CONSUMER PORTFOLIO SERVICES INC, SC 13D, 1998-11-25

CONSUMER PORTFOLIO SERVICES INC
SC 13D, 1998-11-25
ASSET-BACKED SECURITIES

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 13D

UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. _____)*

CONSUMER PORTFOLIO SERVICES, INC.
- -------------------------------------------------------------------------------
(Name of Issuer)

Common Stock, no par value per share
- -------------------------------------------------------------------------------
(Title of Class of Securities)

210502 100
-------------------------------------------------------
(CUSIP Number)

Arthur E. Levine with a copy to:
President James W. Loss, Esq.
Levine Leichtman Capital Partners, Inc. Riordan & McKinzie
335 North Maple Drive, Suite 240 695 Town Center Drive, Suite 1500
Beverly Hills, California 90025 Costa Mesa, California 92626
(310) 275-5335 (714) 433-2626
- -------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)

November 17, 1998
-------------------------------------------------------
(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Sections 240.13d-1(e), 240.13-d1(f) or
240.13d-1(g), check the following box / /.

NOTE: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Section
240.13d-7(b) for other parties to whom copies are to be sent.

*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section
of the Act but shall be subject to all other provisions of the Act (however,
see the Notes).

Page 1 of 14
<PAGE>

SCHEDULE 13D

- -------------------------- --------------------
CUSIP NO. 210502 100 PAGE 2 OF 14 PAGES
---------- --- ----
- -------------------------- --------------------
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Levine Leichtman Capital Partners II, L.P.
- ----------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) / /
(b) / /
- ----------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
00 (SEE ITEM 3)
- ----------------------------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) OR 2(e) / /
- ----------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
- ----------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
NUMBER OF ----------------------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 3,450,000 (See Item 5)
OWNED BY ----------------------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
PERSON ----------------------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
3,450,000 (See Item 5)
- ----------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,450,000 (See Item 5)
- ----------------------------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) / /
- ----------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.1% (See Item 5)
- ----------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
PN
- ----------------------------------------------------------------------------------------------------

<PAGE>

SCHEDULE 13D
- -------------------------- --------------------
CUSIP NO. 210502 100 PAGE 3 OF 14 PAGES
---------- --- ----
- -------------------------- --------------------
- ----------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
LLCP California Equity Partners II, L.P.
- ----------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) / /
(b) / /
- ----------------------------------------------------------------------------------------------------
3 SEC USE ONLY

- ----------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
00 (See Item 3)
- ----------------------------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) / /

- ----------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
- ----------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES ----------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 3,450,000 (See Item 5)
EACH ----------------------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON -0-
WITH ----------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
3,450,000 (See Item 5)
- ----------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,450,000 (See Item 5)
- ----------------------------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) / /

- ----------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.1% (See Item 5)
- ----------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
PN
- ----------------------------------------------------------------------------------------------------

<PAGE>

SCHEDULE 13D
- -------------------------- --------------------
CUSIP NO. 210502 100 PAGE 4 OF 14 PAGES
---------- --- ----
- -------------------------- --------------------
- ----------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Levine Leichtman Capital Partners, Inc.
- ----------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) / /
(b) / /
- ----------------------------------------------------------------------------------------------------
3 SEC USE ONLY

- ----------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.1% (See Item 5)
- ----------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
CO
- ----------------------------------------------------------------------------------------------------

<PAGE>

SCHEDULE 13D
- -------------------------- --------------------
CUSIP NO. 210502 100 PAGE 5 OF 14 PAGES
---------- --- ----
- -------------------------- --------------------
- ----------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Arthur E. Levine
- ----------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) / /
(b) / /
- ----------------------------------------------------------------------------------------------------
3 SEC USE ONLY

- ----------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
- ----------------------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
----------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 3,450,000 (See Item 5)
----------------------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
----------------------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH 3,450,000 (See Item 5)
- ----------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,450,000 (See Item 5)
- ----------------------------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) / /

- ----------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.1% (See Item 5)
- ----------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
IN
- ----------------------------------------------------------------------------------------------------
<PAGE>

SCHEDULE 13D

- -------------------------- --------------------
CUSIP NO. 210502 100 PAGE 6 OF 14 PAGES
---------- --- ----
- -------------------------- --------------------
- ----------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Lauren B. Leichtman
- ----------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) / /
(b) / /
- ----------------------------------------------------------------------------------------------------
3 SEC USE ONLY

- ----------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
- ----------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES ----------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 3,450,000 (See Item 5)
EACH ----------------------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON -0-
WITH ----------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
3,450,000 (See Item 5)
- ----------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,450,000 (See Item 5)
- ----------------------------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) / /

- ----------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.1% (See Item 5)
- ----------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
IN
- ----------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

ITEM 1 SECURITY AND ISSUER.

(a) NAME OF ISSUER:

Consumer Portfolio Services, Inc., a California corporation (the
"Issuer").

(b) ADDRESS OF PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER:

16355 Laguna Canyon Road, Irvine, CA 92618.

Common Stock, no par value per share ("Common Stock").

ITEM 2 IDENTITY AND BACKGROUND.

This Schedule 13D is being filed pursuant to a Joint Reporting
Agreement dated November 19, 1998, a copy of which is attached as EXHIBIT 1
hereto, among and on behalf of Levine Leichtman Capital Partners II, L.P.,
a California limited partnership (the "Partnership"), LLCP California
Equity Partners II, L.P., a California limited partnership (the "General
Partner"), Levine Leichtman Capital Partners, Inc., a California
corporation ("Capital Corp."), Arthur E. Levine ("Mr. Levine") and Lauren
B. Leichtman ("Ms. Leichtman" and, together with the Partnership, the
General Partner, Capital Corp. and Mr. Levine, the "Reporting Persons").

(a) PARTNERSHIP.

The Partnership is a limited partnership formed under the laws of the
State of California. The address of the principal business or principal
office of the Partnership is 335 North Maple Drive, Suite 240, Beverly
Hills, California 90210. The principal business of the Partnership is to
seek out opportunities to invest in the securities of middle market
companies and to acquire, hold, manage and dispose of such securities in
connection with growth financings, restructurings, recapitalizations,
mergers, acquisitions and buyouts.

(b) GENERAL PARTNER.

The General Partner is the sole general partner of the Partnership.
The address of the principal business or principal office of the General
Partner is 335 North Maple Drive, Suite 240, Beverly Hills, California
90210. The principal business of the General Partner is to act as the
general partner of the Partnership and to organize and manage the
investments made by the Partnership.

