i) above, the Issuer shall also
         deliver to the Indenture Collateral Agent and the Security Insurer an
         Independent Certificate as to the same matters, if the fair value to
         the Issuer of the property to be so deposited and of all other such
         property made the basis of any such withdrawal or release since the
         commencement of the then-current fiscal year of the Issuer, as set
         forth in the certificates delivered pursuant to clause (i) above and
         this clause (ii), is 10% or more of the Outstanding Amount of the
         Notes, but such a certificate need not be furnished with respect to any
         property so deposited, if the fair value thereof to the Issuer as set
         forth in the related Officers' Certificate is less than $25,000 or less
         than one percent of the Outstanding Amount of the Notes.

                  (iii)    Other than with respect to any release described in
         clause (A) or (B) of Section 11.01(b)(v), whenever any property or
         securities are to be released from the lien created by this Indenture,
         the Issuer shall also furnish to the Indenture Collateral Agent and the
         Security Insurer (so long as no Insurer Default shall have occurred and
         be continuing) an Officers' Certificate certifying or stating the
         opinion of each person signing such certificate as to the fair value
         (within 90 days of such release) of the

<PAGE>

         property or securities proposed to be released and stating that in the
         opinion of such person the proposed release will not impair the
         security created by this Indenture in contravention of the provisions
         hereof.

                  (iv)     Whenever the Issuer is required to furnish to the
         Trustee and the Security Insurer an Officers' Certificate certifying or
         stating the opinion of any signer thereof as to the matters described
         in clause (iii) above, the Issuer shall also furnish to the Indenture
         Collateral Agent and the Security Insurer an Independent Certificate as
         to the same matters if the fair value of the property or securities and
         of all other property or securities (other than property described in
         clauses (A) or (B) of Section 11.01(b)(v)) released from the lien
         created by this Indenture since the commencement of the then current
         fiscal year, as set forth in the certificates required by clause (iii)
         above and this clause (iv), equals 10% or more of the Outstanding
         Amount of the Notes, but such certificate need not be furnished in the
         case of any release of property or securities if the fair value thereof
         as set forth in the related Officers' Certificate is less than $25,000
         or less than one percent of the then Outstanding Amount of the Notes.

                  (v)      Notwithstanding any other provision of this Section,
         the Issuer may, without compliance with the other provisions of this
         Section (A) collect, liquidate, sell or otherwise dispose of
         Receivables as and to the extent permitted or required by the Related
         Documents (including as provided in Section 3.1 of the Sale and
         Servicing Agreement) and (B) make cash payments out of the Trust
         Accounts as and to the extent permitted or required by the Related
         Documents.

                  SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.

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

<PAGE>

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

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

                  SECTION 11.03.  ACTS OF NOTEHOLDERS.

                  (a)      Any request, demand, authorization, direction,
         notice, consent, waiver or other action provided by this Indenture to
         be given or taken by Noteholders may be embodied in and evidenced by
         one or more instruments of substantially similar tenor signed by such
         Noteholders in person or by agents duly appointed in writing; and
         except as herein otherwise expressly provided, such action shall
         become effective when such instrument or instruments are delivered to
         the Trustee, and, where it is hereby expressly required, to the
         Issuer. Such instrument or instruments (and the action embodied
         therein and evidenced thereby) are herein sometimes referred to as the
         "Act" of the Noteholders signing such instrument or instruments. Proof
         of execution of any such instrument or of a writing appointing any
         such agent shall be sufficient for any purpose of this Indenture and
         (subject to Section 6.01) conclusive in favor of the Trustee and the
         Issuer, if made in the manner provided in this Section.

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

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

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

                  SECTION 11.04. NOTICES, ETC., TO TRUSTEE, ISSUER AND RATING
AGENCIES. Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other documents provided or permitted by this Indenture
to be made upon, given or furnished to or filed with:

<PAGE>

                  (a)      the Trustee by any Noteholder or by the Issuer shall
         be sufficient for every purpose hereunder if made, given, furnished or
         filed in writing to or with the Trustee at its Corporate Trust Office,

                  (b)      the Issuer by the Trustee or by any Noteholder shall
         be sufficient for every purpose hereunder if in writing and mailed,
         first-class, postage prepaid, to the Issuer addressed to: Arcadia
         Automobile Receivables Trust, 1999-C, in care of Wilmington Trust
         Company, as Owner Trustee, Rodney Square North, 1100 North Market
         Street, Wilmington, Delaware 19890, Attention: Corporate Trust
         Administration, or at any other address previously furnished in writing
         to the Trustee by Issuer. The Issuer shall promptly transmit any notice
         received by it from the Noteholders to the Trustee, or

                  (c)      the Security Insurer by the Issuer or the Trustee
         shall be sufficient for any purpose hereunder if in writing and mailed
         by registered mail or personally delivered or telexed or telecopied to
         the recipient as follows:

         To the Security Insurer:           Financial Security Assurance Inc.
                                            350 Park Avenue
                                            New York, NY 10022
                                            Attention:  Surveillance Department
                                            Telex No.:  (212) 688-3101
                                            Confirmation:  (212) 826-0100
                                            Telecopy Nos.:  (212) 339-3518 or
                                                            (212) 339-3529

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

                  Notices required to be given to the Rating Agencies by the
         Issuer, the Trustee or the Owner Trustee shall be in writing,
         personally delivered or mailed by certified mail, return receipt
         requested to (i) in the case of Moody's, at the following address:
         Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church
         Street, New York, New York 10007 and (ii) in the case of Standard &
         Poor's, at the following address: Standard & Poor's Ratings Services,
         55 Water Street, New York, New York 10041, Attention: Asset Backed
         Surveillance Department; or as to each of the foregoing, at such other
         address as shall be designated by written notice to the other parties.

                  SECTION 11.05 NOTICES TO NOTEHOLDERS; WAIVER. Where this
Indenture provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than

<PAGE>

the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.

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

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

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

                  SECTION 11.06. ALTERNATE PAYMENT AND NOTICE PROVISIONS.
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the Trustee or any Paying Agent
to such Holder, that is different from the methods provided for in this
Indenture for such payments or notices. The Issuer will furnish to the Trustee a
copy of each such agreement and the Trustee will cause payments to be made and
notices to be given in accordance with such agreements.

                  SECTION 11.07. CONFLICT WITH TRUST INDENTURE ACT. If any
provision hereof limits, qualifies or conflicts with another provision hereof
that is required to be included in this indenture by any of the provisions of
the Trust Indenture Act, such required provision shall control.

                  The provisions of TIA Sections 310 through 317 that impose
duties on any Person (including the provisions automatically deemed included
herein unless expressly excluded by this Indenture) are a part of and govern
this Indenture, whether or not physically contained herein.

                  SECTION 11.08. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.

<PAGE>

                  SECTION 11.09. SUCCESSORS AND ASSIGNS. All covenants and
agreements in this Indenture and the Notes by the Issuer shall bind its
successors and assigns, whether so expressed or not. All agreements of the
Trustee in this Indenture shall bind its successors.

                  SECTION 11.10. SEVERABILITY. In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality, and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

                  SECTION 11.11. BENEFITS OF INDENTURE. The Security Insurer and
its successors and assigns shall be a third-party beneficiary to the provisions
of this Indenture, and shall be entitled to rely upon and directly to enforce
such provisions of this Indenture so long as no Insurer Default shall have
occurred and be continuing. Nothing in this Indenture or in the Notes, express
or implied, shall give to any Person, other than the parties hereto and their
successors hereunder, and the Noteholders, and any other party secured
hereunder, and any other Person with an ownership interest in any part of the
Trust Estate, any benefit or any legal or equitable right, remedy or claim under
this Indenture. The Security Insurer may disclaim any of its rights and powers
under this Indenture (in which case the Indenture Trustee may exercise such
right or power hereunder), but not its duties and obligations under the Note
Policy, upon delivery of a written notice to the Trustee.

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

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

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

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

<PAGE>

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

                  SECTION 11.17. NO PETITION. The Trustee and the Indenture
Collateral Agent, by entering into this Indenture, and each Noteholder, by
accepting a Note, hereby covenant and agree that they will not at any time
institute against the Seller or the Issuer, or join in any institution against
the Seller or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, this Indenture or any of the Related
Documents.

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

                  SECTION 11.19. LIMITATION OF LIABILITY. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is executed
and delivered by Wilmington Trust Company, not individually or personally but
solely as Owner Trustee of the Issuer under the Trust Agreement, in the exercise
of the powers and authority conferred and vested in it, (b) each of the
representations, undertakings and agreements herein made on the part of the
Issuer is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
for binding only the Issuer, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company, individually or personally,
to perform any covenant either expressed or implied contained herein,

<PAGE>

all such liability, if any, being expressly waived by the parties to this
Agreement and by any person claiming by, through or under them and (d) under no
circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Issuer under this Agreement or any related documents.

                  SECTION 11.20. NO SUBSTANTIVE REVIEW OF COMPLIANCE DOCUMENTS.
Other than as set forth in this Agreement, any reports, information or other
documents provided to the Indenture Collateral Agent or the Trustee are for
purposes only of enabling the sending party to comply with its document delivery
requirements hereunder, and such party's receipt of any such information shall
not constitute actual or constructive notice of any information contained
therein or determinable from any information contained therein, including the
Issuer's, the Seller's or the Servicer's compliance with any of its covenants,
representations or warranties hereunder.

<PAGE>

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

                             ARCADIA AUTOMOBILE RECEIVABLES
                             TRUST, 1999-C

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

                             By /S/ ANITA E. DALLAGO
                                ------------------------------------------
                             Name: Anita E. Dallago
                             Title: Administrative Account Manager

                             NORWEST BANK MINNESOTA,
                             NATIONAL ASSOCIATION,
                                not in its individual capacity but solely as
                                      Trustee and Indenture Collateral Agent

                             By /S/ EILEEN R. O'CONNOR
                                ------------------------------------------
                             Name: Eileen R. O'Connor
                             Title: Assistant Vice President<PAGE>
                                                                     EXHIBIT 4.3

                          SALE AND SERVICING AGREEMENT

                          Dated as of September 1, 1999

                                      among

                  ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1999-C
                                     Issuer

                        ARCADIA RECEIVABLES FINANCE CORP.
                                     Seller

                             ARCADIA FINANCIAL LTD.
                   In its individual capacity and as Servicer

                                       and

                  NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
                                 Backup Servicer

<PAGE>

<TABLE>
<CAPTION>

                                TABLE OF CONTENTS

                                                                                                               PAGE

ARTICLE I
<S>                                                                                                            <C>
         DEFINITIONS..............................................................................................1
         SECTION 1.1.  DEFINITIONS................................................................................1
         SECTION 1.2.  USAGE OF TERMS............................................................................20
         SECTION 1.3.  CALCULATIONS..............................................................................20
         SECTION 1.4.  SECTION REFERENCES........................................................................20
         SECTION 1.5.  NO RECOURSE...............................................................................20
         SECTION 1.6.  MATERIAL ADVERSE EFFECT...................................................................21

ARTICLE II

         CONVEYANCE OF RECEIVABLES...............................................................................22
         SECTION 2.1.  CONVEYANCE OF INITIAL RECEIVABLES.........................................................22
         SECTION 2.2.  CUSTODY OF RECEIVABLE FILES...............................................................22
         SECTION 2.3.  CONDITIONS TO ACCEPTANCE BY OWNER TRUSTEE.................................................23
         SECTION 2.4.  CONVEYANCE OF SUBSEQUENT RECEIVABLES......................................................24
         SECTION 2.5.  REPRESENTATIONS AND WARRANTIES OF SELLER..................................................27
         SECTION 2.6.  REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY.........................................29
         SECTION 2.7.  NONPETITION COVENANT......................................................................30
         SECTION 2.8.  COLLECTING LIEN CERTIFICATES NOT DELIVERED ON THE CLOSING DATE OR
                  SUBSEQUENT TRANSFER DATE.......................................................................30
         SECTION 2.9.  TRUST'S ASSIGNMENT OF ADMINISTRATIVE RECEIVABLES AND WARRANTY
                  RECEIVABLES....................................................................................30

ARTICLE III

         ADMINISTRATION AND SERVICING OF RECEIVABLES.............................................................30
         SECTION 3.1.  DUTIES OF THE SERVICER....................................................................30
         SECTION 3.2.  COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF RECEIVABLES;
                  LOCKBOX AGREEMENTS.............................................................................32
         SECTION 3.3.  REALIZATION UPON RECEIVABLES..............................................................34
         SECTION 3.4.  INSURANCE.................................................................................35
         SECTION 3.5.  MAINTENANCE OF SECURITY INTERESTS IN VEHICLES.............................................37
         SECTION 3.6.  COVENANTS, REPRESENTATIONS, AND WARRANTIES OF SERVICER....................................38
         SECTION 3.7.  PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT...........................................40
         SECTION 3.8.  TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY SERVICER..............................40
         SECTION 3.9.  SERVICER'S CERTIFICATE....................................................................40
         SECTION 3.10.  ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF SERVICER TERMINATION
                  EVENT..........................................................................................41
         SECTION 3.11.  ANNUAL INDEPENDENT ACCOUNTANTS' REPORT...................................................42
         SECTION 3.12.  ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
                  RECEIVABLES....................................................................................43
         SECTION 3.13.  MONTHLY TAPE.............................................................................43
         SECTION 3.14.  RETENTION AND TERMINATION OF SERVICER....................................................44
         SECTION 3.15.  FIDELITY BOND............................................................................44
         SECTION 3.16.  DUTIES OF THE SERVICER UNDER THE INDENTURE...............................................44

                                      - i -
<PAGE>

         SECTION 3.17.  DUTIES OF THE SERVICER UNDER THE INSURANCE AGREEMENT.....................................46
         SECTION 3.18.  CERTAIN DUTIES OF THE SERVICER UNDER THE TRUST AGREEMENT.................................46

ARTICLE IV

         DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS................................................................47
         SECTION 4.1.  TRUST ACCOUNTS............................................................................47
         SECTION 4.2.  COLLECTIONS...............................................................................50
         SECTION 4.3.  APPLICATION OF COLLECTIONS................................................................51
         SECTION 4.4.  MONTHLY ADVANCES..........................................................................52
         SECTION 4.5.  ADDITIONAL DEPOSITS.......................................................................53
         SECTION 4.6.  DISTRIBUTIONS.............................................................................53
         SECTION 4.7.  PRE-FUNDING ACCOUNT.......................................................................54
         SECTION 4.8.  NET DEPOSITS..............................................................................55
         SECTION 4.9.  STATEMENTS TO NOTEHOLDERS.................................................................55
         SECTION 4.10.  INDENTURE TRUSTEE AS AGENT...............................................................56
         SECTION 4.11.  ELIGIBLE ACCOUNTS........................................................................57

ARTICLE V

         THE RESERVE ACCOUNT; THE SPREAD ACCOUNT.................................................................57
         SECTION 5.1.  WITHDRAWALS FROM THE RESERVE ACCOUNT......................................................57
         SECTION 5.2.  WITHDRAWALS FROM SPREAD ACCOUNT...........................................................57

ARTICLE VI

         THE SELLER..............................................................................................58
         SECTION 6.1.  LIABILITY OF SELLER.......................................................................58
         SECTION 6.2.  MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, SELLER;
                  AMENDMENT OF CERTIFICATE OF INCORPORATION......................................................58
         SECTION 6.3.  LIMITATION ON LIABILITY OF SELLER AND OTHERS..............................................59
         SECTION 6.4.  SELLER MAY OWN NOTES......................................................................59

ARTICLE VII

         THE SERVICER............................................................................................59
         SECTION 7.1.  LIABILITY OF SERVICER; INDEMNITIES........................................................59
         SECTION 7.2.  MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, THE
                  SERVICER OR BACKUP SERVICER....................................................................61
         SECTION 7.3.  LIMITATION ON LIABILITY OF SERVICER, BACKUP SERVICER AND OTHERS...........................62
         SECTION 7.4.  DELEGATION OF DUTIES......................................................................62
         SECTION 7.5.  SERVICER AND BACKUP SERVICER NOT TO RESIGN................................................62
         SECTION 7.6.  ADVANCING OBLIGATIONS OF SUCCESSOR SERVICER...............................................63

ARTICLE VIII

         SERVICER TERMINATION EVENTS.............................................................................63
         SECTION 8.1.  SERVICER TERMINATION EVENT................................................................63
         SECTION 8.2.  CONSEQUENCES OF A SERVICER TERMINATION EVENT..............................................65
         SECTION 8.3.  APPOINTMENT OF SUCCESSOR..................................................................66
         SECTION 8.4.  NOTIFICATION TO NOTEHOLDERS...............................................................67
         SECTION 8.5.  WAIVER OF PAST DEFAULTS...................................................................67

ARTICLE IX

         TERMINATION.............................................................................................68
         SECTION 9.1.  OPTIONAL PURCHASE OF ALL RECEIVABLES; LIQUIDATION OF TRUST ESTATE.........................68

                                     - ii -
<PAGE>

ARTICLE X

         MISCELLANEOUS PROVISIONS................................................................................69
         SECTION 10.1.  AMENDMENT................................................................................69
         SECTION 10.2.  PROTECTION OF TITLE TO TRUST PROPERTY....................................................70
         SECTION 10.3.  GOVERNING LAW............................................................................72
         SECTION 10.4.  SEVERABILITY OF PROVISIONS...............................................................72
         SECTION 10.5.  ASSIGNMENT...............................................................................72
         SECTION 10.6.  THIRD-PARTY BENEFICIARIES................................................................72
         SECTION 10.7.  DISCLAIMER BY SECURITY INSURER...........................................................73
         SECTION 10.8.  COUNTERPARTS.............................................................................73
         SECTION 10.9.  INTENTION OF PARTIES.....................................................................73
         SECTION 10.10.  NOTICES.................................................................................73
         SECTION 10.11.  LIMITATION OF LIABILITY.................................................................74
</TABLE>

                                     - iii -
<PAGE>

                                    SCHEDULES

Schedule A        --       Representations and Warranties of Seller and AFL

Schedule B        --       Servicing Policies and Procedures

                                    EXHIBITS

Exhibit A         --       Schedule of Initial Receivables

Exhibit B         --       Form of Custodian Agreement (AFL)

Exhibit C         --       Form of Spread Account Agreement

Exhibit D         --       Form of Receivables Purchase Agreement

Exhibit E         --       Form of Servicer's Certificate

Exhibit F         --       Form of Subsequent Transfer Agreement

                                     - iv -
<PAGE>

                  THIS SALE AND SERVICING AGREEMENT, dated as of September 1,
1999, is made among Arcadia Automobile Receivables Trust, 1999-C (the "Issuer"),
Arcadia Receivables Finance Corp., a Delaware corporation, as Seller (the
"Seller"), Arcadia Financial Ltd., a Minnesota corporation, in its individual
capacity and as Servicer (in its individual capacity, "AFL"; in its capacity as
Servicer, the "Servicer"), and Norwest Bank Minnesota, National Association, a
national banking association, as Backup Servicer (the "Backup Servicer").

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

                                    ARTICLE I

                                   DEFINITIONS

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

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

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

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

                  ADDITION NOTICE: With respect to any transfer of Subsequent
Receivables to the Trust pursuant to Section 2.4, a notice, which shall be given
not later than 15 days prior to the related Subsequent Transfer Date, of the
Seller's designation of Subsequent Receivables to be transferred to the Issuer
and the aggregate Principal Balance of such Subsequent Receivables.

                  ADMINISTRATIVE RECEIVABLE: With respect to any Monthly Period,
a Receivable which the Servicer is required to purchase pursuant to Section 3.7
or which the Servicer has elected to purchase pursuant to Section 3.4(c).

                  AFFILIATE: With respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,

                                      - 1 -
<PAGE>

whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

                  AFL:  Arcadia Financial Ltd., a Minnesota corporation.

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

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

                  AMOUNT FINANCED: With respect to a Receivable, the aggregate
amount advanced under such Receivable toward the purchase price of the Financed
Vehicle and related costs, including amounts advanced in respect of accessories,
insurance premiums, service and warranty contracts, other items customarily
financed as part of retail automobile installment sale contracts or promissory
notes, and related costs. The term "Amount Financed" shall not include any
Insurance Add-On Amounts.

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

                  ASSUMED REINVESTMENT RATE:  2.5% per annum.

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

                  BACKUP SERVICER: Norwest Bank Minnesota, National Association,
or its successor in interest pursuant to Section 8.2, or such Person as shall
have been appointed as Backup Servicer or successor Servicer pursuant to Section
8.3.

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

                                      - 2 -
<PAGE>

                  BASIC SERVICING FEE RATE: 1.25% per annum.

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

                  CLASS A-1 FINAL SCHEDULED DISTRIBUTION DATE: September 15,
2002 (or, if such day is not a Business Day, the next succeeding Business Day
thereafter).

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

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

                  CLASS A-1 INTEREST RATE:  6.25% per annum.