Page 7 of 14
<PAGE>

Capital Corp. is the sole general partner of the General Partner. The
address of the principal business or principal office of Capital Corp. is
335 North Maple Drive, Suite 240, Beverly Hills, California 90210. The
principal business of Capital Corp. is to act as the general partner of the
General Partner and of LLCP California Equity Partners, L.P., a California
limited partnership, the sole general partner of Levine Leichtman Capital
Partners, L.P., a California limited partnership.

(d) MR. LEVINE.

Mr. Levine is a director, the President and a shareholder of Capital
Corp. The business address of Mr. Levine is 335 North Maple Drive, Suite
240, Beverly Hills, California 90210. The present principal occupation or
employment of Mr. Levine is to serve as a director and the President of
Capital Corp. Mr. Levine is a citizen of the United States of America.
Mr. Levine, together with Ms. Leichtman, are the sole directors, executive
officers and shareholders of Capital Corp.

(e) MS. LEICHTMAN.

Lauren B. Leichtman is a director, the Chief Executive Officer,
Treasurer and Secretary and a shareholder of Capital Corp. The business
address of Ms. Leichtman is 335 North Maple Drive, Suite 240, Beverly
Hills, California 90210. The present principal occupation or employment
of Ms. Leichtman is to serve as a director and the Chief Executive Officer,
Treasurer and Secretary of Capital Corp. Ms. Leichtman is a citizen of the
United States of America. Ms. Leichtman, together with Mr. Levine, are the
sole directors, executive officers and shareholders of Capital Corp.

During the last five years, no Reporting Person has been convicted in
a criminal proceeding (excluding traffic violations or similar
misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to
such laws.

ITEM 3 SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

Pursuant to a Bridge Loan Agreement dated as of November 2, 1998 (the
"Bridge Loan Agreement"), between the Issuer and the Purchaser, the Issuer
issued and sold to the Partnership a Senior Bridge Note in the aggregate
principal amount of $2,500,000 (the "Bridge Note") and a warrant to
purchase 345,000 shares of Common Stock (the "Bridge Warrant" and, together
with the Bridge Note, the "Bridge Securities"). The Bridge

Page 8 of 14
<PAGE>

Securities were acquired by the Partnership for an aggregate purchase
price of $2,500,000. On November 10, 1998, the Issuer repaid the Bridge
Note in full.

Pursuant to a Securities Purchase Agreement dated as of November 17,
1998 (the "Securities Purchase Agreement"), between the Issuer and the
Purchaser, a copy of which is attached as EXHIBIT 2 hereto, the Issuer
issued and sold to the Partnership a Senior Subordinated Primary Note in
the aggregate principal amount of $25,000,000 (the "Primary Note") and a
warrant to purchase 3,105,000 shares of Common Stock. In lieu of issuing a
warrant to purchase only 3,105,000 shares of Common Stock, the Issuer
issued a single primary warrant to purchase 3,450,000 shares of Common
Stock (the "Primary Warrant" and, together with the Primary Note, the
"Primary Securities") to evidence (i) the warrant to purchase 3,105,000
shares of Common Stock and (ii) the issuance of 345,000 shares of Common
Stock purchasable upon exercise of the Bridge Warrant which was surrendered
to the Issuer for cancellation at the closing of the transactions
contemplated by the Securities Purchase Agreement. The Primary Securities
were acquired by the Partnership for an aggregate purchase price of
$25,000,000. The Primary Note and the Primary Warrant are attached as
EXHIBIT 3 and EXHIBIT 4 hereto, respectively.

The source of funds for the purchase of the Bridge Securities and the
Primary Securities was capital contributions made by the partners of the
Partnership in the aggregate amount of $25,000,000 in response to a Call to
Purchase Portfolio Securities dated October 5, 1998.

ITEM 4 PURPOSE OF TRANSACTION.

The Partnership acquired the Bridge Securities pursuant to the Bridge
Loan Agreement and the Primary Securities pursuant to the Securities
Purchase Agreement for investment purposes.

In connection with the acquisition by the Partnership of the Primary
Securities, pursuant to the terms of an Investor Rights Agreement dated as
of November 17, 1998 (the "Investor Rights Agreement"), among the Issuer,
Charles E. Bradley, Sr., Charles E. Bradley, Jr., Jeffrey Fritz and the
Partnership, a copy of which is attached as EXHIBIT 5 hereto, the
Partnership acquired certain management and other rights from the Issuer,
including, without limitation, the right to cause the Board of Directors of
the Issuer to cause Mr. Levine (or another representative of the
Partnership) to be elected or appointed as a member of the Board of
Directors of the Issuer. Effective upon the consummation of the
acquisition by the Partnership of the Primary Securities, the Board of
Directors of the Issuer was expanded from six to seven members and Mr.
Levine was appointed as a member of the Board of Directors (and the
Compensation Committee thereof) of the Issuer.

Page 9 of 14
<PAGE>

While the Partnership did not acquire the Primary Securities for the
purpose of changing or influencing the control of the Issuer, such
acquisition, after giving effect to the management and other rights granted
to the Partnership under the Investor Rights Agreement, may have the effect
of changing or influencing the control of the Issuer within the meaning of
Rule 13d-3(d)(1)(i).

Other than as described above, none of the Reporting Persons presently
has any plans or proposals which relate to or would result in any of the
actions described in subparagraphs (a) through (j) of Item 4 of Schedule
13D.

ITEM 5 INTEREST IN SECURITIES OF THE ISSUER.

(a) AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON AND PERCENT OF
CLASS:

Each Reporting Person is deemed to be the beneficial owner (within the
meaning of Rule 13d-3(a) of the Securities Exchange Act of 1934, as
amended) of 3,450,000 shares of Common Stock (the total number of shares
issuable upon exercise of the Primary Warrant), which constitutes 18.1% of
such class (which percentage is based upon a total of 15,658,501 shares of
Common Stock outstanding as of November 17, 1998, and was calculated
pursuant to Rule 13d-3(d)(1)(i)).

Pursuant to Section 2.5 of the Primary Warrant, the Primary Warrant
may be exercised at any time during the Exercise Period (as defined
therein) with respect to all or any portion of the total number of warrant
shares purchasable thereunder (the "Base Warrant Shares") that equals or is
less than 19.9% of the number of shares of Common Stock issued and
outstanding as of November 17, 1998. The Primary Warrant may not be
exercised with respect to any portion of the total number of warrant shares
in excess of the Base Warrant Shares (the "Excess Warrant Shares") unless
and until the Issuer obtains the approval of the shareholders of the Issuer
to the issuance of the Excess Warrant Shares upon exercise of the Primary
Warrant. If the Issuer fails to obtain such shareholder approval, the
Partnership will not be permitted to exercise the Primary Warrant with
respect to any of the Excess Warrant Shares.