                  CLASS A-1 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect
to any Distribution Date, the product of (x) the Class A-1 Interest Rate, (y) a
fraction, the numerator of which is the number of days elapsed from and
including the most recent date to which interest has been paid (or, in the case
of the first Distribution Date, interest accrued for 23 days, which is the
number of days elapsed from and including the Closing Date to but excluding
October 15, 1999) to but excluding such Distribution Date and the denominator of
which is 360 and (z) the outstanding principal balance of the Class A-1 Notes on
the immediately preceding Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date), after giving effect to all payments of
principal to Class A-1 Noteholders on or prior to such immediately preceding
Distribution Date (or, in the case of the first Distribution Date, on the
Closing Date).

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

                  CLASS A-1 PREPAYMENT PREMIUM: An amount computed by the
Servicer equal to the excess, if any, discounted as described below, of (i) the
amount of interest that would accrue on the Class A-1 Prepayment Amount at the
Class A-1 Interest Rate during the period commencing on and including the
Distribution Date on which the Class A-1 Prepayment

                                      - 3 -
<PAGE>

Amount is required to be deposited in the Note Distribution Account pursuant to
Section 4.7 to but excluding June 30, 2000 over (ii) the amount of interest that
would have accrued on the Class A-1 Prepayment Amount over the same period at a
per annum rate of interest equal to the bond equivalent yield to maturity on the
Determination Date preceding such Distribution Date on the 0.75 year Eurodollar
Synthetic Forward ("EDSF") due June 30, 2000. Such excess shall be discounted to
present value to such Distribution Date at the yield described in clause (ii)
above.

                  CLASS A-2 FINAL SCHEDULED DISTRIBUTION DATE: December 15, 2003
(or, if such day is not a Business Day, the next succeeding Business Day
thereafter).

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

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

                  CLASS A-2 INTEREST RATE: 6.90% per annum.

                  CLASS A-2 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect
to any Distribution Date, the product of (x) the Class A-2 Interest Rate, (y) a
fraction, the numerator of which is the number of days elapsed from and
including the most recent date to which interest has been paid (or, in the case
of the first Distribution Date, interest accrued for 23 days, which is the
number of days elapsed from and including the Closing Date to but excluding
October 15, 1999) to but excluding such Distribution Date and the denominator of
which is 360 and (z) the outstanding principal balance of the Class A-2 Notes on
the immediately preceding Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date), after giving effect to all payments of
principal to Class A-2 Noteholders on or prior to such immediately preceding
Distribution Date (or, in the case of the first Distribution Date, on the
Closing Date).

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

                  CLASS A-2 PREPAYMENT PREMIUM: An amount computed by the
Servicer equal to the excess, if any, discounted as described below, of (i) the
amount of interest that would accrue on the Class A-2 Prepayment Amount at the
Class A-2 Interest Rate during the period commencing on and including the
Distribution Date on which the Class A-2 Prepayment

                                      - 4 -
<PAGE>

Amount is required to be deposited in the Note Distribution Account pursuant
to Section 4.7 to but excluding September 30, 2001 over (ii) the amount of
interest that would have accrued on the Class A-2 Prepayment Amount over the
same period at a per annum rate of interest equal to the yield to maturity on
the Determination Date preceding such Distribution Date on the 6.375% United
States Treasury Note due September 30, 2001. Such excess shall be discounted
to present value to such Distribution Date at the yield described in clause
(ii) above.

                  CLASS A-3 FINAL SCHEDULED DISTRIBUTION DATE: June 15, 2007
(or, if such day is not a Business Day, the next succeeding Business Day
thereafter).

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

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

                  CLASS A-3 INTEREST RATE: 7.20% per annum.

                  CLASS A-3 MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect
to any Distribution Date, 30 days of interest (or, in the case of the first
Distribution Date, interest accrued for 23 days, which is the number of days
elapsed from and including the Closing Date to but excluding October 15, 1999,
assuming that the last day of the month is the 30th) at the Class A-3 Interest
Rate on the outstanding principal balance of the Class A-3 Notes on the
immediately preceding Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date), after giving effect to all payments of
principal to Class A-3 Noteholders on or prior to such immediately preceding
Distribution Date (or, in the case of the first Distribution Date, on the
Closing Date).

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

                  CLASS A-3 PREPAYMENT PREMIUM: An amount computed by the
Servicer equal to the excess, if any, discounted as described below, of (i) the
amount of interest that would accrue on the Class A-3 Prepayment Amount at the
Class A-3 Interest Rate during the period commencing on and including the
Distribution Date on which the Class A-3 Prepayment Amount is required to be
deposited in the Note Distribution Account pursuant to Section 4.7 to

                                      - 5 -
<PAGE>

but excluding February 28, 2003, over (ii) the amount of interest that would
have accrued on the Class A-3 Prepayment Amount over the same period at a per
annum rate of interest equal to the yield to maturity on the Determination
Date preceding such Distribution Date on the 5.50% U.S. Treasury Note due
February 28, 2003. Such excess shall be discounted to present value to such
Distribution Date at the yield described in clause (ii) above.

                  CLOSING DATE: September 22, 1999.

                  CLOSING DATE PURCHASE AGREEMENT: The Receivables Purchase
Agreement and Assignment, dated as of September 1, 1999, between AFL and the
Seller.

                  COLLATERAL AGENT: The Collateral Agent named in the Spread
Account Agreement, and any successor thereto pursuant to the terms of the Spread
Account Agreement.

                  COLLATERAL INSURANCE: The insurance policy maintained by the
Servicer, or indemnification obligation of the Servicer in lieu of such
insurance policy, pursuant to Section 3.4(e).

                  COLLECTED FUNDS: With respect to any Determination Date, the
amount of funds in the Collection Account representing collections on the
Receivables during the related Monthly Period, including all Liquidation
Proceeds collected during the related Monthly Period (but excluding any Monthly
Advances and any Purchase Amounts).

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

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

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

                  CORPORATE TRUST OFFICE: With respect to the Owner Trustee, the
principal office of the Owner Trustee at which at any particular time its
corporate trust business shall be administered, which office at the Closing Date
is located at Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890; the telecopy number for the Corporate Trust Administration of
the Owner Trustee on the date of the execution of this Agreement is (302) 651-
8882; with respect to the Indenture Trustee, the principal office of the
Indenture Trustee at which at any particular time its corporate trust business
shall be administered, which office is located at Sixth Street and Marquette
Avenue, Minneapolis, Minnesota 55479-0070, Attention: Corporate Trust
Services--Asset Backed Administration; the telecopy number for the Corporate
Trust Services of the Indenture Trustee on the date of execution of this
Agreement is (612) 667-3539.

                                      - 6 -
<PAGE>

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

                  CREDIT ENHANCEMENT FEE: With respect to any Distribution Date,
the amount to be paid to the Security Insurer pursuant to Section 4.6(vi) and
the amount to which the Seller is entitled pursuant to Section 4.6(vii).

                  CUSTODIAN: AFL and any other Person named from time to time as
custodian in any Custodian Agreement acting as agent for the Trust, which Person
must be (so long as an Insurer Default shall not have occurred and be
continuing) acceptable to the Security Insurer.

                  CUSTODIAN AGREEMENT: Any Custodian Agreement from time to time
in effect between the Custodian named therein and the Trust, substantially in
the form of Exhibit B hereto, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof, which
Custodian Agreement and any amendments, supplements or modifications thereto
shall (so long as an Insurer Default shall not have occurred and be continuing)
be acceptable to the Security Insurer.

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

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

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

                  DEFICIENCY CLAIM AMOUNT: As defined in Section 5.2(a).

                  DEFICIENCY CLAIM DATE: With respect to any Distribution Date,
the fourth Business Day immediately preceding such Distribution Date.

                  DEFICIENCY NOTICE: As defined in Section 5.2(a).

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

                                      - 7 -
<PAGE>

                  DETERMINATION DATE: With respect to any Monthly Period, the
sixth Business Day immediately preceding the related Distribution Date.

                  DISTRIBUTION AMOUNT: With respect to a Distribution Date, the
sum of (i) the Actual Funds for such Distribution Date, and (ii) the Deficiency
Claim Amount, if any, received by the Indenture Trustee with respect to such
Distribution Date.

                  DISTRIBUTION DATE: The 15th day of each calendar month, or if
such 15th day is not a Business Day, the next succeeding Business Day,
commencing October 15, 1999, to and including the Final Scheduled Distribution
Date.

                  DRAW DATE: With respect to any Distribution Date, the third
Business Day immediately preceding such Distribution Date.

                  ELECTRONIC LEDGER: The electronic master record of the retail
installment sales contracts or installment loans of AFL.

                  ELIGIBLE ACCOUNT: (i) A segregated trust account that is
maintained with the corporate trust department of a depository institution
acceptable to the Security Insurer (so long as an Insurer Default shall not have
occurred and be continuing), or (ii) a segregated direct deposit account
maintained with a depository institution or trust company organized under the
laws of the United States of America, or any of the States thereof, or the
District of Columbia, having a certificate of deposit, short term deposit or
commercial paper rating of at least "A-1+" by Standard & Poor's and "P-1" by
Moody's and (so long as an Insurer Default shall not have occurred and be
continuing) acceptable to the Security Insurer.

                  ELIGIBLE INVESTMENTS: Any one or more of the following types
of investments:

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

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

                                      - 8 -
<PAGE>

such investment, or contractual commitment providing for such investment, are
assigned a rating in the highest credit rating category by each Rating Agency;

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

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

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

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

                  (g)      any other demand or time deposit, obligation,
security or investment as may be acceptable to the Rating Agencies and the
Security Insurer, as evidenced by the prior written consent of the Security
Insurer, as may from time to time be confirmed in writing to the Indenture
Trustee by the Security Insurer; PROVIDED, HOWEVER, that securities issued by
any entity (except as provided in paragraph (a)) will not be Eligible
Investments to the extent that an investment therein will cause the then
outstanding principal amount of securities issued by such entity and held in the
Pre-Funding Account to exceed $25 million (with Eligible Investments held in the
Pre-Funding Account valued at par), unless and for so long as such securities
are acceptable to the Rating Agencies and the Security Insurer, as evidenced by
the prior written consent of the Security Insurer, as may from time to time be
confirmed in writing to the Indenture Trustee by the Security Insurer.

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

                                      - 9 -
<PAGE>

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

                  FINAL SCHEDULED DISTRIBUTION DATE: With respect to each class
of Notes, the Class A-1 Final Scheduled Distribution Date, the Class A-2 Final
Scheduled Distribution Date and the Class A-3 Final Scheduled Distribution Date.

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

                  FORCE-PLACED INSURANCE: The meaning set forth in Section
3.4(b).

                  FUNDING PERIOD: The period beginning on the Closing Date and
ending on the first to occur of (a) the Distribution Date on which the
Pre-Funded Amount (after giving effect to any reduction in the Pre-Funded Amount
in connection with the transfer of Subsequent Receivables to the Trust on such
Distribution Date) is less than $100,000, (b) the date on which an Event of
Default or a Servicer Termination Event occurs, (c) the date on which an
Insolvency Event occurs with respect to AFL and (d) the close of business on the
Distribution Date occurring in December 1999.

                  INDENTURE: The Indenture, dated as of September 1, 1999, among
the Trust, the Indenture Trustee and the Indenture Collateral Agent, as the same
may be amended and supplemented from time to time.

                  INDENTURE COLLATERAL AGENT: The Person acting as Indenture
Collateral Agent under the Indenture, its successors in interest and any
successor Indenture Collateral Agent under the Indenture.

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

                  INDEPENDENT ACCOUNTANTS: As defined in Section 3.11(a).

                  INITIAL CUTOFF DATE:  September 7, 1999.

                                     - 10 -
<PAGE>

                  INITIAL CUTOFF DATE PRINCIPAL BALANCE:  $438,524,038.29.

                  INITIAL RECEIVABLES: The Receivables listed on the Schedule of
Initial Receivables on the Closing Date.

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

                  INSURANCE ADD-ON AMOUNT: The premium charged to the Obligor in
the event that the Servicer obtains Force-Placed Insurance pursuant to Section
3.4.

                  INSURANCE AGREEMENT: The Insurance and Indemnity Agreement,
dated as of September 22, 1999, among the Security Insurer, the Trust, the
Seller and AFL.

                  INSURANCE AGREEMENT EVENT OF DEFAULT: An "Event of Default" as
defined in the Insurance Agreement.

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

                  INSURER DEFAULT: The occurrence and continuance of any of the
following:

                           (a)      the Security Insurer shall have failed to
         make a payment required under the Note Policy;

                           (b)      The Security Insurer shall have (i) filed a
         petition or commenced any case or proceeding under any provision or
         chapter of the United States Bankruptcy Code, the New York State
         Insurance Law, or any other similar federal or state law relating to
         insolvency, bankruptcy, rehabilitation, liquidation or reorganization,
         (ii) made

                                     - 11 -
<PAGE>

         a general assignment for the benefit of its creditors, or (iii) had an
         order for relief entered against it under the United States Bankruptcy
         Code, the New York State Insurance Law, or any other similar federal
         or state law relating to insolvency, bankruptcy, rehabilitation,
         liquidation or reorganization which is final and nonappealable; or

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

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

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

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

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

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

                  LOCKBOX AGREEMENT: The Agency Agreement, dated as of November
13, 1992 by and among Harris Trust and Savings Bank, AFL, Shawmut Bank, N.A., as
Trustee, Saturn Financial Services, Inc. and the Program Parties (as defined
therein), taken together with the Retail Lockbox Agreement, dated as of November
13, 1992, among such parties, and the

                                     - 12 -
<PAGE>

Counterpart to Agency Agreement and Retail Lockbox Agreement, dated as of
September 22, 1999, among Harris Trust and Savings Bank, AFL, the Trust, the
Indenture Trustee and the Security Insurer, as such agreements may be amended
from time to time, unless the Indenture Trustee hereunder shall cease to be a
Program Party thereunder, or such agreement shall be terminated in accordance
with its terms, in which event "Lockbox Agreement" shall mean such other
agreement, in form and substance acceptable to the Security Insurer, or if an
Insurer Default shall have occurred and be continuing, to a Note Majority, among
the Servicer, the Trust, the Indenture Trustee and the Lockbox Bank.

                  LOCKBOX BANK: A depository institution named by the Servicer
and, so long as an Insurer Default shall not have occurred and be continuing,
acceptable to the Security Insurer, or, if an Insurer Default shall have
occurred and be continuing, to a Note Majority.

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

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

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

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

                  NOTE DISTRIBUTION ACCOUNT: The account designated as such,
established and maintained pursuant to Section 4.1(c).

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

                  NOTE POLICY: The financial guaranty insurance policy issued by
the Security Insurer to the Indenture Trustee on behalf of the Noteholders.

                                     - 13 -
<PAGE>

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

                  NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT: With respect to
any Distribution Date, the sum of the Class A-1 Interest Distributable Amount,
the Class A-2 Interest Distributable Amount and the Class A-3 Interest
Distributable Amount.

                  NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT: With
respect to any Distribution Date, 100% of the Principal Distribution Amount.

                  NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL: As of the close of
business on any Distribution Date, the excess of the sum of the Noteholders'
Monthly Principal Distributable Amount and any outstanding Noteholders'
Principal Carryover Shortfall from the immediately preceding Distribution Date
over the amount in respect of principal that is actually deposited in the Note
Distribution Account on such immediately preceding Distribution Date.

                  NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to
any Distribution Date (other than the Final Scheduled Distribution Date with
respect to any class of Notes), the sum of the Noteholders' Monthly Principal
Distributable Amount for such Distribution Date and any Noteholders' Principal
Carryover Shortfall as of the close of the preceding Distribution Date. The
Noteholders' Principal Distributable Amount on the Final Scheduled Distribution
Date for any class of Notes will equal the sum of (i) the Noteholders' Monthly
Principal Distributable Amount for such Distribution Date, (ii) the Noteholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date, and (iii) the excess of the outstanding principal balance of such class of
Notes, if any, over the amounts in clauses (i) and (ii). In no event may the
Noteholders' Principal Distributable Amount for any Distribution Date exceed the
outstanding principal balance of the Notes immediately prior to such
Distribution Date.

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

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

                  OPINION OF COUNSEL: A written opinion of counsel acceptable in
form and substance and from counsel acceptable to the Owner Trustee and, if such
opinion or a copy thereof is required to be delivered to the Indenture Trustee
or the Security Insurer, to the Indenture Trustee or the Security Insurer, as
applicable.

                  ORIGINAL POOL BALANCE: As of any date, the sum of the Initial
Cutoff Date Principal Balance plus the aggregate Principal Balance (as of the
related Subsequent Cutoff Date) of all Subsequent Receivables sold to the Trust
on any Subsequent Transfer Date.

                                     - 14 -
<PAGE>

                  OUTSTANDING MONTHLY ADVANCES: With respect to a Receivable and
a Determination Date, the sum of all Monthly Advances made on any Determination
Date prior to such Determination Date relating to that Receivable which have not
been reimbursed pursuant to Section 4.6(i) or Section 4.8.

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

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

                  PRE-FUNDED AMOUNT: As of any date, $161,475,961.71 minus the
aggregate Principal Balance (as of the related Subsequent Cutoff Date) of all
Subsequent Receivables sold to the Trust on or prior to such date.

                  PRE-FUNDING ACCOUNT: The account designated as the Pre-Funding
Account in, and which is established and maintained pursuant to, Section 4.1(b).

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

                  PRINCIPAL DISTRIBUTION AMOUNT: With respect to any
Distribution Date, the amount equal to the sum of the following amounts with
respect to the related Monthly Period, in each case computed with respect to
each Receivable in accordance with the method specified in the related retail
installment sale contract or promissory note: (i) that portion of all
collections on Receivables (other than Liquidated Receivables and Purchased
Receivables) allocable to principal, including all full and partial principal
prepayments, (ii) the Principal Balance (as of the related Accounting Date) of
all Receivables that became Liquidated Receivables during the related Monthly
Period (other than Purchased Receivables), (iii) the Principal Balance of all
Receivables that became Purchased Receivables as of the related Accounting Date,
and, in the sole discretion of the Security Insurer, provided no Insurer Default
shall have occurred and be continuing, the Principal Balance as of the related
Accounting Date of all Receivables that were required to be purchased as of the
related Accounting Date but were not so purchased, and (iv) the aggregate amount
of Cram Down Losses that shall have occurred during the related Monthly Period.

                  PURCHASE AGREEMENTS: (i) The Closing Date Purchase Agreement
and (ii) one or more assignment, transfer, purchase, repurchase or reconveyance
agreements pursuant to the Warehouse Purchase Agreements, pursuant to which,
together, AFL transferred the Initial Receivables to the Seller.

                                     - 15 -
<PAGE>

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

                  PURCHASED RECEIVABLE: As of any Accounting Date, any
Receivable (including any Liquidated Receivable) that became a Warranty
Receivable or Administrative Receivable as of such Accounting Date (or which AFL
or the Servicer has elected to purchase as of an earlier Accounting Date, as
permitted by Section 2.6 or 3.7), and as to which the Purchase Amount has been
deposited in the Collection Account by the Seller, AFL or the Servicer, as
applicable, on or before the related Deposit Date.

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

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

                  RECEIVABLE: A retail installment sale contract or promissory
note (and related security agreement) for a new or used automobile or light
truck (and all accessories thereto) that is included in the Schedule of
Receivables, and all rights and obligations under such a contract, but not
including (i) any Liquidated Receivable (other than for purposes of calculating
Noteholders' Distributable Amounts hereunder and for the purpose of determining
the obligations pursuant to Section 2.6 and 3.7 to purchase Receivables), or
(ii) any Purchased Receivable on or after the Accounting Date immediately
preceding the Deposit Date on which payment of the Purchase Amount is made in
connection therewith pursuant to Section 4.5.

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

                  REFERENCE BANKS: Three major banks in the London interbank
market selected by the Servicer.

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

                  RELATED DOCUMENTS: The Trust Agreement, the Indenture, the
Notes, the Purchase Agreements, each Subsequent Purchase Agreement, each
Subsequent Transfer Agreement, the

                                     - 16 -
<PAGE>

Custodian Agreement, the Note Policy, the Spread Account Agreement, the
Insurance Agreement, the Lockbox Agreement, the Depository Agreement, the Stock
Pledge Agreement and the Underwriting Agreement among the Seller, AFL and the
underwriters of the Notes. The Related Documents executed by any party are
referred to herein as "such party's Related Documents," "its Related Documents"
or by a similar expression.

                  REPURCHASE EVENTS: The occurrence of a breach of any of AFL's,
the Seller's or the Servicer's representations and warranties in this Agreement
or in the Purchase Agreement or in any Subsequent Purchase Agreement which
requires the repurchase of a Receivable by AFL or the Seller pursuant to Section
2.6 or by the Servicer pursuant to Section 3.7.

                  REQUIRED DEPOSIT RATING: A rating on short-term unsecured debt
obligations of "P-1" by Moody's and at least "A-1+" by Standard & Poor's (or
such other rating as may be acceptable to the Rating Agencies and, so long as an
Insurer Default shall not have occurred and be continuing, the Security Insurer)
so as to not affect the rating on the Notes.