Notwithstanding the foregoing, the Reporting Persons have included
the Excess Warrant Shares in the total number of shares of Common Stock
of which they are deemed to be the beneficial owners because while the
Partnership did not acquire the Primary Securities for the purpose of
changing or influencing the control of the Issuer, such acquisition,
after giving effect to the management and other rights granted to the
Partnership under the Investor Rights Agreement, may have the effect of
changing or influencing the control of the Issuer within the meaning of
Rule 13d-3(d)(1)(i).

Page 10 of 14
<PAGE>

(b) VOTING AND DISPOSITIVE POWER:

The Partnership may be deemed to have (i) sole voting and dispositive
power with respect to no shares of Common Stock and (ii) shared voting and
dispositive power with all other Reporting Persons with respect to
3,450,000 shares of Common Stock.

By virtue of being the sole general partner of the Partnership, the
General Partner may be deemed to have (i) sole voting and dispositive power
with respect to no shares of Common Stock and (ii) shared voting and
dispositive power with all other Reporting Persons with respect to
3,450,000 shares of Common Stock.

By virtue of being the sole general partner of the General Partner,
Capital Corp. may be deemed to have (i) sole voting and dispositive power
with respect to no shares of Common Stock and (ii) shared voting and
dispositive power with all other Reporting Persons with respect to
3,450,000 shares of Common Stock.

By virtue of being the sole directors, executive officers and
shareholders of Capital Corp., each of Levine and Leichtman may be deemed
to have (i) sole voting and dispositive power with respect to no shares of
Common Stock and (ii) shared voting and dispositive power with all other
Reporting Persons with respect to 3,450,000 shares of Common Stock.

On November 2, 1998, the Issuer issued and sold to the Partnership the
Bridge Securities pursuant to the Bridge Loan Agreement. The Bridge
Securities were acquired by the Partnership for an aggregate purchase price
of $2,500,000. On November 10, 1998, the Issuer repaid the Bridge Note in
full.

(d) INTERESTS OF OTHER PERSONS:

Not Applicable.

(e) DATE UPON WHICH THE REPORTING PERSON CEASED TO BE THE BENEFICIAL OWNER
OF MORE THAN FIVE PERCENT OF CLASS:

Not Applicable.

Page 11 of 14
<PAGE>

ITEM 6 CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.

The Partnership funded its purchase of the Bridge Securities and the
Primary Securities with capital contributions made by the partners of the
Partnership in the aggregate amount of $25,000,000 in response to a Call to
Purchase Portfolio Securities dated October 5, 1998.

On November 17, 1998, the Issuer issued and sold to the Partnership
the Primary Note. A copy of the Primary Note is attached as EXHIBIT 3
hereto and describes more fully the payment and other terms thereof.

Pursuant to an Investor Rights Agreement dated as of November 17, 1998
(the "Investor Rights Agreement"), among the Issuer, Charles E. Bradley,
Sr., Charles E. Bradley, Jr., Jeffrey Fritz and the Partnership, the
Partnership acquired certain management and other rights in connection with
its acquisition of the Primary Securities, including, without limitation,
the right to cause the Board of Directors of the Issuer to cause Mr. Levine
(or another representative of the Partnership) to be elected or appointed
as a member of the Board of Directors of the Issuer. (Effective upon the
consummation of the acquisition by the Partnership of the Primary
Securities, the Board of Directors of the Issuer was expanded from six to
seven members and Mr. Levine was appointed as a member of the Board of
Directors (and the Compensation Committee thereof) of the Issuer.) Such
management and other rights are described more fully in the Investor Rights
Agreement, a copy of which is attached as EXHIBIT 5 hereto.

Pursuant to a Registration Rights Agreement dated as of November 17,
1998 (the "Registration Rights Agreement"), between the Issuer and the
Partnership, the Partnership has been granted certain "demand" and
"piggyback" registration rights with respect to the shares of Common Stock
issuable upon exercise of the Primary Warrant. Such registration rights
are described more fully in the Registration Rights Agreement, a copy of
which is attached as EXHIBIT 6 hereto.

Pursuant to a Securities Option Agreement dated as of November 17,
1998 (the "SFSC Purchase Option"), among the Partnership, Stanwich
Financial Services Corp., a Rhode Island corporation ("SFSC"), and the
Issuer, the Partnership granted to SFSC the right and option to purchase,
among other things, a portion of the Primary Warrant representing 250,000
of the 3,450,000 shares of Common Stock issuable upon exercise of the
Primary Warrant, subject to the satisfaction of the conditions set forth
therein. Such right and option is described more fully in the SFSC
Purchase Option, a copy of which is attached as EXHIBIT 7 hereto.

Page 12 of 14
<PAGE>

ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.

Exhibit 1. Joint Reporting Agreement dated November 19, 1998, among the
Partnership, LLCP, Capital Corp., Levine and Leichtman.

Exhibit 2. Securities Purchase Agreement dated as of November 17, 1998,
between the Issuer and the Partnership.

Exhibit 3. Senior Subordinated Primary Note dated November 17, 1998,
issued by the Issuer in the aggregate principal amount of
$25,000,000.

Exhibit 4. Primary Warrant to Purchase 3,450,000 shares of Common Stock
of the Issuer, dated November 17, 1998.

Exhibit 5. Investor Rights Agreement dated as of November 17, 1998,
among the Issuer, Charles E. Bradley, Sr., Charles E.
Bradley, Jr., Jeffrey Fritz and the Partnership.

Exhibit 6. Registration Rights Agreement dated as of November 17, 1998,
between the Issuer and the Partnership.

Exhibit 7. Securities Option Agreement dated as of November 17, 1998,
among the Partnership, Stanwich Financial Services Corp., a
Rhode Island corporation, and the Issuer.

Page 13 of 14
<PAGE>

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.

Dated: November 19, 1998 LEVINE LEICHTMAN CAPITAL PARTNERS II,
L.P., a California limited partnership

By: LLCP California Equity Partners, L.P.,
its General Partner

By: Levine Leichtman Capital
Partners, Inc., a California
corporation, its General Partner

By: /s/ Arthur E. Levine
------------------------------
Arthur E. Levine
Title: President

LLCP CALIFORNIA EQUITY PARTNERS II, L.P.,
a California limited partnership

By: Levine Leichtman Capital Partners, Inc.,
a California corporation, its General
Partner

By: /s/ Arthur E. Levine
------------------------------
Arthur E. Levine
Title: President

LEVINE LEICHTMAN CAPITAL PARTNERS, INC.,
a California corporation

By: /s/ Arthur E. Levine
------------------------------
Arthur E. Levine
Title: President

/s/ Arthur E. Levine
------------------------------
ARTHUR E. LEVINE

/s/ Lauren B. Leichtman
------------------------------
LAUREN B. LEICHTMAN

Page 14 of 14

<PAGE>

JOINT REPORTING AGREEMENT

In consideration of the mutual covenants herein contained, each of the
parties hereto represents to and agrees with the other party as follows:

1. Such party is eligible to file a statement or statements on
schedule 13D pertaining to the Common Stock, no par value, of Consumer Portfolio
Services, Inc. to which this agreement is an exhibit, for filing of the
information contained herein.