                  REQUISITE RESERVE AMOUNT: As of the Closing Date,
$1,579,199.77 and as of any Distribution Date or Subsequent Transfer Date
thereafter during the Funding Period an amount equal to the difference between

                           (a)      the product of (x) the weighted average of
         the Class A-1 Interest Rate, the Class A-2 Interest Rate and the Class
         A-3 Interest Rate (based on the outstanding principal balance of the
         Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes on such
         date), divided by 360, (y) the Pre-Funded Amount on such date and (z)
         the number of days until the Distribution Date in December 1999, and

                           (b)      the product of (x) the Assumed Reinvestment
         Rate, divided by 360, (y) the Pre-Funded Amount on such date and (z)
         the number of days until the Distribution Date in December 1999.

The Requisite Reserve Amount for any Subsequent Transfer Date (i) shall be
calculated after taking into account the transfer of Subsequent Receivables to
the Trust on such Subsequent Transfer Date (unless such Subsequent Transfer Date
does not coincide with a Distribution Date and does not occur between a
Distribution Date and the related Determination Date) and (ii) (A) if such
Subsequent Transfer Date does not coincide with a Distribution Date but occurs
between a Distribution Date and the related Determination Date, shall be
calculated as of the Distribution Date immediately following such Subsequent
Transfer Date as if such Subsequent Transfer Date occurred on such Distribution
Date, (B) if such Subsequent Transfer Date coincides with a Distribution Date,
shall be calculated as of such Distribution Date or (C) if such Subsequent
Transfer Date does not coincide with a Distribution Date and does not occur
between a Distribution Date and the related Determination Date, shall be
calculated as of the immediately preceding Distribution Date (or as of the
Closing Date, if such Subsequent Transfer Date occurs before the Determination
Date in December 1999 as if such Subsequent Transfer Date occurred on such
immediately preceding Distribution Date (or the Closing Date).

                                     - 17 -
<PAGE>

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

                  RESERVE AMOUNT: As of any date of determination, the amount on
deposit in the Reserve Account on such date.

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

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

                  SCHEDULE OF RECEIVABLES: The Schedule of Initial Receivables
attached hereto as Exhibit A as supplemented by each Schedule of Subsequent
Receivables attached as Schedule A to each Subsequent Transfer Agreement.

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

                  SCHEDULE OF SUBSEQUENT RECEIVABLES: The schedule of all retail
installment sales contracts and promissory notes sold and transferred to the
Trust pursuant to a Subsequent Transfer Agreement which is attached as Exhibit A
to such Subsequent Transfer Agreement, which Schedule of Subsequent Receivables
shall supplement the Schedule of Initial Receivables.

                  SCHEDULED PAYMENT: With respect to any Monthly Period for any
Receivable, the amount set forth in such Receivable as required to be paid by
the Obligor in such Monthly Period. If after the Closing Date, the Obligor's
obligation under a Receivable with respect to a Monthly Period has been modified
so as to differ from the amount specified in such Receivable as a result of (i)
the order of a court in an insolvency proceeding involving the Obligor, (ii)
pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940 or (iii)
modifications or extensions of the Receivable permitted by Section 3.2(b), the
Scheduled Payment with respect to such Monthly Period shall refer to the
Obligor's payment obligation with respect to such Monthly Period as so modified.

                                     - 18 -
<PAGE>

                  SECURITY INSURER: Financial Security Assurance Inc., a
monoline insurance company incorporated under the laws of the State of New York,
or any successor thereto, as issuer of the Note Policy.

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

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

                  SERVICER EXTENSION NOTICE: The notice delivered pursuant to
Section 3.14.

                  SERVICER TERMINATION EVENT: An event described in Section 8.1.

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

                  SPREAD ACCOUNT: The Spread Account established and maintained
pursuant to the Spread Account Agreement.

                  SPREAD ACCOUNT ADDITIONAL DEPOSIT: With respect to any
transfer of Subsequent Receivables to the Trust pursuant to Section 2.4, the
amount required to be deposited in the Spread Account pursuant to the terms of
the Spread Account Agreement.

                  SPREAD ACCOUNT AGREEMENT: The Spread Account Agreement, dated
as of March 25, 1993, as thereafter amended and restated, among the Seller, AFL,
the Security Insurer, the Collateral Agent and the trustees specified therein,
as the same may be amended, supplemented or otherwise modified in accordance
with the terms thereof.

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

                  STOCK PLEDGE AGREEMENT: The Stock Pledge Agreement, dated as
of March 25, 1993, as thereafter amended and restated, among the Security
Insurer, AFL and the Collateral Agent, as the same may be amended, supplemented
or otherwise modified in accordance with the terms thereof

                  SUBCOLLECTION ACCOUNT: The account designated as the
Subcollection Account in, and which is established and maintained pursuant to
Section 4.2(a).

                  SUBSEQUENT CUTOFF DATE: With respect to any Subsequent
Receivables, the date specified in the related Subsequent Transfer Agreement,
which may in no event be later than the Subsequent Transfer Date.

                                     - 19 -
<PAGE>

                  SUBSEQUENT PURCHASE AGREEMENT: With respect to any Subsequent
Receivables, either (i) the agreement between AFL and the Seller pursuant to
which AFL transferred the Subsequent Receivables to the Seller, the form of
which is attached to the Purchase Agreement as Exhibit A, or (ii) one or more
assignment, transfer, purchase, repurchase or reconveyance agreements pursuant
to the Warehouse Purchase Agreements, pursuant to which AFL transferred the
Subsequent Receivables to the Seller.

                  SUBSEQUENT RECEIVABLES: All Receivables sold and transferred
to the Trust pursuant to Section 2.4.

                  SUBSEQUENT TRANSFER AGREEMENT: With respect to any Subsequent
Receivables, the related agreement described in Section 2.4.

                  SUBSEQUENT TRANSFER DATE: Any date during the Funding Period
on which Subsequent Receivables are transferred to the Trust pursuant to Section
2.4.

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

                  TELERATE PAGE 3750: The display page currently so designated
on the Dow Jones Telerate Service (or such other page as may replace that page
on that service for the purpose of displaying comparable rates or prices).

                  TOTAL SERVICING FEE: The sum of the Basic Servicing Fee and
the Supplemental Servicing Fee.

                  TRUST:  Arcadia Automobile Receivables Trust, 1999-C.

                  TRUST ACCOUNTS: The meaning specified in 4.1(e).

                  TRUST AGREEMENT: The Trust Agreement dated as of September 1,
1999, among the Seller, the Security Insurer and the Owner Trustee, as the same
may be amended and supplemented from time to time.

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

                  WAREHOUSE PURCHASE AGREEMENTS: Any assignment, transfer,
purchase, repurchase or reconveyance agreements by and among AFL or its
affiliates, the Seller and certain providers of warehouse financing to AFL.

                  WARRANTY RECEIVABLE: With respect to any Monthly Period, a
Receivable which AFL has become obligated to repurchase pursuant to Section 2.6.

                                     - 20 -
<PAGE>

                  SECTION 1.2. USAGE OF TERMS. With respect to all terms used in
this Agreement, the singular includes the plural and the plural the singular;
words importing any gender include the other gender; references to "writing"
include printing, typing, lithography, and other means of reproducing words in a
visible form; references to agreements and other contractual instruments include
all subsequent amendments thereto or changes therein entered into in accordance
with their respective terms and not prohibited by this Agreement; references to
Persons include their permitted successors and assigns; and the terms "include"
or "including" mean "include without limitation" or "including without
limitation."

                  SECTION 1.3. CALCULATIONS. All calculations of the amount of
interest accrued on the Notes and all calculations of the amount of the Basic
Servicing Fee shall be made on the basis of a 360-day year consisting of twelve
30-day months. All references to the Principal Balance of a Receivable as of an
Accounting Date shall refer to the close of business on such day.

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

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

                  SECTION 1.6. MATERIAL ADVERSE EFFECT. Whenever a determination
is to be made under this Agreement as to whether a given event, action, course
of conduct or set of facts or circumstances could or would have a material
adverse effect on the Trust or the Noteholders (or any similar or analogous
determination), such determination shall be made without taking into account the
insurance provided by the Note Policy.

                                     - 21 -
<PAGE>

                                   ARTICLE II

                            CONVEYANCE OF RECEIVABLES

                  SECTION 2.1. CONVEYANCE OF INITIAL RECEIVABLES. Subject to the
terms and conditions of this Agreement, the Seller, pursuant to the mutually
agreed upon terms contained herein, hereby sells, transfers, assigns, and
otherwise conveys to the Trust, without recourse (but without limitation of its
obligations in this Agreement), all of the right, title and interest of the
Seller in and to the Initial Receivables, all monies at any time paid or payable
thereon or in respect thereof after the Initial Cutoff Date (including amounts
due on or before the Initial Cutoff Date but received by AFL or the Seller after
the Initial Cutoff Date), an assignment of security interests of AFL in the
related Financed Vehicles, the Insurance Policies and any proceeds from any
Insurance Policies relating to the Initial Receivables, the Obligors or the
related Financed Vehicles, including rebates of premiums, all Collateral
Insurance and any Force-Placed Insurance relating to the Initial Receivables, an
assignment of the rights of AFL or the Seller against Dealers with respect to
the Initial Receivables under the Dealer Agreements and the Dealer Assignments,
all items contained in the related Receivable Files, any and all other documents
that AFL keeps on file in accordance with its customary procedures relating to
the Initial Receivables, the Obligors or the related Financed Vehicles, an
assignment of the rights of the Seller under the Purchase Agreements, property
(including the right to receive future Liquidation Proceeds) that secures an
Initial Receivable and that has been acquired by or on behalf of the Trust
pursuant to liquidation of such Receivable, all funds on deposit from time to
time in the Trust Accounts and all investments therein and proceeds thereof, and
all proceeds of the foregoing. It is the intention of the Seller that the
transfer and assignment contemplated by this Agreement and each Subsequent
Transfer Agreement shall constitute a sale of the Receivables and other Trust
Property from the Seller to the Trust and the beneficial interest in and title
to the Receivables and the other Trust Property shall not be part of the
Seller's estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy law. In the event that, notwithstanding
the intent of the Seller, the transfer and assignment contemplated hereby and
each Subsequent Transfer Agreement is held not to be a sale, this Agreement and
each Subsequent Transfer Agreement shall constitute a grant of a security
interest to the Trust in the property referred to in this Section 2.1 or
transferred to the Trust pursuant to the related Subsequent Transfer Agreement.

                  SECTION 2.2.  CUSTODY OF RECEIVABLE FILES.

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

                                     - 22 -
<PAGE>

Receivable) or the applicable Subsequent Transfer Date (with respect to each
Subsequent Receivable):

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

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

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

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

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

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

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

                                     - 23 -
<PAGE>

                  SECTION 2.3. CONDITIONS TO ACCEPTANCE BY OWNER TRUSTEE. As
conditions to the Owner Trustee's execution and delivery of the Notes on behalf
of the Trust on the Closing Date, the Owner Trustee shall have received the
following on or before the Closing Date:

                           (a)      The Schedule of Initial Receivables
         certified by the President, Controller or Treasurer of the Seller;

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

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

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

                           (e)      Evidence that all filings (including,
         without limitation, UCC filings) required to be made by any Person and
         actions required to be taken or performed by any Person in any
         jurisdiction (other than those actions to be taken with respect to
         Subsequent Receivables pursuant to Section 2.4) to give the Owner
         Trustee a first priority perfected lien on, or ownership interest in,
         the Receivables and the other Trust Property have been made, taken or
         performed; and

                           (f)      An executed copy of the Spread Account
         Agreement and evidence of the deposit of $1,579,199.77 in the Reserve
         Account.

                  SECTION 2.4.  CONVEYANCE OF SUBSEQUENT RECEIVABLES.

                  (a)     Subject to the conditions set forth in paragraph (b)
below, the Seller, pursuant to the mutually agreed upon terms contained herein
and pursuant to one or more Subsequent Transfer Agreements, shall sell,
transfer, assign, and otherwise convey to the Trust, without recourse (but
without limitation of its obligations in this Agreement), all of the right,
title and interest of the Seller in and to the Subsequent Receivables, all
monies at any time paid or payable thereon or in respect thereof after the
related Subsequent Cutoff Date (including amounts due on or before the related
Subsequent Cutoff Date but received by AFL or the Seller after the related
Subsequent Cutoff Date), an assignment of security interests of AFL in the
related Financed Vehicles, the Insurance Policies and any proceeds from any
Insurance Policies relating to the Subsequent Receivables, the Obligors or the
related Financed Vehicles, including rebates of premiums, all Collateral
Insurance and any Force-Placed Insurance relating to the Subsequent Receivables,
rights of AFL or the Seller against Dealers with respect to the Subsequent
Receivables under the Dealer Agreements and the Dealer Assignments, all items
contained in the

                                     - 24 -
<PAGE>

Receivable Files relating to the Subsequent Receivables, any and all other
documents that AFL keeps on file in accordance with its customary procedures
relating to the Subsequent Receivables, the Obligors or the related Financed
Vehicles, the rights of the Seller under the related Subsequent Purchase
Agreement, property (including the right to receive future Liquidation Proceeds)
that secures a Subsequent Receivable and that has been acquired by or on behalf
of the Trust pursuant to liquidation of such Subsequent Receivable, and all
proceeds of the foregoing.

                  (b)      The Seller shall transfer to the Trust the Subsequent
Receivables and the other property and rights related thereto described in
paragraph (a) above only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:

                           (i)      The Seller shall have provided the Owner
         Trustee, the Indenture Trustee, the Security Insurer and the Rating
         Agencies with a timely Addition Notice and shall have provided any
         information reasonably requested by any of the foregoing with respect
         to the Subsequent Receivables;

                           (ii)     the Funding Period shall not have
         terminated;

                           (iii)    the Security Insurer (so long as an Insurer
         Default shall not have occurred and be continuing) shall in its sole
         and absolute discretion have given its prior written approval of the
         transfer of such Subsequent Receivables to the Trust;

                           (iv)     the Seller shall have delivered to the Owner
         Trustee and the Indenture Trustee a duly executed written assignment
         (including an acceptance by the Indenture Trustee and the Owner
         Trustee) in substantially the form of Exhibit F (the "Subsequent
         Transfer Agreement"), which shall include a Schedule of Subsequent
         Receivables listing the Subsequent Receivables and shall specify the
         Spread Account Additional Deposit, if any, and the Requisite Reserve
         Amount, as of or for such Subsequent Transfer Date;

                           (v)      the Seller shall have delivered to the
         Custodian the Receivable Files relating to the Subsequent Receivables,
         and the Custodian shall have delivered to the Seller, the Owner
         Trustee, the Security Insurer and the Indenture Collateral Agent an
         acknowledgment of receipt of such Receivable Files;

                           (vi)     the Seller shall, to the extent required by
         Section 4.1, have deposited in the Collection Account collections in
         respect of the Subsequent Receivables;

                           (vii)    as of each Subsequent Transfer Date, neither
         AFL nor the Seller shall be insolvent nor shall either of them have
         been made insolvent by such transfer nor shall either of them be aware
         of any pending insolvency;

                                     - 25 -
<PAGE>

                           (viii)   the applicable Spread Account Additional
         Deposit for such Subsequent Transfer Date shall have been made pursuant
         to the Spread Account Agreement.

                           (ix)     the Reserve Amount on such Subsequent
         Transfer Date, after taking into account any transfers of funds from
         the Reserve Account to the Depositor in respect of the sale of the
         Subsequent Receivables to the Trust, shall be no less than the
         Requisite Reserve Amount for such Subsequent Transfer Date;

                           (x)      each Rating Agency shall have notified the
         Security Insurer that following such transfer the Notes will be rated
         in the highest short-term or long-term rating category, as applicable,
         by such Rating Agency;

                           (xi)     such addition will not result in a material
         adverse tax consequence to the Trust or the Noteholders as evidenced by
         an Opinion of Counsel to be delivered by the Seller;

                           (xii)    the Seller shall have delivered to the Owner
         Trustee and the Indenture Trustee an Officer's Certificate confirming
         the satisfaction of each condition precedent specified in this
         paragraph (b);

                           (xiii)   the Seller shall have delivered to the
         Rating Agencies and to the Security Insurer one or more Opinions of
         Counsel with respect to the transfer of the Subsequent Receivables
         substantially in the form of the Opinions of Counsel delivered to such
         Persons on the Closing Date;

                           (xiv)    (A) the Receivables in the Trust, including
         the Subsequent Receivables to be conveyed to the Trust on the
         Subsequent Transfer Date, shall meet the following criteria (based on
         the characteristics of the Initial Receivables on the Initial Cutoff
         Date and the Subsequent Receivables on each related Subsequent Cutoff
         Date): (1) the weighted average APR of such Receivables will not be
         less than 16.13%, (2) the weighted average remaining term of such
         Receivables will not be greater than 68 months nor less than 60 months,
         (3) not more than 90% of the Aggregate Principal Balance of such
         Receivables will represent loans secured by used Financed Vehicles, (4)
         not more than 4.00% of the Aggregate Principal Balance of such
         Receivables will be attributable to Receivables with an APR in excess
         of 21.00%, (5) not more than 0.25% of the Aggregate Principal Balance
         of such Receivables will represent loans in excess of $50,000.00, (6)
         not more than 3.00% of the Aggregate Principal Balance of such
         Receivables will represent loans with original terms greater than 72
         months and (7) not more than 0.25% of the Aggregate Principal Balance
         of such Receivables will represent loans secured by Financed Vehicles
         that previously secured a loan originated by AFL with an obligor other
         than the current Obligor, and (B) the Trust, the Owner Trustee, the
         Indenture Trustee and the Security Insurer shall have received written
         confirmation from a firm of certified independent public accountants as
         to the satisfaction of such criteria;

                                     - 26 -
<PAGE>

                           (xv)     the Seller shall have taken any action
         necessary or, if requested by the Security Insurer, advisable to
         maintain the first perfected ownership interest of the Trust in the
         Trust Property and the first perfected security interest of the
         Indenture Collateral Agent in the Indenture Collateral; and

                           (xvi)    no selection procedures adverse to the
         interests of the Noteholders shall have been utilized in selecting the
         Subsequent Receivables.

                  (c)      On such Subsequent Transfer Date, if all the
conditions specified in paragraph (b) above have been satisfied, the Trust shall
accept the transfer of such Subsequent Receivables and shall pay to the Seller
from the Pre-Funding Account an amount equal to (i) the Principal Balance as of
the related Subsequent Cutoff Date of the Subsequent Receivables transferred to
the Trust as of such date, minus (ii) the Spread Account Additional Deposit, if
any, for such Subsequent Transfer Date, and minus (iii) the amount, if any, by
which the Requisite Reserve Amount for such Subsequent Transfer Date exceeds the
Reserve Amount as of such Subsequent Transfer Date.

                  (d)      The Seller covenants to transfer to the Trust
pursuant to paragraph (a) above Subsequent Receivables with an aggregate
Principal Balance equal to approximately $161,475,961.71; PROVIDED, HOWEVER,
that the sole remedy of the Trust, the Owner Trustee, the Indenture Trustee or
the Noteholders with respect to a failure of such covenant shall be to enforce
the provisions of Sections 2.3(c) and 6.2 of the Closing Date Purchase
Agreement, and Section 4.7(c) hereof and Section 10.01(b) of the Indenture with
respect to payment of the Class A-1 Prepayment Premium, Class A-2 Prepayment
Premium and Class A-3 Prepayment Premium.

                  SECTION 2.5. REPRESENTATIONS AND WARRANTIES OF SELLER. By its
execution of this Agreement and each Subsequent Transfer Agreement, the Seller
makes the following representations and warranties on which the Trust relies in
accepting the Receivables and the other Trust Property in trust and on which the
Owner Trustee relies in issuing on behalf of the Trust, Notes and upon which the
Security Insurer relies in issuing the Note Policy. Unless otherwise specified,
such representations and warranties speak as of the Closing Date or Subsequent
Transfer Date, as appropriate, but shall survive the sale, transfer, and
assignment of the Receivables to the Trust.

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

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

                                     - 27 -
<PAGE>

                           (c)      DUE QUALIFICATION. The Seller is duly
         qualified to do business as a foreign corporation in good standing, and
         has obtained all necessary licenses and approvals, in all jurisdictions
         in which the ownership or lease of its property or the conduct of its
         business requires such qualification.

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

                           (e)      VALID SALE; BINDING OBLIGATIONS. This
         Agreement and the related Subsequent Transfer Agreement, if any,
         effects a valid sale, transfer and assignment of the Receivables and
         the other Trust Property, enforceable against the Seller and creditors
         of and purchasers from the Seller; and this Agreement and the related
         Subsequent Transfer Agreement, if any, and the Seller's Related
         Documents, when duly executed and delivered, shall constitute legal,
         valid and binding obligations of the Seller enforceable in accordance
         with their respective terms, except as enforceability may be limited by
         bankruptcy, insolvency, reorganization or other similar laws affecting
         the enforcement of creditors' rights generally and by equitable
         limitations on the availability of specific remedies, regardless of
         whether such enforceability is considered in a proceeding in equity or
         at law.

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

                           (g)      NO PROCEEDINGS. There are no proceedings or
         investigations pending or, to the Seller's knowledge, threatened
         against the Seller or AFL, before any court, regulatory body,
         administrative agency or other tribunal or governmental instrumentality
         having jurisdiction over the Seller or its properties (A) asserting the
         invalidity of this Agreement or any of the Related Documents, (B)
         seeking to prevent the issuance of the Notes or the consummation of any
         of the transactions contemplated by

                                     - 28 -
<PAGE>

         this Agreement or any of the Related Documents, (C) seeking any
         determination or ruling that might materially and adversely affect the
         performance by the Seller of its obligations under, or the validity or
         enforceability of, this Agreement or any of the Related Documents, or
         (D) seeking to adversely affect the federal income tax or other
         federal, state or local tax attributes of the Notes.

                           (h)      CHIEF EXECUTIVE OFFICE. The chief executive
         office of the Seller is at 7825 Washington Avenue South, Suite 410,
         Minneapolis, MN 55439-2435.

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

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

                  SECTION 2.6. REPURCHASE OF RECEIVABLES UPON BREACH OF
WARRANTY. Concurrently with the execution and delivery of this Agreement or the
applicable Subsequent Transfer Agreement, as appropriate, AFL and the Seller
have entered into the Purchase Agreements or Subsequent Purchase Agreement, as
applicable, the rights of the Seller under which have been assigned by the
Seller to the Trust. Under the Purchase Agreements and each Subsequent Purchase
Agreement, if applicable, AFL has made the same representations and warranties
to the Seller with respect to the Receivables as those made by Seller pursuant
to the Schedule of Representations, upon which the Owner Trustee has relied in
accepting the Trust Property in trust and executing the Notes and upon which the
Security Insurer has relied in issuing the Note Policy and upon which the
Indenture Trustee has relied in authenticating the Notes. Upon discovery by any
of AFL, the Seller, the Servicer, the Security Insurer, the Indenture Trustee or
the Owner Trustee of a breach of any of the representations and warranties
contained in Section 2.5 that materially and adversely affects the interests of
the Noteholders, the Security Insurer or the Trust in any Receivable (including
any Liquidated Receivable), the party discovering such breach shall give prompt
written notice to the others; PROVIDED, HOWEVER, that the failure to give any
such notice shall not affect any obligation of AFL or the Seller. As of the
second Accounting Date (or, at AFL's election, the first Accounting Date)
following its discovery or its receipt of notice of any breach of the
representations and warranties set forth on the Schedule of Representations that
materially and adversely affects the interests of the Noteholders, the Security
Insurer or the Trust in any Receivable (including any Liquidated Receivable),
AFL shall, unless such breach shall have been cured in all material respects,
purchase such Receivable from the Trust and, on or before the related Deposit
Date, AFL shall pay the Purchase Amount to the Owner Trustee pursuant to Section
4.5. The obligations of the

                                     - 29 -
<PAGE>

Seller with respect to any such breach of representations and warranties shall
be limited to taking any and all actions necessary to enable the Owner Trustee
to enforce directly the obligations of AFL under the Purchase Agreement or
Subsequent Purchase Agreement, as applicable. It is understood and agreed that,
except as set forth in this Section 2.6, the obligation of AFL to repurchase any
Receivable as to which a breach has occurred and is continuing shall, if such
obligation is fulfilled, constitute the sole remedy against AFL or the Seller
for such breach available to the Security Insurer or the Indenture Trustee on
behalf of the Noteholders.

                  In addition to the foregoing and notwithstanding whether the
related Receivable shall have been purchased by the Seller or AFL, AFL shall
indemnify the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Collateral Agent, the Security Insurer, the Trust and the Noteholders against
all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
incurred by any of them as a result of third party claims arising out of the
events or facts giving rise to such breach.

                  SECTION 2.7. NONPETITION COVENANT. None of the Seller, the
Servicer, the Owner Trustee (in its individual capacity or on behalf of the
Trust), the Backup Servicer nor AFL shall petition or otherwise invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Trust under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Trust or any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Trust.

                  SECTION 2.8. COLLECTING LIEN CERTIFICATES NOT DELIVERED ON THE
CLOSING DATE OR SUBSEQUENT TRANSFER DATE. In the case of any Receivable in
respect of which written evidence from the Dealer selling the related Financed
Vehicle that the Lien Certificate for such Financed Vehicle showing AFL as first
lienholder has been applied for from the Registrar of Titles was delivered to
the Custodian on the Closing Date or Subsequent Transfer Date, as appropriate,
in lieu of a Lien Certificate, the Servicer shall use its best efforts to
collect such Lien Certificate from the Registrar of Titles as promptly as
practicable. If such Lien Certificate showing AFL as first lienholder is not
received by the Custodian within 180 days after the Closing Date or Subsequent
Transfer Date, as appropriate, then the representation and warranty in Paragraph
18 of the Schedule of Representations in respect of such Receivable shall be
deemed to have been incorrect in a manner that materially and adversely affects
the Noteholders, the Security Insurer and the Trust.

                  SECTION 2.9. TRUST'S ASSIGNMENT OF ADMINISTRATIVE RECEIVABLES
AND WARRANTY RECEIVABLES. With respect to all Administrative Receivables and all
Warranty Receivables purchased by the Servicer, the Seller or AFL, the Owner
Trustee shall take any and all actions reasonably requested by the Seller, AFL
or Servicer, at the expense of the requesting party, to assign, without
recourse, representation or warranty, to the Seller, AFL or the Servicer, as
applicable, all the Trust's right, title and interest in and to such purchased
Receivable, all monies due thereon, the security interests in the related
Financed Vehicles, proceeds from any Insurance Policies, proceeds from recourse
against Dealers on such Receivables and the interests of the Trust in certain
rebates of premiums and other amounts relating to the Insurance Policies and any

                                     - 30 -
<PAGE>

documents relating thereto, such assignment being an assignment outright and not
for security; and the Seller, AFL or the Servicer, as applicable, shall
thereupon own such Receivable, and all such security and documents, free of any
further obligation to the Owner Trustee, the Trust, the Indenture Trustee, the
Security Insurer, the Indenture Collateral Agent or the Noteholders with respect
thereto.

                                   ARTICLE III

                   ADMINISTRATION AND SERVICING OF RECEIVABLES

                  SECTION 3.1. DUTIES OF THE SERVICER. The Servicer is hereby
authorized to act as agent for the Trust and in such capacity shall manage,
service, administer and make collections on the Receivables, and perform the
other actions required by the Servicer under this Agreement. The Servicer agrees
that its servicing of the Receivables shall be carried out in accordance with
customary and usual procedures of institutions which service motor vehicle
retail installment sales contracts and, to the extent more exacting, the degree
of skill and attention that the Servicer exercises from time to time with
respect to all comparable motor vehicle receivables that it services for itself
or others. In performing such duties, so long as AFL is the Servicer, it shall
comply with the policies and procedures attached hereto as Schedule B. The
Servicer's duties shall include, without limitation, collection and posting of
all payments, responding to inquiries of Obligors on the Receivables,
investigating delinquencies, sending payment coupons to Obligors, reporting any
required tax information to Obligors, policing the collateral, complying with
the terms of the Lockbox Agreement, accounting for collections and furnishing
monthly and annual statements to the Owner Trustee, the Indenture Trustee and
the Security Insurer with respect to distributions, monitoring the status of
Insurance Policies with respect to the Financed Vehicles and performing the
other duties specified herein. The Servicer shall also administer and enforce
all rights and responsibilities of the holder of the Receivables provided for in
the Dealer Agreements (and shall maintain possession of the Dealer Agreements,
to the extent it is necessary to do so), the Dealer Assignments and the
Insurance Policies, to the extent that such Dealer Agreements, Dealer
Assignments and Insurance Policies relate to the Receivables, the Financed
Vehicles or the Obligors. To the extent consistent with the standards, policies
and procedures otherwise required hereby, the Servicer shall follow its
customary standards, policies, and procedures and shall have full power and
authority, acting alone, to do any and all things in connection with such
managing, servicing, administration and collection that it may deem necessary or
desirable. Without limiting the generality of the foregoing, the Servicer is
hereby authorized and empowered by the Owner Trustee to execute and deliver, on
behalf of the Trust, any and all instruments of satisfaction or cancellation, or
of partial or full release or discharge, and all other comparable instruments,
with respect to the Receivables and with respect to the Financed Vehicles;
PROVIDED, HOWEVER, that notwithstanding the foregoing, the Servicer shall not,
except pursuant to an order from a court of competent jurisdiction, release an
Obligor from payment of any unpaid amount under any Receivable or waive the
right to collect the unpaid balance of any Receivable from the Obligor, except
that the Servicer may forego collection efforts if the amount subject to
collection is DE MINIMIS and if it would forego collection in accordance with
its customary procedures. The Servicer is hereby authorized to commence, in

                                     - 31 -
<PAGE>

its own name or in the name of the Trust (provided the Servicer has obtained the
Owner Trustee's consent, which consent shall not be unreasonably withheld), a
legal proceeding to enforce a Receivable pursuant to Section 3.3 or to commence
or participate in any other legal proceeding (including, without limitation, a
bankruptcy proceeding) relating to or involving a Receivable, an Obligor or a
Financed Vehicle. If the Servicer commences or participates in such a legal
proceeding in its own name, the Trust shall thereupon be deemed to have
automatically assigned such Receivable to the Servicer solely for purposes of
commencing or participating in any such proceeding as a party or claimant, and
the Servicer is authorized and empowered by the Owner Trustee to execute and
deliver in the Servicer's name any notices, demands, claims, complaints,
responses, affidavits or other documents or instruments in connection with any
such proceeding. The Owner Trustee shall furnish the Servicer with any powers of
attorney and other documents which the Servicer may reasonably request and which
the Servicer deems necessary or appropriate and take any other steps which the
Servicer may deem necessary or appropriate to enable the Servicer to carry out
its servicing and administrative duties under this Agreement.

                  SECTION 3.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS
OF RECEIVABLES; LOCKBOX AGREEMENTS.

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

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

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

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

                                     - 32 -
<PAGE>

                           (ii)     So long as an Insurer Default shall not have
         occurred and be continuing, the Servicer shall not amend or modify a
         Receivable (except as provided in Section 3.2(b)) without the consent
         of the Security Insurer;

                           (iii)    So long as an Insurer Default shall not have
         occurred and be continuing, the Aggregate Principal Balance of
         Receivables which have been extended during any Monthly Period (A)
         shall not exceed 6.5% of the Aggregate Principal Balance of Receivables
         during such Monthly Period (computed as of the Accounting Date
         immediately prior to the first day of the related Monthly Period) and
         (B) shall not exceed 4.0% of the average of the Aggregate Principal
         Balance of Receivables for such Monthly Period and the three prior
         Monthly Periods (computed as of the Accounting Date immediately prior
         to the first day of the related Monthly Period);

                           (iv)     So long as an Insurer Default shall not have
         occurred and be continuing, the Aggregate Principal Balance of
         Receivables for which payment deferrals have been granted during any
         Monthly Period (A) shall not exceed 3.0% of the Aggregate Principal
         Balance of Receivables during such Monthly Period (computed as of the
         Accounting Date immediately prior to the first day of the related
         Monthly Period) and (B) shall not exceed 2.0% of the average of the
         Aggregate Principal Balance of Receivables for such Monthly Period and
         the three prior Monthly Periods (computed as of the Accounting Date
         immediately prior to the first day of the related Monthly Period);

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

                           (vi)     If an Insurer Default shall have occurred
         and be continuing, the Servicer may not extend or modify any Receivable
         (other than as permitted by Section 3.2(b)).

                  (d)      The Servicer shall use its reasonable best efforts to
cause Obligors to make all payments on the Receivables, whether by check or by
direct debit of the Obligor's bank account, to be made directly to one or more
Lockbox Banks, acting as agent for the Trust pursuant to a Lockbox Agreement.
Amounts received by a Lockbox Bank in respect of the Receivables may initially
be deposited into a demand deposit account maintained by the Lockbox Bank as
agent for the Trust and for other owners of automobile receivables serviced by
the Servicer. The Servicer shall use its reasonable best efforts to cause any
Lockbox Bank to deposit all payments on the Receivables in the Lockbox Account
no later than the Business Day after receipt, and to cause all amounts credited
to the Lockbox Account on account of such payments to be transferred to the
Collection Account no later than the second Business Day after receipt of such
payments. The Lockbox Account shall be a demand deposit account held by the

                                     - 33 -
<PAGE>

Lockbox Bank, or at the request of the Security Insurer (unless an Insurer
Default shall have occurred and be continuing) an Eligible Account satisfying
clause (i) of the definition thereof.

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

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

                  In the event the Servicer shall for any reason no longer be
acting as such, the successor Servicer shall thereupon assume all of the rights
and obligations of the outgoing Servicer under the Lockbox Agreement. In such
event, the successor Servicer shall be deemed to have assumed all of the
outgoing Servicer's interest therein and to have replaced the outgoing Servicer
as a party to each such Lockbox Agreement to the same extent as if such Lockbox
Agreement had been assigned to the successor Servicer, except that the outgoing
Servicer shall not thereby be relieved of any liability or obligations on the
part of the outgoing Servicer to the Lockbox Bank under such Lockbox Agreement.
The outgoing Servicer shall, upon request of the Owner Trustee but at the
expense of the outgoing Servicer, deliver to the successor Servicer all
documents and records relating to each such Agreement and an accounting of
amounts collected and held by the Lockbox Bank and otherwise use its best
efforts to effect the orderly and efficient transfer of any Lockbox Agreement to
the successor Servicer. In the event that the Security Insurer (so long as an
Insurer Default shall not have occurred and be continuing) or a Note Majority
(if an Insurer Default shall have occurred and be continuing) elects to change
the identity of the Lockbox Bank, the outgoing Servicer, at its expense, shall
cause the Lockbox Bank to deliver, at the direction of the Security Insurer (so
long as an Insurer Default shall not have occurred and be continuing) or a Note
Majority (if an Insurer Default shall have occurred and be continuing) to the
Owner Trustee or a successor Lockbox Bank, all documents and

                                     - 34 -
<PAGE>

records relating to the Receivables and all amounts held (or thereafter
received) by the Lockbox Bank (together with an accounting of such amounts) and
shall otherwise use its best efforts to effect the orderly and efficient
transfer of the lockbox arrangements and the Servicer shall notify the Obligors
to make payments to the Lockbox established by the successor.

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

                  SECTION 3.3.  REALIZATION UPON RECEIVABLES.

                  (a)      Consistent with the standards, policies and
procedures required by this Agreement, the Servicer shall use its best efforts
to repossess (or otherwise comparably convert the ownership of) and liquidate
any Financed Vehicle securing a Receivable with respect to which the Servicer
has determined that payments thereunder are not likely to be resumed, as soon
as is practicable after default on such Receivable but in no event later than
the date on which all or any portion of a Scheduled Payment has become 91 days
delinquent. The Servicer is authorized to follow such customary practices and
procedures as it shall deem necessary or advisable, consistent with the standard
of care required by Section 3.1, which practices and procedures may include
reasonable efforts to realize upon any recourse to Dealers, the sale of the
related Financed Vehicle at public or private sale, the submission of claims
under an Insurance Policy and other actions by the Servicer in order to realize
upon such a Receivable. The foregoing is subject to the provision that, in any
case in which the Financed Vehicle shall have suffered damage, the Servicer
shall not expend funds in connection with any repair or towards the repossession
of such Financed Vehicle unless it shall determine in its discretion that such
repair and/or repossession shall increase the proceeds of liquidation of the
related Receivable by an amount greater than the amount of such expenses. All
amounts received upon liquidation of a Financed Vehicle shall be remitted
directly by the Servicer to the Subcollection Account without deposit into any
intervening account as soon as practicable, but in no event later than the
Business Day after receipt thereof. The Servicer shall be entitled to recover
all reasonable expenses incurred by it in the course of repossessing and
liquidating a Financed Vehicle into cash proceeds, but only out of the cash
proceeds of such Financed Vehicle, any deficiency obtained from the Obligor or
any amounts received from the related Dealer, which amounts may be retained by
the Servicer (and shall not be required to be deposited as provided in Section
3.2(e)) to the extent of such expenses. The Servicer shall pay on behalf of the
Trust any personal property taxes assessed on repossessed Financed Vehicles; the
Servicer shall be entitled to reimbursement of any such tax from Liquidation
Proceeds with respect to such Receivable.

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

                                     - 35 -
<PAGE>

Dealer Agreement or Dealer Assignment, including bringing suit in its name or
the name of the Seller or of the Indenture Collateral Agent for the benefit of
the Issuer Secured Parties. All amounts recovered shall be remitted directly by
the Servicer as provided in Section 3.2(e).

                  SECTION 3.4.  INSURANCE.

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

                  (b)      The Servicer may, if an Obligor fails to obtain or
maintain a physical loss and damage Insurance Policy, obtain insurance with
respect to the related Financed Vehicle and advance on behalf of such Obligor,
as required under the terms of the insurance policy, the premiums for such
insurance (such insurance being referred to herein as "Force-Placed Insurance").
All policies of Force-Placed Insurance shall be endorsed with clauses providing
for loss payable to the Owner Trustee. Any cost incurred by the Servicer in
maintaining such Force- Placed Insurance shall only be recoverable out of
premiums paid by the Obligors or Liquidation Proceeds with respect to the
Receivable, as provided in Section 3.4(c).

                  (c)      In connection with any Force-Placed Insurance
obtained hereunder, the Servicer may, in the manner and to the extent permitted
by applicable law, require the Obligors to repay the entire premium to the
Servicer. In no event shall the Servicer include the amount of the premium in
the Amount Financed under the Receivable. For all purposes of this Agreement,
the Insurance Add-On Amount with respect to any Receivable having Force-Placed
Insurance will be treated as a separate obligation of the Obligor and will not
be added to the Principal Balance of such Receivable, and amounts allocable
thereto will not be available for distribution on the Notes. The Servicer shall
retain and separately administer the right to receive payments from Obligors
with respect to Insurance Add-On Amounts or rebates of Force-Placed Insurance
premiums. If an Obligor makes a payment with respect to a Receivable having
Force-Placed Insurance, but the Servicer is unable to determine whether the
payment is allocable to the Receivable or to the Insurance Add-On Amount, the
payment shall be applied first to any unpaid Scheduled Payments and then to the
Insurance Add-On Amount. Liquidation Proceeds on any Receivable will be used
first to pay the Principal Balance and accrued interest on such Receivable and
then to pay the related Insurance Add-On Amount. If an Obligor under a

                                     - 36 -
<PAGE>

Receivable with respect to which the Servicer has placed Force-Placed Insurance
fails to make scheduled payments of such Insurance Add-On Amount as due, and the
Servicer has determined that eventual payment of the Insurance Add-On Amount is
unlikely, the Servicer may, but shall not be required to, purchase such
Receivable from the Trust for the Purchase Amount on any subsequent Deposit
Date. Any such Receivable, and any Receivable with respect to which the Servicer
has placed Force-Placed Insurance which has been paid in full (excluding any
Insurance Add-On Amounts) will be assigned to the Servicer.

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

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

                  SECTION 3.5.  MAINTENANCE OF SECURITY INTERESTS IN VEHICLES.

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

                                     - 37 -
<PAGE>

of the Trust, the Servicer hereby agrees that the Servicer's designation as the
secured party on the certificate of title is in its capacity as agent of the
Trust.

                  (b)      Upon the occurrence of an Insurance Agreement Event
of Default, the Security Insurer may (so long as an Insurer Default shall not
have occurred and be continuing) instruct the Owner Trustee and the Servicer to
take or cause to be taken, or, if an Insurer Default shall have occurred, upon
the occurrence of a Servicer Termination Event, the Owner Trustee and the
Servicer shall take or cause to be taken such action as may, in the opinion of
counsel to the Security Insurer (or, if an Insurer Default shall have occurred
and be continuing, counsel to the Owner Trustee), be necessary to perfect or
re-perfect the security interests in the Financed Vehicles securing the
Receivables in the name of the Trust by amending the title documents of such
Financed Vehicles or by such other reasonable means as may, in the opinion of
counsel to the Security Insurer or the Owner Trustee (as applicable), be
necessary or prudent. AFL hereby agrees to pay all expenses related to such
perfection or re-perfection and to take all action necessary therefor. In
addition, prior to the occurrence of an Insurance Agreement Event of Default,
the Security Insurer may (unless an Insurer Default shall have occurred and be
continuing) instruct the Owner Trustee and the Servicer to take or cause to be
taken such action as may, in the opinion of counsel to the Security Insurer, be
necessary to perfect or re-perfect the security interest in the Financed
Vehicles underlying the Receivables in the name of the Trust, including by
amending the title documents of such Financed Vehicles or by such other
reasonable means as may, in the opinion of counsel to the Security Insurer, be
necessary or prudent; PROVIDED, HOWEVER, that (unless an Insurer Default shall
have occurred and be continuing) if the Security Insurer requests that the title
documents be amended prior to the occurrence of an Insurance Agreement Event of
Default, the out-of-pocket expenses of the Servicer or the Owner Trustee in
connection with such action shall be reimbursed to the Servicer or the Owner
Trustee, as applicable, by the Security Insurer.