2. Such party is responsible for timely filing of such statement and
any amendments thereto and for the completeness and accuracy of the information
concerning such party contained therein, provided that no such party is
responsible for the completeness or accuracy of the information concerning any
other party making the filing, unless such party knows or has reason to believe
that such information is inaccurate.

3. Such party agrees that such statement is filed by and on behalf of
each such party and that any amendment thereto will be filed on behalf of each
such party.

This Joint Reporting Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original instrument, but
all of such counterparts together shall constitute but one agreement.

Dated: November 19, 1998

LEVINE LEICHTMAN CAPITAL PARTNERS II, L.P.,
a California limited partnership
By: LLCP California Equity Partners II, L.P.,
Its: General Partner
By: Levine Leichtman Capital Partners, Inc.,
Its: General Partner

By: /s/ Arthur E. Levine
--------------------------------
Arthur E. Levine
Title: President

LLCP CALIFORNIA EQUITY PARTNERS II, L.P.,
a California limited partnership
By: Levine Leichtman Capital Partners, Inc.
Its: General Partner

By: /s/ Arthur E. Levine
--------------------------------
Arthur E. Levine
Title: President

[signatures continue on following page]

<PAGE>

LEVINE LEICHTMAN CAPITAL PARTNERS, INC.,
a California corporation

By: /s/ Arthur E. Levine
--------------------------
Arthur E. Levine
Title: President

/s/ Arthur E. Levine
------------------------------
ARTHUR E. LEVINE

/s/ Lauren B. Leichtman
------------------------------
LAURENB. LEICHTMAN

-2-

<PAGE>

EXECUTION COPY

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

SECURITIES PURCHASE AGREEMENT

BY AND BETWEEN

LEVINE LEICHTMAN CAPITAL PARTNERS II, L.P.,

AS PURCHASER,

AND

CONSUMER PORTFOLIO SERVICES, INC.,

AS ISSUER

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

DATED AS OF NOVEMBER 17, 1998

<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. PURCHASE AND SALE OF THE SECURITIES . . . . . . . . . . . . . . . . . . .20
2.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . .20
2.2 Purchase of the Securities. . . . . . . . . . . . . . . . . . .20
2.3 Closing of Sale of the Securities . . . . . . . . . . . . . . .21
2.4 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . .21

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . .21
3.1 Organization and Good Standing. . . . . . . . . . . . . . . . .21
3.2 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . .22
3.3 Qualification . . . . . . . . . . . . . . . . . . . . . . . . .22
3.4 Authorization . . . . . . . . . . . . . . . . . . . . . . . . .22
3.5 Due Execution and Delivery; Binding Obligations . . . . . . . .22
3.6 No Violation; Senior Subordinated Indebtedness; Senior
Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . .22
3.7 Governmental and Other Third Party Consents . . . . . . . . . .23
3.8 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . .24
3.9 Validity and Issuance of Primary Warrant Shares . . . . . . . .25
3.10 Transactions with Affiliates. . . . . . . . . . . . . . . . . .25
3.11 Financial Statements. . . . . . . . . . . . . . . . . . . . . .25
3.12 Existing Indebtedness; Liens; Investments; Guaranties;
Material Liabilities . . . . . . . . . . . . . . . . . . . . .26
3.13 Certain Changes . . . . . . . . . . . . . . . . . . . . . . . .27
3.14 Material Contracts; Automobile Contracts. . . . . . . . . . . .28
3.15 Trade Accounts Payable. . . . . . . . . . . . . . . . . . . . .29
3.16 Labor Agreements and Actions. . . . . . . . . . . . . . . . . .29
3.17 Employee Benefit Plans; ERISA . . . . . . . . . . . . . . . . .30
3.18 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
3.19 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . .31
3.20 Governmental Regulation; Margin Stock . . . . . . . . . . . . .31
3.21 Compliance with Laws; Licenses and Permits. . . . . . . . . . .31
3.22 Title to Properties and Assets. . . . . . . . . . . . . . . . .31
3.23 Intellectual Property . . . . . . . . . . . . . . . . . . . . .31
3.24 Brokers; Certain Expenses . . . . . . . . . . . . . . . . . . .32
3.25 Real Property Leases. . . . . . . . . . . . . . . . . . . . . .33
3.26 Powers of Attorney. . . . . . . . . . . . . . . . . . . . . . .33
3.27 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .33
3.28 Books and Records . . . . . . . . . . . . . . . . . . . . . . .34
3.29 Dealers . . . . . . . . . . . . . . . . . . . . . . . . . . . .34

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3.30 Personal Property Leases. . . . . . . . . . . . . . . . . . . .34
3.31 Employment and Agency Agreements. . . . . . . . . . . . . . . .34
3.32 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . .35
3.33 Environmental Matters . . . . . . . . . . . . . . . . . . . . .35
3.34 Public Holding Company; Investment Company. . . . . . . . . . .35
3.35 Depository and Other Accounts . . . . . . . . . . . . . . . . .35
3.36 Tax Status of Securitization Transactions . . . . . . . . . . .36
3.37 Burdensome Obligations; Future Expenditures . . . . . . . . . .36
3.38 FSA Indebtedness and Liabilities. . . . . . . . . . . . . . . .36
3.39 Charges to Net Interest Receivable. . . . . . . . . . . . . . .36
3.40 SEC Documents; Undisclosed Liabilities. . . . . . . . . . . . .36
3.41 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . .37

4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER . . . . . . . . . . . . .37
4.1 Organization and Good Standing. . . . . . . . . . . . . . . . .37
4.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . .37
4.3 Due Execution and Delivery; Binding Obligations . . . . . . . .37
4.4 No Violation. . . . . . . . . . . . . . . . . . . . . . . . . .38
4.5 Investment Intent . . . . . . . . . . . . . . . . . . . . . . .38
4.6 Accredited Investor Status. . . . . . . . . . . . . . . . . . .38
4.7 Governmental Consents . . . . . . . . . . . . . . . . . . . . .38