                  SECTION 3.6. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF
SERVICER. By its execution and delivery of this Agreement, the Servicer makes
the following representations, warranties and covenants on which the Owner
Trustee relies in accepting the Receivables in trust and issuing the Notes on
behalf of the Trust, on which the Indenture Trustee relies in authenticating the
Notes and on which the Security Insurer relies in issuing the Note Policy.

                           (a)      The Servicer covenants as follows:

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

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

                                     - 38 -
<PAGE>

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

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

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

                                    (ii)     DUE QUALIFICATION. The Servicer is
                  duly qualified to do business as a foreign corporation in good
                  standing, and has obtained all necessary licenses and
                  approvals, in all jurisdictions in which the ownership or
                  lease of property or the conduct of its business (including
                  the servicing of the Receivables as required by this
                  Agreement) requires or shall require such qualification;

                                    (iii)    POWER AND AUTHORITY. The Servicer
                  has the power and authority to execute and deliver this
                  Agreement and its Related Documents and to carry out its terms
                  and their terms, respectively, and the execution, delivery and
                  performance of this Agreement and the Servicer's Related
                  Documents have been duly authorized by the Servicer by all
                  necessary corporate action;

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

                                    (v)      NO VIOLATION. The consummation of
                  the transactions contemplated by this Agreement and the
                  Servicer's Related Documents, and the fulfillment of the terms
                  of this Agreement and the Servicer's Related Documents, shall
                  not conflict with, result in any breach of any of the terms
                  and provisions of, or constitute (with or without notice or
                  lapse of time) a default under, the articles of incorporation
                  or bylaws of the Servicer, or any indenture, agreement,
                  mortgage, deed of trust or other instrument to which the
                  Servicer is a party or by which it is bound, or result in the
                  creation or imposition of any Lien upon any of its properties
                  pursuant to the terms of any such indenture, agreement,
                  mortgage, deed of trust or other instrument, other than this
                  Agreement, or violate any law, order,

                                     - 39 -
<PAGE>

                  rule or regulation applicable to the Servicer of any court
                  or of any federal or state regulatory body, administrative
                  agency or other governmental instrumentality having
                  jurisdiction over the Servicer or any of its properties;

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

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

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

                  SECTION 3.7. PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT.
Upon discovery by any of the Servicer, the Security Insurer, the Owner Trustee
or the Indenture Trustee of a breach of any of the covenants set forth in
Sections 3.5(a) or 3.6(a), the party discovering such breach shall give prompt
written notice to the others; PROVIDED, HOWEVER, that the failure to give any
such notice shall not affect any obligation of the Servicer. As of the second
Accounting Date following its discovery or receipt of notice of any breach of
any covenant set forth in Sections 3.5(a) or 3.6(a) which materially and
adversely affects the interests of the Noteholders, the Trust or the Security
Insurer in any Receivable (including any Liquidated Receivable) (or, at the
Servicer's election, the first Accounting Date so following), the Servicer
shall, unless it shall have cured such breach in all material respects, purchase
from the Trust the Receivable affected by such breach and, on the related
Deposit Date, the Servicer shall pay the related Purchase Amount. It is
understood and agreed that the obligation of the Servicer to purchase any
Receivable (including any Liquidated Receivable) with respect to which such a
breach has occurred and is continuing shall, if such obligation is fulfilled,
constitute the sole remedy against the Servicer for such breach available to the
Security Insurer, the Noteholders, or the Indenture Trustee on behalf of
Noteholders; PROVIDED, HOWEVER, that the Servicer shall indemnify the Owner
Trustee, the Backup Servicer, the Collateral Agent, the Security Insurer, the
Trust, the Indenture Trustee and the Noteholders against all costs, expenses,
losses, damages, claims and liabilities, including reasonable fees and expenses
of counsel, which may be asserted

                                     - 40 -
<PAGE>

against or incurred by any of them as a result of third party claims arising out
of the events or facts giving rise to such breach.

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

                  SECTION 3.9. SERVICER'S CERTIFICATE. No later than 10:00 a.m.
New York City time on each Determination Date, the Servicer shall deliver to the
Owner Trustee, the Indenture Trustee, the Backup Servicer, the Security Insurer,
the Collateral Agent and each Rating Agency a Servicer's Certificate executed by
a Responsible Officer of the Servicer containing, among other things, (i) all
information necessary to enable the Indenture Trustee to make any withdrawal and
deposit required by Section 5.1, to give any notice required by Section 5.2, to
make the distributions required by Sections 4.6 and 4.7(b), to make the
withdrawals, distributions and deliveries required by Section 4.7(a) and to
determine the amount to which the Servicer is entitled to be reimbursed or has
been reimbursed during the related Monthly Period for Monthly Advances pursuant
to Section 4.4(c), (ii) all information necessary to enable the Indenture
Trustee to send the statements to Noteholders required by Section 4.9, (iii) a
listing of all Warranty Receivables and Administrative Receivables purchased as
of the related Deposit Date, identifying the Receivables so purchased, and (iv)
all information necessary to enable the Indenture Trustee to reconcile all
deposits to, and withdrawals from, the Collection Account for the related
Monthly Period and Distribution Date, including the accounting required by
Section 4.8. Receivables purchased by the Servicer or by the Seller or AFL on
the related Deposit Date and each Receivable which became a Liquidated
Receivable or which was paid in full during the related Monthly Period shall be
identified by account number (as set forth in the Schedule of Receivables). A
copy of such certificate may be obtained by any Noteholder (or by a Note Owner,
upon certification that such Person is a Note Owner and payment of any expenses
associated with the distribution thereof) by a request in writing to the
Indenture Trustee addressed to the Corporate Trust Office. In addition to the
information set forth in the preceding sentence, the Servicer's Certificate
delivered to the Security Insurer, the Collateral Agent and the Indenture
Trustee on the Determination Date shall also contain the following information:
(a) the Delinquency Ratio, Average Delinquency Ratio, Cumulative Default Rate
and

                                     - 41 -
<PAGE>

Cumulative Net Loss Rate for such Determination Date; (b) whether any Trigger
Event has occurred as of such Determination Date; (c) whether any Trigger Event
that may have occurred as of a prior Determination Date is Deemed Cured as of
such Determination Date; (d) whether to the knowledge of the Servicer an
Insurance Agreement Event of Default has occurred, (e) if AFL shall be the
Servicer, whether a Capture Event shall have occurred and be continuing, and (f)
if AFL shall be the Servicer, whether any Capture Event specified in any prior
Servicer's Certificate has been cured by a permanent waiver, effective in
accordance with the terms of the Purchase Agreements.

                  SECTION 3.10. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF
SERVICER TERMINATION EVENT.

                  (a)      The Servicer shall deliver to the Owner Trustee, the
Indenture Trustee, the Backup Servicer, the Security Insurer and each Rating
Agency, on or before March 31 (or 90 days after the end of the Servicer's fiscal
year, if other than December 31) of each year, beginning on March 31, 2000, an
officer's certificate signed by any Responsible Officer of the Servicer, dated
as of December 31 (or other applicable date) of the immediately preceding year,
stating that (i) a review of the activities of the Servicer during the preceding
12-month period (or such other period as shall have elapsed from the Closing
Date to the date of the first such certificate) and of its performance under
this Agreement has been made under such officer's supervision, and (ii) to such
officer's knowledge, based on such review, the Servicer has fulfilled all its
obligations under this Agreement throughout such period, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof.

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

                  SECTION 3.11.  ANNUAL INDEPENDENT ACCOUNTANTS' REPORT.

                  (a)      The Servicer shall cause a firm of nationally
recognized independent certified public accountants (the "Independent
Accountants"), who may also render other services to the Servicer or to the
Seller, to deliver to the Owner Trustee, the Indenture Trustee, the Backup
Servicer, the Security Insurer and each Rating Agency, on or before March 31 (or
90 days after the end of the Servicer's fiscal year, if other than December 31)
of each year, beginning on March 31, 2000, with respect to the twelve months
ended the immediately

                                     - 42 -
<PAGE>

preceding December 31 (or other applicable date) (or such other period as shall
have elapsed from the Closing Date to the date of such certificate), a statement
(the "Accountant's Report") addressed to the Board of Directors of the Servicer,
to the Owner Trustee, the Indenture Trustee, the Backup Servicer and to the
Security Insurer, to the effect that such firm has audited the financial
statements of the Servicer and issued its report thereon and that such audit was
made in accordance with generally accepted auditing standards, and accordingly
included such tests of the accounting records and such other auditing procedures
as such firm considered necessary in the circumstances, including procedures as
determined by the Independent Accountants related to (1) the documents and
records concerning the servicing of automobile installment sales contracts under
pooling and servicing agreements and sale and servicing agreements substantially
similar one to another (such statement to have attached thereto a schedule
setting forth the pooling and servicing agreements and sale and servicing
agreements covered thereby, including this Agreement); and (2) the delinquency
and loss statistics relating to the Servicer's portfolio of automobile
installment sales contracts; and except as described in the statement, disclosed
no exceptions or errors in the records relating to automobile and light truck
loans serviced for others that, in the firm's opinion, generally accepted
auditing standards requires such firm to report. The Accountants' Report shall
further state that (1) a review in accordance with agreed upon procedures was
made of three randomly selected Servicer's Certificates for each Trust and (2)
except as disclosed in the Report, no exceptions or errors in the Servicer's
Certificates so examined were found.

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

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

                  SECTION 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING RECEIVABLES. The Servicer shall provide to representatives of the
Owner Trustee, Indenture Trustee, the Backup Servicer and the Security Insurer
reasonable access to the documentation regarding the Receivables. The Servicer
shall provide such access to any Noteholder (or Note Owner) only in such cases
where the Servicer is required by applicable statutes or regulations (whether
applicable to the Servicer or to such Noteholder or Note Owner) to permit such
Noteholder (or Note Owner) to review such documentation. In each case, such
access shall be afforded without charge but only upon reasonable request and
during normal business hours. Nothing in this Section shall derogate from the
obligation of the Servicer to observe any applicable law prohibiting disclosure
of information regarding the Obligors, and the failure of the Servicer to
provide access as provided in this Section as a result of such obligation shall
not constitute a breach of this Section. Any Noteholder (or Note Owner), by its
acceptance of a Note (or by acquisition of its beneficial interest therein), as
applicable, shall be deemed to have agreed to keep confidential and not to use
for its own benefit any information obtained by it pursuant to this Section,
except as may be required by applicable law.

                                     - 43 -
<PAGE>

                  SECTION 3.13. MONTHLY TAPE. On or before the third Business
Day, but in no event later than the fifth calendar day, of each month, the
Servicer will deliver to the Indenture Trustee and the Backup Servicer a
computer tape and a diskette (or any other electronic transmission acceptable to
the Indenture Trustee and the Backup Servicer) in a format acceptable to the
Indenture Trustee and the Backup Servicer containing the information with
respect to the Receivables as of the preceding Accounting Date necessary for
preparation of the Servicer's Certificate relating to the immediately succeeding
Determination Date and necessary to determine the application of collections as
provided in Section 4.3. The Backup Servicer shall use such tape or diskette (or
other electronic transmission acceptable to the Indenture Trustee and the Backup
Servicer) to verify the Servicer's Certificate delivered by the Servicer (based
on the information contained in such tape or diskette), and the Backup Servicer
shall certify to the Security Insurer that it has verified the Servicer's
Certificate in accordance with this Section 3.13 and shall notify the Servicer
and the Security Insurer of any discrepancies, in each case, on or before the
second Business Day following the Determination Date. In the event that the
Backup Servicer reports any discrepancies, the Servicer and the Backup Servicer
shall attempt to reconcile such discrepancies prior to the related Deficiency
Claim Date, but in the absence of a reconciliation, the Servicer's Certificate
shall control for the purpose of calculations and distributions with respect to
the related Distribution Date. In the event that the Backup Servicer and the
Servicer are unable to reconcile discrepancies with respect to a Servicer's
Certificate by the related Distribution Date, the Servicer shall cause the
Independent Accountants, at the Servicer's expense, to audit the Servicer's
Certificate and, prior to the third Business Day, but in no event later than the
fifth calendar day, of the following month, reconcile the discrepancies. The
effect, if any, of such reconciliation shall be reflected in the Servicer's
Certificate for such next succeeding Determination Date. In addition, the
Servicer shall, if so requested by the Security Insurer (unless an Insurer
Default shall have occurred and be continuing) deliver to the Backup Servicer
its Collection Records and its Monthly Records within one Business Day of demand
therefor and a computer tape containing as of the close of business on the date
of demand all of the data maintained by the Servicer in computer format in
connection with servicing the Receivables. Other than the duties specifically
set forth in this Agreement, the Backup Servicer shall have no obligations
hereunder, including, without limitation, to supervise, verify, monitor or
administer the performance of the Servicer. The Backup Servicer shall have no
liability for any actions taken or omitted by the Servicer. The duties and
obligations of the Backup Servicer shall be determined solely by the express
provisions of this Agreement and no implied covenants or obligations shall be
read into this Agreement against the Backup Servicer.

                  SECTION 3.14. RETENTION AND TERMINATION OF SERVICER. The
Servicer hereby covenants and agrees to act as such under this Agreement for
an initial term, commencing on the Closing Date and ending on December 31,
1999, which term shall be extendible by the Security Insurer for successive
quarterly terms ending on each successive March 31, June 30, September 30 and
December 31 (or, pursuant to revocable written standing instructions from
time to time to the Servicer, the Indenture Trustee and the Owner Trustee,
for any specified number of terms greater than one), until the termination of
the Trust. Each such notice (including each notice pursuant to standing
instructions, which shall be deemed delivered at the end of successive
quarterly terms for so long as such instructions are in effect) (a "Servicer
Extension Notice")

                                     - 43 -
<PAGE>

shall be delivered by the Security Insurer to the Owner Trustee, the Indenture
Trustee and the Servicer. The Servicer hereby agrees that, as of the date hereof
and upon its receipt of any such Servicer Extension Notice, the Servicer shall
become bound, for the initial term beginning on the Closing Date and for the
duration of the term covered by such Servicer Extension Notice, to continue as
the Servicer subject to and in accordance with the other provisions of this
Agreement. Until such time as an Insurer Default shall have occurred and be
continuing, the Indenture Trustee agrees that if as of the fifteenth day prior
to the last day of any term of the Servicer the Indenture Trustee shall not have
received any Servicer Extension Notice from the Security Insurer, the Indenture
Trustee will, within five days thereafter, give written notice of such
non-receipt to the Owner Trustee, the Security Insurer and the Servicer.

                  SECTION 3.15. FIDELITY BOND. The Servicer shall maintain a
fidelity bond in such form and amount as is customary for entities acting as
custodian of funds and documents in respect of consumer contracts on behalf of
institutional investors.

                  SECTION 3.16. DUTIES OF THE SERVICER UNDER THE INDENTURE. The
Servicer shall, and hereby agrees that it will, perform on behalf of the Trust
and the Owner Trustee the following duties of the Trust or the Owner Trustee, as
applicable, under the Indenture (references are to the applicable Sections in
the Indenture):

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

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

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

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

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

                           (f)      the monitoring of the Issuer's obligations
         as to the satisfaction and discharge of the Indenture and the
         preparation of an Officers' Certificate and the

                                     - 45 -
<PAGE>

         obtaining of the Opinion of Counsel and the Independent Certificate
         relating thereto (Section 4.01);

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

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

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

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

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

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

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

                  SECTION 3.17. DUTIES OF THE SERVICER UNDER THE INSURANCE
AGREEMENT. The Servicer shall, and hereby agrees that it will, perform on behalf
of the Trust and the Owner Trustee the following duties of the Trust under the
Insurance Agreement (references are to the applicable Sections in the Insurance
Agreement):

                           (a)      the maintenance of books and records of
         accounts of the Trust's assets and business and the furnishing to the
         Security Insurer of reports, certificates, statements, financial
         statements or notices furnished to the Indenture Trustee or the
         Noteholders pursuant to the Related Documents (Section 2.02(b));

                                     - 46 -
<PAGE>

                           (b)      the delivery to the Security Insurer and,
         upon request, any Noteholder, of certificates with respect to
         compliance with, and other matters under, the Related Documents
         (Section 2.02(c));

                           (c)      the filing of financing statements,
         assignments or other instruments, and amendments or continuation
         statements relating thereto to preserve and protect fully the lien and
         security interest in, and all rights of the Indenture Trustee and the
         Security Insurer with respect to, the Trust Estate (Section 2.02(f));

                           (d)      the maintenance of licenses, permits,
         charters and registrations of the Trust material to the performance by
         the Trust of its obligations under the Insurance Agreement and the
         Related Documents (Section 2.02(g));

                           (e)      the provision to the Security Insurer of
         executed original copies of the documents executed in connection with
         the closing of the offering of the Notes (Section 2.02(k)); and

                           (f)      the taking of actions to ensure that the
         Trust is taxable as a partnership for federal and state income tax
         purposes and not as an association (or publicly traded partnership)
         taxable as a corporation (Section 2.02(l)).

                  SECTION 3.18. CERTAIN DUTIES OF THE SERVICER UNDER THE TRUST
AGREEMENT. The Servicer shall, and hereby agrees that it will, monitor the
Trust's compliance with all applicable provisions of state and federal
securities laws, notify the Trust and the Administrator (as defined in the Trust
Agreement) of any actions to be taken by the Trust necessary for compliance with
such laws and prepare on behalf of the Trust and the Administrator all notices,
filings or other documents or instruments required to be filed under such laws.

                                   ARTICLE IV

                    DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS

                  SECTION 4.1.  TRUST ACCOUNTS.

                  (a)      The Servicer shall establish the Collection Account
in the name of the Indenture Collateral Agent for the benefit of the Issuer
Secured Parties (as defined in the Indenture). The Collection Account shall be
an Eligible Account and initially shall be a segregated trust account
established with the Indenture Collateral Agent and maintained with the
Indenture Collateral Agent.

                  (b)      The Servicer shall establish the Pre-Funding Account
in the name of the Indenture Collateral Agent for the benefit of the Issuer
Secured Parties. The Pre-Funding Account shall be an Eligible Account and
initially shall be a segregated trust account established with the Indenture
Collateral Agent and maintained with the Indenture Collateral Agent.

                                     - 47 -
<PAGE>

                  (c)      The Servicer shall establish the Note Distribution
Account in the name of the Indenture Collateral Agent for the benefit of the
Issuer Secured Parties. The Note Distribution Account shall be an Eligible
Account and initially shall be a segregated trust account established with the
Indenture Collateral Agent and maintained with the Indenture Collateral Agent.

                  (d)      The Servicer shall establish the Reserve Account in
the name of the Indenture Collateral Agent for the benefit of the Issuer Secured
Parties. The Reserve Account shall be an Eligible Account and initially shall be
a segregated trust account established with the Indenture Collateral Agent and
maintained with the Indenture Collateral Agent.