5. CONDUCT PRIOR TO CLOSING. . . . . . . . . . . . . . . . . . . . . . . . .38
5.1 Conduct of Business Prior to Closing. . . . . . . . . . . . . .38
5.2 Access to Information and Documents . . . . . . . . . . . . . .40
5.3 Covenant to Close . . . . . . . . . . . . . . . . . . . . . . .40

6. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. . . . . . . . . . . . . .40
6.1 Representations and Warranties; No Default. . . . . . . . . . .40
6.2 Purchase Permitted By Applicable Laws . . . . . . . . . . . . .40
6.3 No Material Adverse Changes . . . . . . . . . . . . . . . . . .41
6.4 No Judgment or Order. . . . . . . . . . . . . . . . . . . . . .41
6.5 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . .41
6.6 Delivery of Documents . . . . . . . . . . . . . . . . . . . . .41
6.7 Stanwich Transactions . . . . . . . . . . . . . . . . . . . . .41
6.8 Closing and Other Fees. . . . . . . . . . . . . . . . . . . . .42
6.9 Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . .42
6.10 Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . .42

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6.11 Certain FSA and ESFR Waivers; ESFR Fees . . . . . . . . . . . .42
6.12 Financial Projections . . . . . . . . . . . . . . . . . . . . .43
6.13 CPS Operating Plan. . . . . . . . . . . . . . . . . . . . . . .43
6.14 Board Representative. . . . . . . . . . . . . . . . . . . . . .43
6.15 Third Party Consents. . . . . . . . . . . . . . . . . . . . . .43
6.16 Documents in Satisfactory Form. . . . . . . . . . . . . . . . .43

7. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. . . . . . . . . . . . . . .44
7.1 Representations and Warranties. . . . . . . . . . . . . . . . .44
7.2 Purchase Permitted By Applicable Laws . . . . . . . . . . . . .44
7.3 No Material Judgment or Order . . . . . . . . . . . . . . . . .44
7.4 Payment for Securities. . . . . . . . . . . . . . . . . . . . .44
7.5 Stanwich Purchase Option. . . . . . . . . . . . . . . . . . . .44

8. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . .44
8.1 Payments with Respect to the Note . . . . . . . . . . . . . . .45
8.2 Information Covenants . . . . . . . . . . . . . . . . . . . . .45
8.3 Financial Covenants . . . . . . . . . . . . . . . . . . . . . .47
8.4 Performance of the Related Agreements . . . . . . . . . . . . .47
8.5 CPS Operating Plan. . . . . . . . . . . . . . . . . . . . . . .47
8.6 Agreement with FSA. . . . . . . . . . . . . . . . . . . . . . .48
8.7 Repayment of NAB Loans. . . . . . . . . . . . . . . . . . . . .48
8.8 Key-Man Life Insurance. . . . . . . . . . . . . . . . . . . . .48
8.9 Legal Existence; Franchises; Compliance with Laws . . . . . . .48
8.10 Books, Records and Inspections. . . . . . . . . . . . . . . . .49
8.11 Maintenance of Property; Insurance. . . . . . . . . . . . . . .49
8.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
8.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
8.14 Performance of Servicing Duties; Clean-Up Calls . . . . . . . .50
8.15 Maintenance of LLCP Blocked Account . . . . . . . . . . . . . .50
8.16 Communication with Accountants. . . . . . . . . . . . . . . . .50
8.17 Compliance with Leaseholds. . . . . . . . . . . . . . . . . . .50
8.18 Compliance with Material Contracts. . . . . . . . . . . . . . .50
8.19 Further Assurances. . . . . . . . . . . . . . . . . . . . . . .51
8.20 Future Information. . . . . . . . . . . . . . . . . . . . . . .51
8.21 New Senior Credit Facility. . . . . . . . . . . . . . . . . . .51
8.22 Year 2000 Compatibility . . . . . . . . . . . . . . . . . . . .53
8.23 Nasdaq Listing. . . . . . . . . . . . . . . . . . . . . . . . .53

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8.24 Stanwich Commitment . . . . . . . . . . . . . . . . . . . . . .53

9. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .54
9.1 Limitations on Indebtedness . . . . . . . . . . . . . . . . . .54
9.2 Limitations on Liens. . . . . . . . . . . . . . . . . . . . . .54
9.3 Limitations on Investments. . . . . . . . . . . . . . . . . . .55
9.4 Limitation on Restricted Payments . . . . . . . . . . . . . . .55
9.5 Subsidiaries; Changes in Business . . . . . . . . . . . . . . .56
9.6 Observance of Stanwich Subordination Provisions . . . . . . . .56
9.7 Environmental Liabilities . . . . . . . . . . . . . . . . . . .56
9.8 Amendments to Securitization Transaction Documents. . . . . . .56
9.9 Transactions With Affiliates. . . . . . . . . . . . . . . . . .56
9.10 Restriction On Fundamental Changes. . . . . . . . . . . . . . .57
9.11 Agreements Affecting Capital Stock and Indebtedness;
Amendments to Material Contracts. . . . . . . . . . . . . . . .57
9.12 Indebtedness to FSA . . . . . . . . . . . . . . . . . . . . . .58
9.13 Payment Restrictions Affecting Certain Subsidiaries . . . . . .58
9.14 No Insurance Agreement Event of Default . . . . . . . . . . . .58

10. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
10.1 Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . . .59
10.2 Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
10.3 Indemnification Procedures. . . . . . . . . . . . . . . . . . .59
10.4 Contribution. . . . . . . . . . . . . . . . . . . . . . . . . .60

11. DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . .60
11.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . .60
11.2 Acceleration. . . . . . . . . . . . . . . . . . . . . . . . . .63
11.3 Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . .63
11.4 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . .63

12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63
12.1 Notations . . . . . . . . . . . . . . . . . . . . . . . . . . .63
12.2 Consent to Amendments . . . . . . . . . . . . . . . . . . . . .64
12.3 Registration of Notes; Assignments. . . . . . . . . . . . . . .64
12.4 Persons Deemed Owners; Participations . . . . . . . . . . . . .64
12.5 Survival of Representations and Warranties. . . . . . . . . . .65
12.6 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . .65

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12.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . .65
12.8 Successors and Assigns. . . . . . . . . . . . . . . . . . . . .65
12.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
12.10 Accounting Terms. . . . . . . . . . . . . . . . . . . . . . . .66
12.11 Descriptive Headings; Construction and Interpretation . . . . .66
12.12 Exhibits and Disclosure Schedules . . . . . . . . . . . . . . .67
12.13 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .67
12.14 Assignments of Note . . . . . . . . . . . . . . . . . . . . . .67
12.15 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . .67
12.16 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .67
12.17 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . .67
12.18 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . .68
</TABLE>

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EXHIBITS

Exhibit A -- Form of Senior Subordinated Primary Note
Exhibit B -- Form of Primary Warrant
Exhibit C -- Form of Registration Rights Agreement
Exhibit D -- Form of Stanwich Purchase Option
Exhibit E -- Form of Compliance Certificate
Exhibit F -- Form of Investor Rights Agreement
Exhibit G -- Form of Debt Restructure Agreement
Exhibit H -- Form of Subordination Agreement

SCHEDULES

Schedule 2.2 -- Allocation of Purchase Price
Schedule 2.4 -- Use of Proceeds
Schedule 3.2 -- Subsidiaries
Schedule 3.7 -- Consents
Schedule 3.8 -- Authorized Capital Stock
Schedule 3.10 -- Transactions with Affiliates
Schedule 3.11 -- Financial Statements
Schedule 3.12 -- Existing Indebtedness; Liens; Investments;
Guaranties
Schedule 3.13 -- Certain Changes
Schedule 3.14(a) -- Material Contracts
Schedule 3.14(b) -- Automobile Contracts
Schedule 3.15 -- Accounts Payable
Schedule 3.17 -- Employee Welfare Benefit Plans
Schedule 3.18 -- Taxes
Schedule 3.19 -- Litigation
Schedule 3.21 -- Licenses and Permits
Schedule 3.23 -- Intellectual Property
Schedule 3.25 -- Real Property Leases
Schedule 3.27 -- Insurance
Schedule 3.29 -- Dealers
Schedule 3.30 -- Personal Property Leases
Schedule 3.31 -- Employment and Agency Agreements
Schedule 3.35 -- Depository and Other Accounts

vi
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ADDENDUM

Addendum Regarding Stanwich

ANNEX

Annex A -- Financial Covenants and Related Definitions

vii
<PAGE>

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement is entered into as of November 17, 1998
(this "Agreement"), by and between Levine Leichtman Capital Partners II, L.P., a
California limited partnership, as purchaser (the "Purchaser"), and Consumer
Portfolio Services, Inc., a California corporation (the "Company"), as issuer.

RECITALS

A. The Company previously issued and sold to the Purchaser, pursuant to a
Bridge Loan Agreement, dated as of November 2, 1998, between the Purchaser and
the Company, a Senior Bridge Note, dated November 2, 1998, in the principal
amount of $2,500,000 (the "Bridge Note"), and a Bridge Warrant to Purchase
345,000 shares of Common Stock, all on the terms and subject to the conditions
set forth therein and in the other Bridge Loan Documents. On November 10, 1998,
the Company repaid in full the outstanding principal balance of, and all accrued
interest on, the Bridge Note.

B. The Company desires further to issue and sell to the Purchaser, and
the Purchaser desires to purchase from the Company, on the terms and subject to
the conditions set forth herein, a Senior Subordinated Primary Note in the
aggregate principal amount of $25,000,000.

C. As an inducement to the Purchaser to purchase the Note being sold by
the Company hereunder, the Company desires to issue to the Purchaser a warrant
to purchase 3,105,000 shares of its Common Stock, all as contemplated therein.

D. As a further inducement to the Purchaser to purchase the Note, the
Company and certain of its Affiliates are willing to enter into the Related
Agreements, including, without limitation, an Investor Rights Agreement with the
Purchaser, or an Affiliate of the Purchaser, under which the Purchaser or its
Affiliate will be entitled to certain management and other rights in connection
with the Purchaser's investment in the Note and such warrant.

AGREEMENT

In consideration of the mutual covenants and agreements set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:

1. DEFINITIONS. For the purpose of this Agreement, the following capitalized
terms shall have the meanings set forth below (PROVIDED, HOWEVER, that the
definitions used in the ESFR Agreement, when applied to the following terms as
set forth below, shall apply to such terms notwithstanding that the ESFR
Agreement is terminated at any time after the date hereof):

<PAGE>

"AFFILIATE" shall mean, when used with reference to any specified
Person, (i) any other Person that, directly or indirectly, owns or
controls, whether beneficially or of record, or as a trustee, guardian or
other fiduciary (other than a commercial bank or trust company), five
percent (5%) or more of the Capital Stock of such specified Person having
ordinary voting power in the election of directors of such specified
Person, (ii) any other Person that, directly or indirectly, controls, is
controlled by, is under direct or indirect common control with or is
included in the Immediate Family of, such specified Person or any Affiliate
of such specified Person, (iii) any executive officer, director, joint
venturer, partner or member of such specified Person or any Person included
in the Immediate Family of any of the foregoing, (iv) any Dealer, if such
Dealer or any Affiliate of such Dealer is included in the Immediate Family
of Charles E. Bradley, Sr., Charles E. Bradley, Jr. or any other officer or
director of the Company, or (v) any Automobile Contract Debtor, independent
contractor, vendor, client or customer of the Company if such Automobile
Contract Debtor, independent contractor, vendor, client or customer or any
Affiliate thereof is included in the Immediate Family of Charles E.
Bradley, Sr., Charles E. Bradley, Jr. or any other officer or director of
the Company. For the purposes of this definition, "CONTROL," when used
with respect to any specified Person, shall mean the power to direct or
cause the direction of management or 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 of the foregoing. Notwithstanding the foregoing, for the
purposes of this Agreement and the Related Agreements, neither the
Purchaser nor any of its Affiliates, officers, directors, partners or
employees shall be deemed to be Affiliates of the Company.

"AGREEMENT" shall mean this Agreement, including the Exhibits,
Schedules, ANNEX A and the Addendum, in each case as amended, supplemented
or otherwise modified from time to time.

"APPLICABLE LAWS" shall mean (i) all constitutions, treaties,
statutes, laws, rules, regulations and ordinances of any Governmental
Authority applicable to the Company, its Subsidiaries or its or their
respective businesses or properties, 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, Regulations B, M and Z of the Federal Reserve
Board and any other consumer credit, equal opportunity, disclosure or
repossession laws or regulations, laws relating to the discharge of
pollutants into the environment and the storage and handling of Hazardous
Materials and laws relating to franchise, building, zoning, health,
sanitation, safety or labor relations, and (ii) any orders, decisions,
rulings, judgments or decrees of any Governmental Authority applicable to
the Company, the Subsidiaries or its or their respective businesses or
properties.

2
<PAGE>

"ARC" shall mean Alton Receivables Corp., a California corporation.