                  (e)      All amounts held in the Collection Account, the
Pre-Funding Account, the Note Distribution Account and the Reserve Account
(collectively, the "Trust Accounts") shall, to the extent permitted by
applicable laws, rules and regulations, be invested, as directed in writing by
the Servicer, in Eligible Investments that, in the case of amounts held in the
Collection Account, the Note Distribution Account and the Reserve Account,
mature not later than one Business Day prior to the Distribution Date for the
Monthly Period to which such amounts relate, and, in the case of amounts held in
the Pre-Funding Account, mature in such amounts and on such dates, not later
than one Business Day prior to the last day of the Funding Period, as the
Servicer may direct in writing; PROVIDED, HOWEVER, that the amounts held in the
Trust Accounts shall be invested by the Indenture Collateral Agent on behalf of
the Trust in overnight or next-day funds in such Eligible Investments as may be
acceptable to the Rating Agencies and the Security Insurer (which initially
shall be the Indenture Collateral Agent's U.S. Government Fund and, from time to
time, shall include such other proprietary Eligible Investments of the Indenture
Collateral Agent as shall be confirmed in writing by the Security Insurer to the
Indenture Collateral Agent) for the period of time from the Business Day prior
to the Distribution Date or the end of the Funding Period, as applicable, until
such Distribution Date or the end of the Funding Period, as applicable. Any such
written direction shall certify that any such investment is authorized by this
Section 4.1. Investments in Eligible Investments shall be made in the name
of the Indenture Collateral Agent on behalf of the Trust, and such investments
shall not be sold or disposed of prior to their maturity. Any investment of
funds in the Trust Accounts shall be made in Eligible Investments held by a
financial institution in accordance with the following requirements:

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

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

                           (A)      with respect to bankers' acceptances,
                  commercial paper, negotiable certificates of deposit and other
                  obligations that constitute "instruments" within the meaning
                  of Section 9-105(1)(i) of the UCC (other than certificated
                  securities) and are susceptible of physical delivery,
                  transferred to the Indenture Collateral Agent by physical
                  delivery to the Indenture Collateral

                                     - 48 -
<PAGE>

                  Agent, indorsed to, or registered in the name of, the
                  Indenture Collateral Agent or its nominee or indorsed in
                  blank; or such additional or alternative procedures as may
                  hereafter become appropriate to effect the complete transfer
                  of ownership of any such Eligible Investments to the
                  Indenture Collateral Agent free of any adverse claims,
                  consistent with changes in applicable law or regulations or
                  the interpretation thereof;

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

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

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

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

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<PAGE>

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

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

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

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

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

                                    (1)      if a securities intermediary (A)
                           indicates by book entry that a "financial asset" (as
                           defined in Section 8-102(a)(9) of the UCC) has been
                           credited to the Indenture Collateral Agent's
                           "securities account" (as defined in Section 8-501(a)
                           of the UCC), (B) receives a financial asset (as so
                           defined) from the Indenture Collateral Agent or
                           acquires a financial asset for the Indenture
                           Collateral Agent, and in either case, accepts it for
                           credit to the Indenture Collateral Agent's securities
                           account (as so defined), (C) becomes obligated under
                           other law, regulation or rule to credit a financial
                           asset to the Indenture Collateral Agent's securities
                           account, or (D) has agreed that it will comply with
                           "entitlement orders" (as defined in Section
                           8-102(a)(8) of the UCC) originated by the Indenture
                           Collateral Agent, without further consent by the
                           "entitlement holder" (as defined in Section
                           8-102(a)(7) of the UCC), of a confirmation of the
                           purchase and the making by such securities
                           intermediary of entries on its books and records
                           identifying as belonging to the Indenture Collateral
                           Agent of (I) a specific certificated security in the
                           securities intermediary's possession, (II) a quantity
                           of securities that constitute or are part of a
                           fungible bulk of certificated securities in the
                           securities intermediary's possession, or (III) a
                           quantity of securities that constitute or are part of
                           a fungible bulk of securities shown on the account of
                           the securities intermediary on the books of another
                           securities intermediary.

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

                                     - 50 -
<PAGE>

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

                  (f)      On the Closing Date, the Servicer shall deposit in
the Collection Account (i) all Scheduled Payments and prepayments of Initial
Receivables received by the Servicer after the Initial Cutoff Date and on or
prior to the Business Day immediately preceding the Closing Date or received by
the Lockbox Bank after the Initial Cutoff Date and on or prior to the second
Business Day immediately preceding the Closing Date and (ii) all Liquidation
Proceeds and proceeds of Insurance Policies realized in respect of a Financed
Vehicle and applied by the Servicer after the Initial Cutoff Date. On each
Subsequent Transfer Date, the Servicer shall deposit in the Collection Account
(x) all Scheduled Payments and prepayments of the related Subsequent Receivables
received by the Servicer after the related Subsequent Cutoff Date and on or
prior to the Business Day immediately preceding the related Subsequent Transfer
Date or received by the Lockbox Bank after the related Subsequent Cutoff Date
and on or prior to the second Business Day immediately preceding the related
Subsequent Transfer Date and (y) all Liquidation Proceeds and proceeds of
Insurance Policies related in respect of a Financed Vehicle and applied by the
Servicer after the related Subsequent Cutoff Date.

                  SECTION 4.2.  COLLECTIONS.

                  (a)      The Servicer shall establish the Subcollection
Account in the name of the Indenture Trustee for the benefit of the Noteholders.
The Subcollection Account shall be an Eligible Account satisfying clause (ii) of
the definition of "Eligible Account," and shall initially be established with
the Lockbox Bank. The Servicer shall remit directly to the Subcollection
Account without deposit into any intervening account all payments by or on
behalf of the Obligors on the Receivables and all Liquidation Proceeds received
by the Servicer, in each case, as soon as practicable, but in no event later
than the Business Day after receipt thereof. Within two days of deposit of
payments into the Subcollection Account, the Servicer shall cause the Lockbox
Bank to transfer all amounts credited to the Subcollection Account on account of
such payments to the Collection Account. Amounts in the Subcollection Account
shall not be invested. Notwithstanding the foregoing, the Servicer may utilize
an alternative remittance schedule acceptable to the Servicer if the Security
Insurer consents in writing (so long as an Insurer Default shall not have
occurred and be continuing) and the Servicer provides to the Indenture Trustee
written confirmation from each Rating Agency that such alternative remittance

                                     - 51 -
<PAGE>

schedule will not result in the downgrading or withdrawal by the Rating Agency
of the rating then assigned to the Notes.

                  (b)      Notwithstanding the provisions of subsection (a)
hereof, the Servicer will be entitled to be reimbursed from amounts on deposit
in the Collection Account with respect to a Monthly Period for amounts
previously deposited in the Collection Account but later determined by the
Servicer or the Lockbox Bank to have resulted from mistaken deposits or postings
or checks returned for insufficient funds. The amount to be reimbursed hereunder
shall be paid to the Servicer on the related Distribution Date pursuant to
Section 4.6(iii) upon certification by the Servicer of such amounts and the
provision of such information to the Indenture Trustee and the Security Insurer
as may be necessary in the opinion of the Indenture Trustee and the Security
Insurer to verify the accuracy of such certification. In the event that the
Security Insurer has not received evidence satisfactory to it of the Servicer's
entitlement to reimbursement pursuant to this Section 4.2(b), the Security
Insurer shall (unless an Insurer Default shall have occurred and be continuing)
give the Indenture Trustee notice to such effect, following receipt of which the
Indenture Trustee shall not make a distribution to the Servicer in respect of
such amount pursuant to Section 4.6, or if the Servicer prior thereto has been
reimbursed pursuant to Section 4.6 or Section 4.8, the Indenture Trustee shall
withhold such amounts from amounts otherwise distributable to the Servicer on
the next succeeding Distribution Date.

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

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

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

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

                                     - 52 -
<PAGE>

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

                  SECTION 4.4.  MONTHLY ADVANCES.

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

                  (b)      On or before each Determination Date and prior to the
delivery of the Servicer's Certificate for such Determination Date pursuant to
Section 3.9, the Servicer shall deposit in the Collection Account the aggregate
amount of Monthly Advances required for the related Monthly Period in
immediately available funds (subject to Section 4.8).

                  (c)      The Servicer shall be entitled to be reimbursed for
Outstanding Monthly Advances with respect to a Receivable pursuant to Section
4.6(i) or pursuant to Section 4.8 from the following sources with respect to
such Receivable on any day subsequent to the Distribution Date in respect of
which such Monthly Advance was made: (i) subsequent payments by or on behalf of
the Obligor with respect to such Receivable, (ii) collections of Liquidation
Proceeds with respect to such Receivable if such Receivable becomes a Liquidated
Receivable and (iii) payment of any Purchase Amount with respect to such
Receivable if such Receivable becomes a Purchased Receivable. If any Receivable
shall become a Liquidated Receivable and the Servicer shall not have been fully
reimbursed for Outstanding Monthly Advances with respect to such Receivable from
the sources of funds previously described in this paragraph, the Servicer shall
be entitled to reimbursement from collections on Receivables other than the
Receivable in respect of which such Outstanding Monthly Advance shall have been
made.

                  SECTION 4.5. ADDITIONAL DEPOSITS. On or before each Deposit
Date, the Servicer or AFL shall deposit in the Collection Account the aggregate
Purchase Amounts with respect to Administrative Receivables and Warranty
Receivables, respectively. All such deposits of Purchase Amounts shall be made
in immediately available funds. On or before each Draw Date, the Indenture
Trustee shall deposit in the Collection Account any amounts delivered to the
Indenture Trustee by the Collateral Agent.

                                     - 53 -
<PAGE>

                  SECTION 4.6. DISTRIBUTIONS. On each Distribution Date, the
Indenture Trustee shall (based on the information contained in the Servicer's
Certificate delivered on the related Determination Date) distribute the
following amounts and in the order of priority specified below. Within each
order of priority, amounts shall be deemed withdrawn first from Available Funds,
second from the Reserve Account and third from any Deficiency Claim Amounts.

                           (i)      first, from the Distribution Amount, (A) to
         the Trust for payment of any taxes due and unpaid with respect to the
         Trust, to the extent such taxes have not been previously paid by AFL or
         by the Servicer pursuant to Section 3.8, and (B) then to the Servicer,
         the amount of Outstanding Monthly Advances for which the Servicer is
         entitled to be reimbursed pursuant to Section 4.4(c) and for which the
         Servicer has not previously been reimbursed pursuant to Section 4.8;

                           (ii)     second, from the Distribution Amount then
         remaining on deposit in the Collection Account, to the Owner Trustee,
         any accrued and unpaid fees of the Owner Trustee in accordance with the
         Trust Agreement and including amounts with respect to which the
         Administrator is entitled to be reimbursed pursuant to the
         Administration Agreement; to the Indenture Trustee, any accrued and
         unpaid fees of the Indenture Trustee in accordance with the Indenture;
         to any Lockbox Bank, Custodian, Backup Servicer, Collateral Agent,
         Indenture Collateral Agent or Administrator (including the Owner
         Trustee or Indenture Trustee if acting in any such additional
         capacity), any accrued and unpaid fees (in each case, to the extent
         such Person has not previously received such amount from the Servicer
         or AFL), to the Backup Servicer, any transition expenses (not to exceed
         $100,000) in accordance with Section 8.3; PROVIDED, HOWEVER, in the
         event that the rating assigned by Standard & Poor's to the
         claims-paying ability of the Security Insurer is not AAA, the accrued
         and unpaid fees of the Owner Trustee, the Indenture Trustee, the Backup
         Servicer, the Collateral Agent, the Indenture Collateral Agent and the
         Administrator shall be distributed pursuant to this clause (ii) to the
         extent such fees are not in excess of the amount (the "Servicer Fee
         Threshold") obtained by dividing (x) .20% of the Aggregate Principal
         Balance by (y) twelve, and any accrued and unpaid fees in excess of the
         Servicer Fee Threshold remaining to be distributed pursuant to this
         clause (ii) shall not be distributed pursuant to this clause (ii) but
         shall be distributed after the distributions to be made pursuant to
         clause (v) below but before the distributions to be made pursuant to
         clause (vi) below;

                           (iii)    third, from the Distribution Amount then
         remaining on deposit in the Collection Account, to the Servicer, the
         Basic Servicing Fee for the related Monthly Period, any Supplemental
         Servicing Fees for the related Monthly Period, and any amounts
         specified in Section 4.2(b), to the extent the Servicer has not
         reimbursed itself in respect of such amounts pursuant to Section 4.8;

                           (iv)     fourth, from the Distribution Amount then
         remaining on deposit in the Collection Account, to the Note
         Distribution Account, an amount equal to the Noteholders' Interest
         Distributable Amount for such Distribution Date;

                                     - 54 -
<PAGE>

                           (v)      fifth, from the Distribution Amount then
         remaining on deposit in the Collection Account, to the Note
         Distribution Account, an amount equal to the Noteholders' Principal
         Distributable Amount for such Distribution Date;

                           (vi)     sixth, from the Distribution Amount then
         remaining on deposit in the Collection Account, to the Security
         Insurer, to the extent of any amounts owing to the Security Insurer
         under the Insurance Agreement and not paid, whether or not AFL is also
         obligated to pay such amounts, such amounts representing a portion of
         the Credit Enhancement Fee otherwise payable on a subordinated basis to
         the Seller; and

                           (vii)    seventh, any remaining Available Funds to
         the Collateral Agent for deposit in the Spread Account, such amounts
         representing a portion of the Credit Enhancement Fee payable on a
         subordinated basis to the Seller.

                  SECTION 4.7.  PRE-FUNDING ACCOUNT.

                  (a)      On the Closing Date, the Indenture Trustee will
deposit, on behalf of the Seller, in the Pre-Funding Account $161,475,961.71
from the proceeds of the sale of the Notes. On each Subsequent Transfer Date,
the Servicer shall instruct the Indenture Trustee in writing:

                           (i)      to withdraw from the Pre-Funding Account the
         Spread Account Additional Deposit, if any, on such Subsequent Transfer
         Date, and to deliver such funds to the Collateral Agent for deposit in
         the Spread Account,

                           (ii)     to withdraw from the Pre-Funding Account the
         amount, if any, by which the Requisite Reserve Amount for such
         Subsequent Transfer Date exceeds the Reserve Amount, and to deposit
         such funds in the Reserve Account,

                           (iii)    to withdraw from the Pre-Funding Account the
         amount, if any, on deposit therein in excess of the remaining
         Pre-Funded Amount, after giving effect to the withdrawals specified in
         clauses (i) - (ii) above, and to distribute such amount to or upon the
         order of the Seller upon satisfaction of the conditions set forth in
         Section 2.4 with respect to such transfer, and

                           (iv)     to withdraw from the Reserve Account an
         amount equal to the excess, if any, of the Reserve Amount (after giving
         effect to withdrawals from the Reserve Account pursuant to Section
         5.1 on the immediately following Distribution Date, if such Subsequent
         Transfer Date falls between a Determination Date and the related
         Distribution Date) over the Requisite Reserve Amount for such
         Subsequent Transfer Date and to distribute such amount to or upon the
         order of the Depositor.

                  (b)      If (x) the Pre-Funded Amount has not been reduced to
zero on the Distribution Date on or immediately following the end of the Funding
Period or (y) the Pre- Funded Amount has been reduced to $100,000 or less on any
Distribution Date, in either case

                                     - 55 -
<PAGE>

after giving effect to any reductions in the Pre-Funded Amount on such
Distribution Date pursuant to paragraph (a) above, the Servicer shall provide
written instructions to the Indenture Trustee to withdraw from the Pre-Funding
Account on such Distribution Date an amount equal to the sum of the Class A-1
Prepayment Amount, the Class A-2 Prepayment Amount and the Class A-3 Prepayment
Amount and deposit such amount in the Note Distribution Account. Any remaining
funds on deposit in the Pre-Funding Account shall be distributed to the
Depositor. If the funds on deposit in the Pre-Funding Account are less than the
amount described above, then the Servicer shall provide written instructions to
the Indenture Trustee to withdraw the funds on deposit in the Pre-Funding
Account and deposit such funds in the Note Distribution Account and Collection
Account, pro rata in accordance with the amount specified above.

                  (c)      If the Pre-Funded Amount is greater than $100,000 at
the end of the Funding Period, the Seller will deposit into the Note
Distribution Account an amount equal to the sum of the Class A-1 Prepayment
Premium, the Class A-2 Prepayment Premium and the Class A-3 Prepayment Premium;
PROVIDED, HOWEVER, that the obligation of the Seller to make the deposits
referred to in this sentence is expressly limited to the extent of the amount of
Liquidated Damages (as defined in the Closing Date Purchase Agreement) paid to
the Seller by AFL and by the Seller to the Trust.

                  SECTION 4.8. NET DEPOSITS. Subject to payment by the Servicer
of amounts otherwise payable pursuant to Section 4.6(ii) and provided that no
Servicer Termination Event shall have occurred and be continuing with respect to
such Servicer, the Servicer may make the remittances to be made by it pursuant
to Sections 4.2, 4.4 and 4.5 net of amounts (which amounts may be netted prior
to any such remittance for a Monthly Period) to be distributed to it pursuant to
Sections 3.8, 4.2(b) and 4.6(i); PROVIDED, HOWEVER, that the Servicer shall
account for all of such amounts in the related Servicer's Certificate as if such
amounts were deposited and distributed separately; and, PROVIDED, FURTHER, that
if an error is made by the Servicer in calculating the amount to be deposited or
retained by it, with the result that an amount less than required is deposited
in the Collection Account, the Servicer shall make a payment of the deficiency
to the Collection Account, immediately upon becoming aware, or receiving notice
from the Indenture Trustee, of such error.

                  SECTION 4.9.  STATEMENTS TO NOTEHOLDERS.

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

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

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

                                     - 56 -
<PAGE>

                           (iii)    the amount of such distribution payable out
         of amounts withdrawn from the Reserve Account, the Spread Account or
         pursuant to a claim on the Note Policy;

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

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

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

                           (vii)    for Payment Dates during the Funding Period,
         the remaining Pre- Funded Amount and the remaining Reserve Amount;

                           (viii)   for the Payment Date on or immediately
         following the end of the Funding Period, the Class A-1 Prepayment
         Amount, the Class A-2 Prepayment Amount the Class A-3 Prepayment
         Amount, the Class A-1 Prepayment Premium, the Class A-2 Prepayment
         Premium and the Class A-3 Prepayment Premium, if any, and the remaining
         Reserve Amount that has not been distributed pursuant to Section 4.6 or
         to the Depositor; and

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

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

                  (b)      Note Owners may obtain copies of the statements
delivered by the Indenture Trustee pursuant to subsection (a) above upon written
request to the Indenture Trustee at its Corporate Trust Office (together with a
certification that such Person is a Note Owner and payment of any expenses
associated with the distribution thereof).

                  SECTION 4.10. INDENTURE TRUSTEE AS AGENT. The Indenture
Trustee, in holding all funds in the Trust Accounts and in making distributions
as provided in this Agreement, shall act solely on behalf of and as agent for
the Noteholders.

                  SECTION 4.11. ELIGIBLE ACCOUNTS. Any account which is required
to be established as an Eligible Account pursuant to this Agreement and which
ceases to be an Eligible Account shall within five Business Days (or such longer
period, not to exceed 30 days, as to which each Rating Agency and the Security
Insurer may consent) be established as a new account which shall be an Eligible
Account and any cash and/or any investments shall be transferred to such new
account.

                                     - 57 -
<PAGE>

                                    ARTICLE V

                     THE RESERVE ACCOUNT; THE SPREAD ACCOUNT

                  SECTION 5.1. WITHDRAWALS FROM THE RESERVE ACCOUNT. In the
event that the Servicer's Certificate with respect to any Determination Date
shall state that the amount of Available Funds with respect to such
Determination Date is less than the sum of the amounts payable on the related
Distribution Date pursuant to clauses (i) through (vi) of Section 4.6, then on
the Draw Date immediately preceding such Distribution Date, the Indenture
Trustee, in accordance with written instructions, shall (i) withdraw amounts on
deposit in the Reserve Account, (up to the amount by which the amounts payable
on the related Distribution Date pursuant to clauses (i) through (vi) of Section
4.6 exceed the amount of Available Funds with respect to such Determination
Date) and (ii) deposit the amounts so withdrawn from the Reserve Account into
the Collection Account. On each Distribution Date, any funds on deposit in the
Reserve Account in excess of the Requisite Reserve Amount (after giving effect
to any withdrawals on the immediately preceding Draw Date as described above)
shall be paid to the Depositor.

                  SECTION 5.2.  WITHDRAWALS FROM SPREAD ACCOUNT.

                  (a)      In the event that the Servicer's Certificate with
respect to any Determination Date shall state that the Deficiency Claim Amount
(as defined below) with respect to the related Distribution Date is greater than
zero, then on the Deficiency Claim Date immediately preceding such Distribution
Date, the Indenture Trustee shall deliver to the Collateral Agent, the Security
Insurer, the Fiscal Agent, if any, the Owner Trustee and the Servicer, by hand
delivery, telex or facsimile transmission, a written notice (a "Deficiency
Notice"). Such Deficiency Notice shall direct the Collateral Agent to remit such
Deficiency Claim Amount (to the extent of the funds available to be distributed
pursuant to the Spread Account Agreement) to the Indenture Trustee for deposit
in the Collection Account. The "Deficiency Claim Amount" with respect to any
Distribution Date shall equal the excess, if any, of

                           (i)      the amount required to be distributed
         pursuant to clauses (i) - (vi) of Section 4.6 (without giving effect to
         the limitation of the Distribution Amount specified in each such
         clause) over

                           (ii)     the Actual Funds with respect to such
         Distribution Date, plus (B) if such Distribution Date.

                  (b)      any Deficiency Notice shall be delivered by 10:00
a.m., New York City time, on the fourth Business Day preceding such Distribution
Date. The amounts distributed by the Collateral Agent to the Indenture Trustee
pursuant to a Deficiency Notice shall be deposited by the Indenture Trustee into
the Collection Account pursuant to Section 4.5.

                                     - 58 -
<PAGE>

                                   ARTICLE VI

                                   THE SELLER

                  SECTION 6.1.  LIABILITY OF SELLER.

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

                  SECTION 6.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SELLER; AMENDMENT OF CERTIFICATE OF INCORPORATION.

                  (a) The Seller shall not merge or consolidate with any other
Person or permit any other Person to become the successor to the Seller's
business without (so long as an Insurer Default shall not have occurred and be
continuing) the prior written consent of the Security Insurer. The certificate
of incorporation of any corporation (i) into which the Seller may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Seller shall be a party, or (iii) succeeding to the business of Seller, shall
contain provisions relating to limitations on business and other matters
substantively identical to those contained in the Seller's certificate of
incorporation. Any such successor corporation shall execute an agreement of
assumption of every obligation of the Seller under this Agreement and each
Related Document and, whether or not such assumption agreement is executed,
shall be the successor to the Seller under this Agreement without the execution
or filing of any document or any further act on the part of any of the parties
to this Agreement. The Seller shall provide prompt notice of any merger,
consolidation or succession pursuant to this Section 6.2 to the Owner Trustee,
the Indenture Trustee, the Security Insurer and the Rating Agencies.
Notwithstanding the foregoing, the Seller shall not merge or consolidate with
any other Person or permit any other Person to become a successor to the
Seller's business, unless (x) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Section 2.5 shall
have been breached (for purposes hereof, such representations and warranties
shall speak as of the date of the consummation of such transaction) and no event
that, after notice or lapse of time, or both, would become a Servicer
Termination Event shall have occurred and be continuing, (y) the Seller shall
have delivered to the Owner Trustee, the Indenture Trustee and the Security
Insurer an officer's certificate and an Opinion of Counsel each stating that
such consolidation, merger or succession and such agreement of assumption comply
with this Section 6.2 and that all conditions precedent, if any, provided for in
this Agreement relating to such transaction have been complied with, and (z) the
Seller shall have delivered to the Owner Trustee, the Indenture Trustee and the
Security Insurer an Opinion of Counsel, stating that, in the opinion of such
counsel, either (A) all financing statements and continuation statements and
amendments thereto have been executed and filed that are necessary to preserve
and protect the interest of the Trust in the Trust Property and reciting the
details of the filings or (B) no such action shall be necessary to preserve and
protect such interest.

                  (b)      The Seller hereby agrees that it shall not (i) take
any action prohibited by Article XVI of its certificate of incorporation or (ii)
without the prior written consent of the

                                     - 59 -
<PAGE>

Owner Trustee and the Indenture Trustee and (so long as an Insurer Default shall
not have occurred and be continuing) the Security Insurer and without giving
prior written notice to the Rating Agencies, amend Article III, Article IX,
Article XIV or Article XVI of its certificate of incorporation.

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

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

                                   ARTICLE VII

                                  THE SERVICER

                  SECTION 7.1.  LIABILITY OF SERVICER; INDEMNITIES.

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

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

                                     - 60 -
<PAGE>

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

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

                  (e)      The Servicer shall indemnify, defend, and hold
harmless the Owner Trustee, in its individual capacity, its officers, directors,
agents and employees, from and against all costs, taxes (other than income taxes
on fees and expenses payable to the Owner Trustee), expenses, losses, claims,
damages and liabilities arising out of or incurred in connection with the
acceptance or performance of the trusts and duties contained in the Trust
Agreement and the Related Documents, except to the extent that such cost, taxes
(other than income taxes), expense, loss, claim, damage or liability (A) is due
to the willful misfeasance or gross negligence of the Owner Trustee, or (B)
arises from the Owner Trustee's breach of any of its representations or
warranties set forth in Section 6.2 of the Trust Agreement; PROVIDED, HOWEVER,
that amounts payable under this paragraph shall be increased by the amount of
income taxes actually paid by the Owner Trustee in respect of any indemnity
payment unless the Owner Trustee received or can reasonably be expected to
receive a tax deduction for the related loss or cost.

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

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

                                     - 62 -
<PAGE>

                  SECTION 7.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER OR BACKUP SERVICER.

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

                  (b) Any corporation (i) into which the Backup Servicer may be
merged or consolidated, (ii) resulting from any merger or consolidation to which
the Backup Servicer shall be a party, (iii) which acquires by conveyance,
transfer or lease substantially all of the assets of the Backup Servicer, or
(iv) succeeding to the business of the Backup Servicer, in any of the foregoing
cases shall execute an agreement of assumption to perform every obligation of
the Backup Servicer under this Agreement and, whether or not such assumption
agreement is executed, shall be the successor to the Backup Servicer under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties to this

                                     - 62 -
<PAGE>

Agreement, anything in this Agreement to the contrary notwithstanding; PROVIDED,
HOWEVER, that nothing contained herein shall be deemed to release the Backup
Servicer from any obligation.

                  SECTION 7.3. LIMITATION ON LIABILITY OF SERVICER, BACKUP
SERVICER AND OTHERS.

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

                  (b)      The Backup Servicer shall not be liable for any
obligation of the Servicer contained in this Agreement, and the Owner Trustee,
the Indenture Trustee, the Seller, the Security Insurer and the Noteholders
shall look only to the Servicer to perform such obligations.

                  SECTION 7.4. DELEGATION OF DUTIES. The Servicer may delegate
duties under this Agreement to an Affiliate of AFL with the prior written
consent of the Security Insurer, the Indenture Trustee, the Owner Trustee and
the Backup Servicer. The Servicer also may at any time perform the specific duty
of repossession of Financed Vehicles through sub-contractors who are in the
business of servicing automotive receivables and may perform other specific
duties through such sub-contractors with the prior written consent of the
Security Insurer (unless an Insurer Default shall have occurred and be
continuing), PROVIDED, HOWEVER, that no such delegation or sub-contracting
duties by the Servicer shall relieve the Servicer of its responsibility with
respect to such duties. So long as no Insurer Default shall have occurred and be
continuing, neither AFL or any party acting as Servicer hereunder shall appoint
any subservicer hereunder without the prior written consent of the Security
Insurer, the Indenture Trustee, the Owner Trustee and the Backup Servicer.

                  SECTION 7.5. SERVICER AND BACKUP SERVICER NOT TO RESIGN.
Subject to the provisions of Section 7.2, neither the Servicer nor the Backup
Servicer shall resign from the obligations and duties imposed on it by this
Agreement as Servicer or Backup Servicer except upon a determination that by
reason of a change in legal requirements the performance of its duties under
this Agreement would cause it to be in violation of such legal requirements in a
manner which would have a material adverse effect on the Servicer or the Backup
Servicer, as the case may be, and the Security Insurer (so long as an Insurer
Default shall not have occurred

                                     - 63 -
<PAGE>

and be continuing) or Note Majority (if an Insurer Default shall have occurred
and be continuing) does not elect to waive the obligations of the Servicer or
the Backup Servicer, as the case may be, to perform the duties which render it
legally unable to act or to delegate those duties to another Person. Any such
determination permitting the resignation of the Servicer or Backup Servicer
shall be evidenced by an Opinion of Counsel to such effect delivered and
reasonably acceptable to the Owner Trustee, the Indenture Trustee and the
Security Insurer (unless an Insurer Default shall have occurred and be
continuing). No resignation of the Servicer shall become effective until, so
long as no Insurer Default shall have occurred and be continuing, the Backup
Servicer or an entity acceptable to the Security Insurer shall have assumed the
responsibilities and obligations of the Servicer or, if an Insurer Default shall
have occurred and be continuing, the Backup Servicer or a successor Servicer
that is an Eligible Servicer shall have assumed the responsibilities and
obligations of the Servicer. No resignation of the Backup Servicer shall become
effective until, so long as no Insurer Default shall have occurred and be
continuing, an entity acceptable to the Security Insurer shall have assumed the
responsibilities and obligations of the Backup Servicer or, if an Insurer
Default shall have occurred and be continuing, a Person that is an Eligible
Servicer shall have assumed the responsibilities and obligations of the Backup
Servicer; PROVIDED, HOWEVER, that in the event a successor Backup Servicer is
not appointed within 60 days after the Backup Servicer has given notice of its
resignation and has provided the Opinion of Counsel required by this Section
7.5, the Backup Servicer may petition a court for its removal.

                  SECTION 7.6. ADVANCING OBLIGATIONS OF SUCCESSOR SERVICER. The
successor Servicer, if Norwest Bank Minnesota, National Association, its
successors or assigns, shall have no obligation to perform any repurchase or
advancing obligations, if any, of the Servicer hereunder.

                                  ARTICLE VIII

                           SERVICER TERMINATION EVENTS

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

                           (a)      Any failure by the Servicer to deliver to
         the Indenture Trustee for distribution to Noteholders any proceeds or
         payment required to be so delivered under the terms of this Agreement
         (or, if AFL is the Servicer, the Purchase Agreement) that continues
         unremedied for a period of two Business Days (one Business Day with
         respect to payment of Purchase Amounts) after written notice is
         received by the Servicer from the Indenture Trustee or (unless an
         Insurer Default shall have occurred and be continuing) the Security
         Insurer or after discovery of such failure by a Responsible Officer of
         the Servicer; or

                           (b)      Failure by the Servicer to deliver to the
         Indenture Trustee, the Owner Trustee and (so long as an Insurer Default
         shall not have occurred and be

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<PAGE>

         continuing) the Security Insurer, the Servicer's Certificate by the
         fourth Business Day prior to the Distribution Date, or failure on the
         part of the Servicer to observe its covenants and agreements set forth
         in Section 7.2(a); or

                           (c)      Failure on the part of the Servicer duly to
         observe or perform in any material respect any other covenants or
         agreements of the Servicer set forth in this Agreement (or, if AFL is
         the Servicer, the Purchase Agreement), which failure (i) materially and
         adversely affects the rights of Noteholders (determined without regard
         to the availability of funds under the Note Policy), or of the Security
         Insurer (unless an Insurer Default shall have occurred and be
         continuing), and (ii) continues unremedied 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 the Servicer by the Owner
         Trustee, the Indenture Trustee or the Security Insurer (or, if an
         Insurer Default shall have occurred and be continuing, any Noteholder);
         or

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

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

                           (f)      Any representation, warranty or statement of
         the Servicer or the Seller made in this Agreement or any certificate,
         report or other writing delivered pursuant hereto shall prove to be
         incorrect in any material respect as of the time when the same shall
         have been made (excluding, however, any representation or warranty set
         forth in Section 2.5(a)), and the incorrectness of such representation,
         warranty or statement has a material adverse effect on the Trust and,
         within 30 days after written notice thereof shall have been given to
         the Servicer or the Seller by the Owner Trustee, the Indenture Trustee
         or the Security Insurer (or, if an Insurer Default shall have occurred
         and be continuing, a

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<PAGE>

         Noteholder), the circumstances or condition in respect of which such
         representation, warranty or statement was incorrect shall not have
         been eliminated or otherwise cured; or

                           (g)      So long as an Insurer Default shall not have
         occurred and be continuing, the Security Insurer shall not have
         delivered a Servicer Extension Notice pursuant to Section 3.14 (in
         which case the Servicer Termination Event will be deemed to have
         occurred as of the last day of the term of the most recent Servicer
         Extension Notice received); or

                           (h)      So long as an Insurer Default shall not have
         occurred and be continuing, an Insurance Agreement Event of Default
         shall have occurred; or

                           (i)      A claim is made under the Note Policy.

                  SECTION 8.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT. If
a Servicer Termination Event shall occur and be continuing, the Security Insurer
(or, if an Insurer Default shall have occurred and be continuing, either the
Indenture Trustee, the Owner Trustee, or a Note Majority), by notice given in
writing to the Servicer (and to the Indenture Trustee, the Backup Servicer and
the Owner Trustee if given by the Security Insurer or the Noteholders) may
terminate all of the rights and obligations of the Servicer under this
Agreement. On or after (i) the receipt by the Servicer of such written notice,
or (ii) the receipt by the Backup Servicer (or any alternate successor servicer
appointed by the Security Insurer pursuant to Section 8.3(b)) of written notice
from the Security Insurer that the Security Insurer is not extending the
Servicer's term pursuant to Section 3.14, all authority, power, obligations and
responsibilities of the Servicer under this Agreement, whether with respect to
the Notes or the Trust Property or otherwise, shall be terminated and
automatically shall pass to, be vested in and become obligations and
responsibilities of the Backup Servicer (or such other successor Servicer
appointed by the Security Insurer); PROVIDED, HOWEVER, that the successor
Servicer shall have no liability with respect to any obligation which was
required to be performed by the terminated Servicer prior to the date that the
successor Servicer becomes the Servicer or any claim of a third party based on
any alleged action or inaction of the terminated Servicer. The successor
Servicer is authorized and empowered by this Agreement to execute and deliver,
on behalf of the terminated Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the Receivables
and the other Trust Property and related documents to show the Owner Trustee as
lienholder or secured party on the related Lien Certificates, or otherwise. The
terminated Servicer agrees to cooperate with the successor Servicer in effecting
the termination of the responsibilities and rights of the terminated Servicer
under this Agreement, including, without limitation, the transfer to the
successor Servicer for administration by it of all cash amounts that shall at
the time be held by the terminated Servicer for deposit, or have been deposited
by the terminated Servicer, in the Collection Account or thereafter received
with respect to the Receivables and the delivery to the successor Servicer of
all Receivable Files, Monthly Records and Collection Records and a computer tape
in readable form as of the most recent Business Day containing all information
necessary to enable the successor Servicer or a successor Servicer to service
the Receivables and the other Trust Property. If requested by the Security
Insurer (unless

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<PAGE>

an Insurer Default shall have occurred and be continuing), the successor
Servicer shall terminate the Lockbox Agreement and direct the Obligors to make
all payments under the Receivables directly to the successor Servicer (in which
event the successor Servicer shall process such payments in accordance with
Section 3.2(e)), or to a lockbox established by the successor Servicer at the
direction of the Security Insurer (unless an Insurer Default shall have occurred
and be continuing), at the successor Servicer's expense. In addition to any
other amounts that are then payable to the terminated Servicer under this
Agreement, the terminated Servicer shall then be entitled to receive out of
Available Funds reimbursements for any Outstanding Monthly Advances (in
accordance with Section 4.4(c)) made during the period prior to the notice
pursuant to this Section 8.2 which terminates the obligation and rights of the
terminated Servicer under this Agreement. The Owner Trustee, the Indenture
Trustee and the successor Servicer may set off and deduct any amounts owed by
the terminated Servicer from any amounts payable to the terminated Servicer
pursuant to the preceding sentence. The terminated Servicer shall grant the
Owner Trustee, the Indenture Trustee, the successor Servicer and the Security
Insurer reasonable access to the terminated Servicer's premises at the
terminated Servicer's expense.

                  SECTION 8.3.  APPOINTMENT OF SUCCESSOR.

                  (a)      On and after (i) the time the Servicer receives a
notice of termination pursuant to Section 8.2, or (ii) the resignation of the
Servicer pursuant to Section 7.5, or (iii) the receipt by the Backup Servicer
(or any alternate successor servicer appointed by the Security Insurer pursuant
to Section 8.3(b)) of written notice from the Security Insurer that the Security
Insurer is not extending the Servicer's term pursuant to Section 3.14, the
Backup Servicer (unless the Security Insurer shall have exercised its option
pursuant to Section 8.3(b) to appoint an alternate successor Servicer) shall be
the successor in all respects to the Servicer in its capacity as servicer under
this Agreement and the transactions set forth or provided for in this Agreement,
and shall be subject to all the responsibilities, restrictions, duties,
liabilities and termination provisions relating thereto placed on the Servicer
by the terms and provisions of this Agreement. The Owner Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession. If a successor Servicer is acting
as Servicer hereunder, it shall be subject to termination under Section 8.2 upon
the occurrence of any Servicer Termination Event applicable to it as Servicer
and shall serve from term to term as provided in Section 3.14.

                  (b) The Security Insurer may (so long as an Insurer Default
shall not have occurred and be continuing) exercise at any time its right to
appoint as Backup Servicer or as successor to the Servicer a Person other than
the Person serving as Backup Servicer at the time, and (without limiting its
obligations under the Note Policy) shall have no liability to the Owner Trustee,
the Indenture Trustee, AFL, the Seller, the Person then serving as Backup
Servicer, any Noteholders, any Note Owner or any other Person if it does so.
Notwithstanding the above, if the Backup Servicer shall be legally unable or
unwilling to act as Servicer and an Insurer Default shall have occurred and be
continuing, the Backup Servicer, the Indenture Trustee, a Note Majority or the
Owner Trustee may petition a court of competent jurisdiction to appoint any
Eligible Servicer as the successor to the Servicer. Pending appointment pursuant
to the preceding sentence, the Backup Servicer shall act as successor Servicer
unless it is legally unable

                                     - 67 -
<PAGE>

to do so, in which event the outgoing Servicer shall continue to act as Servicer
until a successor has been appointed and accepted such appointment. Subject to
Section 7.5, no provision of this Agreement shall be construed as relieving the
Backup Servicer of its obligation to succeed as successor Servicer upon the
termination of the Servicer pursuant to Section 8.2 or the resignation of the
Servicer pursuant to Section 7.5. If upon the termination of the Servicer
pursuant to Section 8.2 or the resignation of the Servicer pursuant to Section
7.5, the Security Insurer appoints a successor Servicer other than the Backup
Servicer, the Backup Servicer shall not be relieved of its duties as Backup
Servicer hereunder.

                  (c)      Any successor Servicer shall be entitled to such
compensation (whether payable out of the Collection Account or otherwise) as the
Servicer would have been entitled to under the Agreement if the Servicer had not
resigned or been terminated hereunder, except that the Basic Servicing Fee Rate
for such successor Servicer shall be calculated on a pro rata basis at the rate
of 1.00% per annum for all loans originated under AFL's "Premier" program and
1.50% per annum for all loans originated under AFL's "Classic" program. If any
successor Servicer is appointed as a result of the Backup Servicer's refusal (in
contravention of the terms of this Agreement) to act as Servicer although it is
legally able to do so, the Security Insurer and such successor Servicer may
agree on reasonable additional compensation to be paid to such successor
Servicer by the Backup Servicer, which additional compensation shall be paid by
the Backup Servicer in its individual capacity and solely out of its own funds.
If any successor Servicer is appointed for any reason other than the Backup
Servicer's refusal to act as Servicer although legally able to do so, the
Security Insurer and such successor Servicer may agree on additional
compensation to be paid to such successor Servicer, which additional
compensation shall be payable as provided in the Spread Account Agreement. If
the Backup Servicer is the successor Servicer, the Backup Servicer shall be
entitled to reimbursement, pursuant to Section 4.6(ii), of reasonable transition
expenses, not in excess of $100,000, incurred in acting as successor Servicer.
In addition, any successor Servicer shall be entitled to reimbursement, as
provided in the Spread Account Agreement, of reasonable transition expenses
incurred in acting as successor Servicer.

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

                  SECTION 8.5. WAIVER OF PAST DEFAULTS. The Security Insurer
(or, if an Insurer Default shall have occurred and be continuing, a Note
Majority) may, on behalf of all Holders of Notes, waive any default by the
Servicer in the performance of its obligations hereunder and its consequences.
Upon any such waiver of a past default, such default shall cease to exist, and
any Servicer Termination Event arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon. Nothing in
this Section 8.5 shall preclude the Security Insurer (or, if an Insurer Default
shall have occurred and be continuing, a Note Majority) from waiving any default
for a period of time or subject to any contingency or from waiving some but not
all of the consequences of such default.

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<PAGE>

                                   ARTICLE IX

                                   TERMINATION

                  SECTION 9.1. OPTIONAL PURCHASE OF ALL RECEIVABLES; LIQUIDATION
OF TRUST ESTATE.

                  (a)      On each Determination Date as of which the Aggregate
Principal Balance is less than 10% of the Original Pool Balance, the Servicer
and the Seller each shall have the option to purchase the corpus of the Trust
(with the consent of the Security Insurer, if a claim has previously been made
under the Note Policy or if such purchase would result in a claim on the Note
Policy or if such purchase would result in any amount owing to the Security
Insurer remaining unpaid); PROVIDED, HOWEVER, that the amount to be paid for
such purchase (as set forth in the following sentence) shall be sufficient to
pay the full amount of principal, premium, if any, and interest then due and
payable on the Notes. To exercise such option, the Servicer or the Seller, as
the case may be, shall pay the aggregate Purchase Amounts for the Receivables,
plus the appraised value of any other property (including the right to receive
any future recoveries) held as part of the Trust, such appraisal to be conducted
by an appraiser mutually agreed upon by the Servicer or the Seller, as the case
may be, and the Security Insurer (or the Indenture Trustee, if an Insurer
Default shall have accrued and be continuing), and shall succeed to all
interests in and to the Trust Property. The fees and expenses related to such
appraisal shall be paid by the party exercising the option to purchase. The
party exercising such option to repurchase shall deposit the aggregate Purchase
Amounts for the Receivables and the amount of the appraised value of any other
property held as part of the Trust into the Collection Account, and the
Indenture Trustee shall distribute the amounts so deposited in accordance with
Section 4.6.