"ASSET SALE" shall mean any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions) by the Company or any of its Subsidiaries of (i) any shares
of Capital Stock of the Company's Subsidiaries, or (ii) any other assets or
properties of the Company or such Subsidiaries outside of the ordinary
course of business.

"ASSIGNMENT" shall have the meaning set forth in SECTION 12.14.

"AUTOMOBILE CONTRACT" shall mean all right, title, and interest of the
Company or any of its Subsidiaries in and to each presently existing and
hereafter arising loan account, consumer loan, account, lease, installment
sale contract, contract right, Instrument, note, document, chattel paper or
general intangible, and all rights of the Company or any of its
Subsidiaries to receive payment thereunder, together with all other rights
of the Company or any of its Subsidiaries obtained in connection therewith,
and any collateral therefor, including all rights under any and all related
Automobile Security Documents.

"AUTOMOBILE CONTRACT DEBTOR" shall have the meaning set forth in ANNEX
A.

"AUTOMOBILE PRINCIPAL BALANCE" shall have the meaning set forth in
ANNEX A.

"AUTOMOBILE SECURITY DOCUMENTS" shall mean all security agreements,
chattel mortgages, deeds of trust, mortgages or other security instruments,
guaranties, sureties, and all agreements of every type and nature
(including a certificate of title) securing the obligations of an
Automobile Contract Debtor.

"BANK OF AMERICA FACILITY" shall mean the Business Loan Agreement
dated as of December 6, 1996, between Bank of America National Trust and
Savings Association and the Company, as amended by Amendment No. 1, dated
as of "_____, 1997," and as further amended by Amendment No. 2, dated as of
"_____, 1998," as further amended by Amendment No. 3, dated as of November
2, 1998, and as further amended by Amendment No. 4, dated as of November 6,
1998.

"BANKRUPTCY LAW" shall mean Title 11, U.S. Code (11 U.S.C. Section 101
ET SEQ.) or any similar federal or state law for the relief of debtors, as
amended from time to time.

"BASE PAYMENT" shall have the meaning set forth in SECTION 8.21.

"BOARD OF DIRECTORS" shall mean, with respect to any Person, the board
of directors (or similar governing body) of such Person.

3
<PAGE>

"BRIDGE LOAN AGREEMENT" shall mean the Bridge Loan Agreement, dated as
of November 2, 1998, between the Purchaser and the Company, pursuant to
which, on the terms and subject to the conditions set forth therein, the
Company issued and sold to the Purchaser the Bridge Note and the Bridge
Warrant.

"BRIDGE LOAN DOCUMENTS" shall mean, collectively, the Bridge Loan
Agreement, the Bridge Note, the Bridge Warrant, ESFR Amendment No. 1, the
Irrevocable Instruction Letter (as such term is defined in the Bridge Loan
Agreement), the representation letter dated as of November 2, 1998,
delivered by the Company to the Purchaser, and any and all agreements,
instruments and other documents executed and/or delivered in connection
therewith, as the same may be amended, supplemented or otherwise modified
from time to time.

"BRIDGE NOTE" shall have the meaning set forth in the recitals.

"BRIDGE WARRANT" shall mean the Bridge Warrant to Purchase 345,000
Shares of Common Stock of the Company, dated November 2, 1998, issued by
the Company to the Purchaser under the Bridge Loan Agreement.

"BUSINESS DAY" shall mean any day except Saturday, Sunday and any day
which either is a legal holiday under the laws of the State of California
or is a day on which banking institutions located in such state are
authorized or obligated to close.

"CAPITAL EXPENDITURES" shall have the meaning set forth in ANNEX A.

"CAPITAL LEASE OBLIGATIONS" shall mean any obligations of the Company
and its Subsidiaries under all leases of real or personal property that are
required to be recorded as a capitalized lease on the consolidated balance
sheet of the Company and its Subsidiaries in accordance with GAAP.

"CAPITAL STOCK" shall mean, with respect to any Person, (i) if such
Person is a corporation, any and all shares, interests, participations in
profits or other equivalents (however designated) of capital stock or other
equity interests of such Person, (ii) if such Person is a limited liability
company, any and all membership units or interests, or (iii) if such Person
is a partnership, any and all partnership units or interests.

"CHANGE IN CONTROL" shall have the meaning set forth in Section 6 of
the Note.

"CLOSING" shall have the meaning specified in SECTION 2.3.

"CLOSING BALANCE SHEET" shall have the meaning set forth in SECTION
3.11(d).

"CLOSING DATE" shall have the meaning specified in SECTION 2.3.

4
<PAGE>

"CODE" shall mean the Uniform Commercial Code, as adopted and in force
in the State of California as from time to time in effect, and the Uniform
Commercial Code of any other jurisdiction as required under Division 9103
of the California Commercial Code.

"COMMON STOCK" shall mean the common stock, no par value per share, of
the Company.

"COMPANY" shall have the meaning set forth in the preamble.

"COMPANY SEC DOCUMENTS" shall have the meaning set forth in SECTION
3.40.

"CONSENT" shall mean any consent, approval, authorization, waiver,
permit, grant, franchise, license, exemption or order of, any registration,
certificate, qualification, declaration or filing with, or any notice to,
any Person, including, without limitation, any Government Authority.

"CONVERTIBLE SECURITIES" shall have the meaning specified in
SECTION 3.8.

"CPS OPERATING PLAN" shall have the meaning specified in SECTION 6.13.

"CPSRC" shall mean CPS Receivables Corp., a California corporation.

"CREDIT ENHANCER" shall mean FSA and/or any other Person which is not
an Affiliate of the Company that issues any surety bond, letter of credit
or other credit enhancement in connection with any Securitization
Transactions.

"CREDIT TRIGGER" shall have the meaning set forth in the ESFR
Agreement.

"CUSTODIAN" shall mean any receiver, trustee, assignee, liquidation,
sequestrator or similar official under any Bankruptcy Law.

"DEALER" shall mean a dealer that has sold Goods to any Automobile
Contract Debtor pursuant to an Automobile Contract.

"DEALER AGREEMENT" shall mean an agreement between the Company and a
Dealer that governs the sale or assignment of Automobile Contracts from
such Dealer to the Company, including any provisions for assignment
(whether with or without recourse, with a repurchase obligation by the
Dealer or with a guaranty by such Dealer) contained in such Automobile
Contract or related Automobile Security Documents with respect thereto.

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<PAGE>

"DEALER BUYBACK" shall mean the reassignment of an Automobile Contract
to an originating Dealer as a result of a breach of a representation or
warranty of the Dealer or breach by the Automobile Contract Debtor under
any Automobile Contract acquired by the Company with recourse to such
Dealer.