                  (b)      Upon any sale of the assets of the Trust pursuant to
Section 8.2 of the Trust Agreement, the Owner Trustee shall instruct the
Indenture Trustee in writing to deposit the proceeds from such sale after all
payments and reserves therefrom have been made (the "Insolvency Proceeds") in
the Collection Account. On the Distribution Date on which the Insolvency
Proceeds are deposited in the Collection Account (or, if such proceeds are not
so deposited on a Distribution Date, on the Distribution Date immediately
following such deposit), the Owner Trustee shall instruct the Indenture Trustee
in writing to make the following deposits (after the application on such
Distribution Date of the Available Funds) from the Insolvency Proceeds:

                           (i)      to the Note Distribution Account, any
         portion of the Noteholders' Interest Distributable Amount not otherwise
         deposited into the Note Distribution Account on such Distribution Date;

                           (ii)     to the Note Distribution Account, the Class
         A-1 Prepayment Premium, Class A-2 Prepayment Premium and Class A-3
         Prepayment Premium (only to

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<PAGE>

         the extent of the amount of Liquidated Damages (as defined in the
         Purchase Agreement) received by the Trust from the Seller); and

                           (iii)    to the Note Distribution Account, the
         outstanding principal balance of the Notes (after giving effect to the
         reduction in the outstanding principal balance of the Notes to result
         from the deposits otherwise made in the Note Distribution Account on
         such Distribution Date).

Any Insolvency Proceeds remaining after the deposits described above shall be
paid, first, to the Security Insurer, to the extent of any amounts owing to the
Security Insurer under the Insurance Agreement and not paid, whether or not AFL
is obligated to pay such amounts, and second to the Collateral Agent for deposit
in the Spread Account.

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

                                    ARTICLE X

                            MISCELLANEOUS PROVISIONS

                  SECTION 10.1.  AMENDMENT.

                  (a)      This Agreement may be amended by the Seller, the
Servicer and the Trust, with the prior written consent of the Indenture Trustee
and the Security Insurer (so long as an Insurer Default shall not have occurred
and be continuing) but without the consent of any of the Noteholders, (i) to
cure any ambiguity, (ii) to correct or supplement any provisions in this
Agreement or (iii) for the purpose of adding any provision to or changing in any
manner or eliminating any provision of this Agreement or of modifying in any
manner the rights of the Noteholders; PROVIDED, HOWEVER, that such action shall
not, as evidenced by an Opinion of Counsel, adversely affect in any material
respect the interests of the Noteholders.

                  (b)      This Agreement may also be amended from time to time
by the Seller, the Servicer and the Trust with the prior written consent of the
Indenture Trustee and the Security Insurer (so long as an Insurer Default shall
not have occurred and be continuing) and with the consent of a Note Majority
(which consent of any Holder of a Note given pursuant to this Section or
pursuant to any other provision of this Agreement shall be conclusive and
binding on such Holder and on all future Holders of such Note and of any Note
issued upon the transfer thereof or in exchange thereof or in lieu thereof
whether or not notation of such consent is made upon the Note) for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, or of modifying in any manner the rights of the
Holders of Notes; PROVIDED, HOWEVER, that, subject to the express rights of the
Security Insurer under the Related Documents, including its rights to agree to
certain modifications of the Receivables pursuant to Section 3.2 and its rights
to cause the Indenture Collateral Agent to liquidate the Collateral under the
circumstances and subject to the provisions of Section 5.04 of the Indenture,

                                     - 70 -
<PAGE>

no such amendment shall (a) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on Receivables or
distributions required to be made on any Note or the Class A-1 Interest Rate,
Class A-2 Interest Rate or Class A-3 Interest Rate, (b) amend any provisions of
Section 4.6 in such a manner as to affect the priority of payment of interest,
principal or premium to Noteholders, or (c) reduce the aforesaid percentage
required to consent to any such amendment or any waiver hereunder, without the
consent of the Holders of all Notes then outstanding.

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

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

                  (e)      It shall not be necessary for the consent of
Noteholders pursuant to Section 10.1(b) to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and any
other consents of Noteholders provided for in this Agreement) and of evidencing
the authorization of the execution thereof by Noteholders shall be subject to
such reasonable requirements as the Indenture Trustee may prescribe, including
the establishment of record dates.

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

                  SECTION 10.2.  PROTECTION OF TITLE TO TRUST PROPERTY.

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

                  (b)      Neither the Seller, the Servicer nor the Trust shall
change its name, identity or corporate structure in any manner that would, could
or might make any financing statement or continuation statement filed by the
Seller in accordance with paragraph (a) above seriously misleading within the
meaning of Section 9-402(7) of the UCC, unless it shall have

                                     - 71 -
<PAGE>

given the Owner Trustee, the Indenture Trustee and the Security Insurer (so long
as an Insurer Default shall not have occurred and be continuing) at least 60
days' prior written notice thereof, and shall promptly file appropriate
amendments to all previously filed financing statements and continuation
statements.

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

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

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

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

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

                  (h)      The Servicer shall furnish to the Owner Trustee, the
Indenture Trustee, the Backup Servicer and the Security Insurer at any time upon
request a list of all Receivables then held as part of the Trust, together with
a reconciliation of such list to the Schedule of Receivables and to each of the
Servicer's Certificates furnished before such request indicating removal of

                                     - 72 -
<PAGE>

Receivables from the Trust. Upon request, the Servicer shall furnish a copy of
any list to the Seller. The Owner Trustee shall hold any such list and Schedule
of Receivables for examination by interested parties during normal business
hours at the Corporate Trust Office upon reasonable notice by such Persons of
their desire to conduct an examination.

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

                  (j)      The Servicer shall deliver to the Owner Trustee, the
Indenture Trustee and the Security Insurer, within 90 days after the beginning
of each calendar year beginning with the first calendar year beginning more than
three months after the Closing Date, an Opinion of Counsel, either (a) stating
that, in the opinion of such counsel, all financing statements and continuation
statements have been executed and filed that are necessary fully to preserve and
protect the interest of the Trust and the Indenture Collateral Agent in the
Receivables, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (b) stating that, in the
opinion of such counsel, no action shall be necessary to preserve and protect
such interest.

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

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

                  SECTION 10.5. ASSIGNMENT. Notwithstanding anything to the
contrary contained in this Agreement, except as provided in Section 7.2 or
Section 8.2 (and as provided in the provisions of the Agreement concerning the
resignation of the Servicer and the Backup Servicer), this Agreement may not be
assigned by the Seller or the Servicer without the prior written consent of the
Owner Trustee, the Indenture Trustee and the Security Insurer (or, if an Insurer
Default shall have occurred and be continuing, the Owner Trustee, the Indenture
Trustee and a Note Majority).

                                     - 73 -
<PAGE>

                  SECTION 10.6. THIRD-PARTY BENEFICIARIES. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. The Security Insurer and its
successors and assigns shall be a third-party beneficiary to the provisions of
this Agreement, and shall be entitled to rely upon and directly to enforce such
provisions of this Agreement so long as no Insurer Default shall have occurred
and be continuing. Nothing in this Agreement, express or implied, shall give to
any Person, other than the parties hereto and their successors hereunder, any
benefit or any legal or equitable right, remedy or claim under this Agreement.
Except as expressly stated otherwise herein or in the Related Documents, any
right of the Security Insurer to direct, appoint, consent to, approve of, or
take any action under this Agreement, shall be a right exercised by the Security
Insurer in its sole and absolute discretion.

                  SECTION 10.7. DISCLAIMER BY SECURITY INSURER. The Security
Insurer may disclaim any of its rights and powers under this Agreement (but not
its duties and obligations under the Note Policy) upon delivery of a written
notice to the Owner Trustee and the Indenture Trustee.

                  SECTION 10.8. COUNTERPARTS. For the purpose of facilitating
its execution and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and all of which counterparts shall constitute but
one and the same instrument.

                  SECTION 10.9. INTENTION OF PARTIES. The execution and delivery
of this Agreement shall constitute an acknowledgment by the Seller, that it is
intended that the assignment and transfer herein contemplated constitute a sale
and assignment outright, and not for security, of the Receivables and the other
Trust Property, conveying good title thereto free and clear of any Liens, from
the Seller to the Trust, and that the Receivables and the other Trust Property
shall not be a part of the Seller's estate in the event of the insolvency,
receivership, conservatorship or the occurrence of another similar event, of, or
with respect to, the Seller. In the event that such conveyance is determined to
be made as security for a loan made by the Trust to the Seller, the Seller
intends that it shall have granted to the Owner Trustee a first priority
security interest in all of the Seller's right, title and interest in and to the
Trust Property conveyed to the Trust pursuant to Sections 2.1 and 2.4 of this
Agreement, and that this Agreement shall constitute a security agreement under
applicable law.

                  SECTION 10.10. NOTICES. All demands, notices and
communications under this Agreement shall be in writing, personally delivered,
sent by facsimile or mailed by certified mail-return receipt requested, and
shall be deemed to have been duly given upon receipt (a) in the case of AFL, the
Seller or the Servicer, at the following address: Arcadia Receivables Finance
Corp., 7825 Washington Avenue South, Suite 410, Minneapolis, Minnesota
55439-2435, with copies to: Arcadia Financial Ltd., 7825 Washington Avenue
South, Minneapolis, Minnesota 55439- 2435, Attention: John A. Witham, (b) in the
case of the Owner Trustee, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890, Attention: Corporate Trust Administration, (c) in
the case of the Indenture Trustee and, for so long as the

                                     - 74 -
<PAGE>

Indenture Trustee is the Backup Servicer or the Collateral Agent, at MAC
N9311-161, Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0070,
Attention: Corporate Trust Services--Asset Backed Administration, (d) in the
case of each Rating Agency, 99 Church Street, New York, New York 10007 (for
Moody's) and 55 Water Street, New York, New York 10041 (for Standard & Poor's),
Attention: Asset-Backed Surveillance, and (e) in the case of the Security
Insurer, Financial Security Assurance Inc., 350 Park Avenue, New York, New York
10022, Attention: Surveillance Department, Telex No.: (212) 688-3103,
Confirmation: (212) 826-0100, Telecopy Nos.: (212) 339-3518, (212) 339-3529 (in
each case in which notice or other communication to Financial Security refers to
an Event of Default, a claim on the Note Policy or with respect to which failure
on the part of Financial Security to respond shall be deemed to constitute
consent or acceptance, then a copy of such notice or other communication should
also be sent to the attention of the General Counsel and the Head-Financial
Guaranty Group "URGENT MATERIAL ENCLOSED"), or at such other address as shall be
designated by any such party in a written notice to the other parties. Any
notice required or permitted to be mailed to a Noteholder shall be given by
first class mail, postage prepaid, at the address of such Holder as shown in the
Note Register, and any notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given, whether or not
the Noteholder receives such notice.

                  SECTION 10.11. LIMITATION OF LIABILITY. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is executed
and delivered by Wilmington Trust Company, not individually or personally but
solely as Owner Trustee of the Trust under the Trust Agreement, in the exercise
of the powers and authority conferred and vested in it, (b) each of the
representations, undertakings and agreements herein made on the part of the
Trust is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
for binding only the Trust, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company, individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties to this Agreement and
by any person claiming by, through or under them and (d) under no circumstances
shall Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Trust or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by the
Trust under this Agreement or any related documents.

                            [SIGNATURE PAGE FOLLOWS]

                                     - 75 -
<PAGE>

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

                 ISSUER:
                 ARCADIA AUTOMOBILE RECEIVABLES
                     TRUST, 1999-C

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

                 By             /S/ ANITA E. DALLAGO
                     --------------------------------------------------
                     Name:      Anita E. Dallago
                     Title:     Administrative Account Manager

                 SELLER:
                 ARCADIA RECEIVABLES FINANCE CORP.

                 By             /S/ JOHN A. WITHAM
                     --------------------------------------------------
                     Name:      John A. Witham
                     Title:     Executive Vice President and Chief
                                Financial Officer

                 ARCADIA FINANCIAL LTD.
                 In its individual capacity and as Servicer

                 By             /S/ JOHN A. WITHAM
                     --------------------------------------------------
                     Name:      John A. Witham
                     Title:     Senior Vice President and Chief Financial
                                Officer

                 BACKUP SERVICER:

                 NORWEST BANK MINNESOTA,
                 NATIONAL ASSOCIATION

                 By             /S/ EILEEN R. O'CONNOR
                     --------------------------------------------------
                     Name:      Eileen R. O'Connor
                     Title:     Assistant Vice President

Acknowledged and Accepted:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity but as
Indenture Trustee

By       /S/ EILEEN R. O'CONNOR
   ------------------------------------------
Name:   Eileen R. O'Connor
Title:  Assistant Vice President

<PAGE>

                                   SCHEDULE A

                REPRESENTATIONS AND WARRANTIES OF SELLER AND AFL

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

                  2.       NO FRAUD OR MISREPRESENTATION. Each Receivable was
originated by a Dealer and was sold by the Dealer to AFL without any fraud or
misrepresentation on the part of such Dealer in either case.

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

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

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

                                      S-A-1
<PAGE>

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

                  7.       OBLIGOR BANKRUPTCY. At the Initial Cutoff Date or
each Subsequent Cutoff Date, as applicable, no Obligor had been identified on
the records of AFL as being the subject of a current bankruptcy proceeding.

                  8.       SCHEDULE OF RECEIVABLES. The information set forth in
the Schedule of Receivables has been produced from the Electronic Ledger and was
true and correct in all material respects as of the close of business on the
Initial Cutoff Date or each Subsequent Cutoff Date, as applicable.

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

                  10.      COMPUTER TAPE. The Computer Tape made available by
the Seller to the Owner Trustee on the Closing Date or on each Subsequent
Transfer Date was complete and accurate as of the Initial Cutoff Date or
Subsequent Cutoff Date, as applicable, and includes a description of the same
Receivables that are described in the Schedule of Receivables.

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

                  12.      CHATTEL PAPER. The Receivables constitute chattel
paper within the meaning of the UCC as in effect in the States of Minnesota and
New York.

                  13.      ONE ORIGINAL. There is only one original executed
copy of each Receivable.

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

                                      S-A-2
<PAGE>

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

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

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

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

                                      S-A-3
<PAGE>

for taxes, work, labor or materials affecting a Financed Vehicle which are or
may be Liens prior or equal to the lien of the related Receivable.

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

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

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

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

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

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

                  25.      PAST DUE. At Initial Cutoff Date or any Subsequent
Cutoff Date, as applicable, no Receivable was more than 30 days past due.

                                      S-A-4
<PAGE>

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

                  27.      FINAL SCHEDULED MATURITY DATE. No Receivable has a
final scheduled maturity later than December 31, 2006.

                  28.      CERTAIN CHARACTERISTICS. (A) Each Initial Receivable
had a remaining maturity, as of the Initial Cutoff Date, of at least 3 months
but not more than 84 months; (B) each Initial Receivable had an original
maturity of at least 12 months but not more than 84 months; (C) each Initial
Receivable had an original principal balance of at least $3,999.00 and not more
than $62,999.96; (D) each Initial Receivable had a remaining Principal Balance
as of the Initial Cutoff Date of at least $572.71 and not more than $62,999.96;
(E) each Initial Receivable has an Annual Percentage Rate of at least 8.00% and
not more than 24.90%; (F) no Initial Receivable was more than 30 days past due
as of the Initial Cutoff Date; (G) no funds have been advanced by the Seller,
the Servicer, any Dealer, or anyone acting on behalf of any of them in order to
cause any Receivable to qualify under clause (F) above; (H) no Initial
Receivable has a final scheduled payment date on or before December 1, 1999; (I)
the Principal Balance of each Receivable set forth in Schedule of Receivables is
true and accurate in all material respects as of the Initial Cutoff Date; (J)
14.79% of the Initial Receivables, by principal balance as of the Initial Cutoff
Date, was attributable to loans for the purchase of new Financed Vehicles and
85.21% of the Initial Receivables was attributable to loans for the purchase of
used Financed Vehicles; (K) not more than 4.00% of the Principal Balance of the
Initial Receivables as of the Initial Cutoff Date had an Annual Percentage Rate
in excess of 21.00%; (L) not more than 0.25% of such Receivables represented
loans in excess of $50,000.00; (M) not more than 3.00% of the Aggregate
Principal Balance of such Receivables represented loans with original terms
greater than 72 months; and (N) not more than 0.25% of the Aggregate Principal
Balance of such Receivables represented loans secured by Financed Vehicles that
previously secured a loan originated by AFL with an obligor other than the
current Obligor.

                                      S-A-5
<PAGE>

                                   SCHEDULE B

                        SERVICING POLICIES AND PROCEDURES

                NOTE: APPLICABLE TIME PERIODS WILL VARY BY STATE.

I.       PAST DUE PAYMENT COLLECTIONS

         A.       Past due payment notices are generated and sent on the 9th and
                  15th day of delinquency.

         B.       The collection officer will make at least one phone call by
                  day 10.

         C.       The collection officer will write a personalized collection
                  letter by day 15 and will have made at least two collection
                  phone calls.

         D.       The collection officer will make at least two (2) more phone
                  calls and write at least one (1) more letter between days 15
                  and 30.

         E.       The collection officer will send a final demand letter on or
                  about 31 days past due. The letter will allow 10 days to bring
                  the account current.

         F.       The collection officer will recommend either repossession, or
                  some form of reasonable forbearance (e.g., one extension in
                  exchange for a partial payment for cooperative debtors).

                  All phone calls and correspondence will require a brief
handwritten comment in the credit file. The date of each comment and the
officer's initials will be documented.

II.      PAYMENT EXTENSIONS

                  Extensions of monthly payments must be granted only after
careful consideration and analysis. The extension is not to be used to mask
delinquencies, but rather assist in the collection and correction of verifiable
and legitimate customer problems. All extensions or modifications require the
prior approval of the Branch Manager. In the absence of the Branch Manager, the
Executive Vice President's or the President's approval is required.

                  Possible qualifications for extensions to cooperative and
trustworthy customers include:

         (a)      Medical problems - verifiable;

         (b)      Temporary work loss - verifiable;

         (c)      Pending insurance claim - verifiable; or

                                      S-B-1
<PAGE>

         (d)      Bankruptcy trustee cram down.

III.     REPOSSESSIONS

                  Repossessions of the collateral is only to be pursued after
exhausting all other collection efforts. Once the decision is made to attempt
repossession, the following process is to be utilized:

         (a)      Decision on repossession.

         (b)      If the customer is cooperative, attempt repossession by
                  Servicer personnel. If uncooperative or unable to locate,
                  utilize a third party collection agency.

         (c)      Once secured, complete an inventory of personal belongings and
                  brief condition report on the vehicle. Return the property to
                  the customer and obtain a signed statement of inventory
                  receipt.

         (d)      If the repossession is involuntary, notify the police
                  department in the city where the repossession occurred.

         (e)      Notify the originating dealership of repossession as soon as
                  possible and request a refund of all rebateable dealer adds.

         (f)      Send written notification to the customer regarding a 10-day
                  notice to redeem the loan.

         (g)      Decide on proper method of liquidation and plan for sale after
                  the 10-day redemption period has expired.

         (h)      If consignment, set 21-day maximum term with the dealership,
                  after which time, if unsold, the vehicle is returned to the
                  Servicer.

                  If wholesale, contact the appropriate auction company to make
                  arrangements for immediate sale.

                  If private sale, place advertisements in the proper media and
                  attempt to liquidate within one week.

         (i)      After the collateral is liquidated, send the debtor a letter
                  stating the amount of deficiency. Continued collection efforts
                  will take the form of voluntary payments or involuntary
                  payments via judgment, garnishment, and levy.

IV.      CHARGE OFFS

                                      S-B-2
<PAGE>

                  It is the responsibility of the collection officer to
diligently pursue any and all deficiencies which result from problem accounts.
All avenues of potential collection will be pursued, ranging from cash
settlements to amortized deficiency notes to judgment and garnishment.

                  A complete list of all charge offs will be maintained. The
list will be categorized into "active" and "dead" accounts. A brief action plan
will be shown for each active account. Accounts will only be designated as
"dead" with the recommendation of the collection officer and approval of the
Executive Vice President. The "dead" designation will only be granted for those
accounts which hold no potential for recovery (e.g., discharged Chapter 7).

                  Active charge off action plans will be presented at least
monthly to the Executive Vice President. Decisions regarding pursuit of legal
action and incurring potential legal fees will need prior approval by the
Executive Vice President.

V.       DEFICIENCY COLLECTIONS

         (a)      Establish the exact amount of the deficiency, using the
                  repossession worksheet. This includes all fees and per diem
                  interest.

         (b) Attempt verbal and/or written negotiations with the debtor to
settle the deficiency.

         (c)      Send a certified letter to the debtor and cosigner(s) stating
                  that we need $X by ___________, 19__ (7-10 days), or we will
                  begin legal action. If no reasonable response is received move
                  to (d).

         (d)      Complete a General Claim Form. Send the form to [applicable
                  local court].

         (e)      We should receive notification of the court's decision within
                  one week. If we receive notice of judgment, it is possible
                  that the debtor will pay the court and the court will then pay
                  the Servicer. As this usually does not happen, proceed to
                  exercise on the judgment as follows:

                  (1)      File both the Transcript of Judgment and the
                           Affidavit of Identification of Judgment Debtor with
                           [appropriate office].

                  (2)      Order a Writ of Execution from [appropriate office].

                  (3)      "Service" of the Writ of Execution is handled by the
                           Sheriff or an Attorney.

                                      S-B-3

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