"DEFAULT" shall mean any event or condition which, with the giving of
notice or the lapse of time or both, becomes an Event of Default.

"DEPOSITARY" shall have the meaning set forth in the First Union
Agreement.

"DISCLOSURE SCHEDULES" shall have the meaning specified in the
introductory paragraph of SECTION 3.

"ENVIRONMENTAL LAWS" shall mean all Applicable Laws relating to
Hazardous Materials or the protection of human health or the environment,
including all requirements pertaining to reporting, permitting,
investigating or remediating releases or threatened releases of Hazardous
Materials into the environment, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials.

"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time and any successor statute, including the
rules and regulations promulgated thereunder.

"ESCROW DEPOSIT" shall have the meaning specified in SECTION 8.21.

"ESFR AGENT" shall mean State Street Bank and Trust Company, as
"Agent" for itself and for each other ESFR Lender, and any successor agent
under the ESFR Agreement.

"ESFR AGREEMENT" shall mean, collectively, that certain Residual
Interest in Securitizations Revolving Credit and Term Loan Agreement, dated
as of April 30, 1998, by and among the Company, State Street Bank and Trust
Company, as "Agent" and the "Lender," The Structured Finance High Yield
Fund, LLC, as "Lender," and The Prudential Insurance Company of America, as
"Lender," as amended by ESFR Amendment No. 1 and Amendment No. 2 and as
further amended from time to time in accordance with SECTION 9.11(a).

"ESFR AMENDMENT NO. 1" shall mean a letter amendment to the ESFR
Agreement, dated November 2, 1998, among the Company, the "Agent" and the
ESFR Lenders, amending the ESFR Agreement to provide for the incurrence of
the Indebtedness of the Company evidenced by the Bridge Note.

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<PAGE>

"ESFR AMENDMENT NO. 2" shall have the meaning set forth in SECTION
6.6(f).

"ESFR COMPLIANCE CERTIFICATE" shall have the meaning set forth in the
ESFR Agreement.

"ESFR INDEBTEDNESS" shall mean all Indebtedness of the Company and its
Subsidiaries under the ESFR Agreement.

"ESFR LENDERS" shall mean the "Lenders" under the ESFR Agreement.

"EVENT OF DEFAULT" shall have the meaning specified in SECTION 11.1.

"EXCESS CASH" shall mean, in any period, all cash released to the
Company or any of its Subsidiaries during such period in connection with
any Securitization Transactions.

"EXCESS WARRANT SHARES" shall have the meaning set forth in the
Primary Warrant.

"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, as the same
shall be in effect at the time.

"EXISTING INDEBTEDNESS" shall have the meaning set forth in SECTION
3.12.

"EXISTING LIENS" shall have the meaning set forth in SECTION 3.12.

"EXISTING STOCK PLANS" shall mean, collectively, the Company's 1991
Stock Option Plan, as amended, and the Company's 1997 Long-Term Incentive
Stock Plan.

"EXTENSION PAYMENTS" shall have the meaning set forth in SECTION 8.21.

"FINANCIAL STATEMENTS" shall have the meaning specified in
SECTION 3.11.

"FIRST UNION AGREEMENT" shall mean the Receivables Funding and
Servicing Agreement, dated as of November 24, 1997, by and among CPS
Warehouse Corp., a Delaware corporation, as the borrower, the financial
institutions listed therein, Variable Funding Capital Corporation, a
Delaware corporation, as a lender, First Union Capital Markets Corp., as
deal agent ("FIRST UNION"), First Union National Bank, as liquidity agent
and as collateral agent, and the Company, as the servicer, as amended by

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<PAGE>

Amendment No. 1 dated as of May 1, 1988, Amendment No. 2 dated as of July
17, 1988, Amendment No. 3 dated as of October 5, 1988, and Amendment No. 4
dated as of October 12, 1988.

"FSA" shall mean Financial Security Assurance Inc.

"GAAP" shall mean generally accepted accounting principles and
practices set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants
and statements and pronouncements of the Financial Accounting Standards
Board or in such other statements by such other entity as may be approved
by a significant segment of the accounting profession that are applicable
to the circumstances as of the date hereof, applied on a consistent basis.

"GOODS" shall mean any new or used automobile or light truck,
including equipment sold or financed in connection therewith, or any other
item of personal property, each being intended principally for personal or
family use by consumers, sold, leased or otherwise encumbered under any
Automobile Contract.

"GOVERNMENTAL AUTHORITY" shall mean any nation or government, and any
state or political subdivision thereof, any entity (including, without
limitation, the SEC) exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, and
any tribunal or arbitrator(s) of competent jurisdiction, and any
self-regulatory organization.

"GUARANTEE" OR "GUARANTY" shall mean, with respect to any Person,
(i) any guarantee (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), direct or indirect, of any
Indebtedness or other obligation of any other Person and (ii) any
agreement, direct or indirect, contingent or otherwise, the practical
effect of which is to assure in any way the payment or performance (or
payment of damages in the event of non-performance) of any Indebtedness or
other obligation of such other Person, including, without limitation, any
indemnification agreement, warranty and agreement to pay amounts drawn down
by letters of credit. The amount of a Guarantee shall be deemed to be the
maximum amount of the obligation guaranteed for which the guarantor could
be held liable under such Guarantee.

"HAZARDOUS MATERIALS" shall mean any substance (i) the presence of
which requires investigation or remediation under any Applicable Laws; (ii)
that is defined or becomes defined as a "hazardous waste" or "hazardous
substance" under any Applicable Laws, including the Comprehensive
Environmental Response, Compensation and

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<PAGE>

Liability Act (42 U.S.C. Section 9601 et seq.) or the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901 et seq.); (iii) that is toxic,
explosive, corrosive, inflammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous and is or become regulated by any
Governmental Authority; (iv) the presence of which on any real property
causes or threatens to cause a nuisance upon the real property or to
adjacent properties or poses or threatens to pose a hazard to any real
property or to the health or safety of Persons on about any real property;
or (v) without limitation, that contains gasoline or other petroleum
hydrocarbons, polychlorinated biphenyls or asbestos.

"HOLDER" shall mean any Person (including, without limitation, the
initial Purchaser) in whose name the Note (or Notes) is registered in the
register maintained by the Company pursuant to SECTION 12.3.

"IMMEDIATE FAMILY" of a Person includes such Person's spouse, and the
parents, children and siblings of such Person or his or her spouse and
their spouses and other Persons related to the foregoing by blood, adoption
or marriage within the second degree of kinship, and, with respect to
Charles E. Bradley, Sr., Charles E. Bradley, Jr., and any officer or
director of the Company shall also include any Person who is primarily a
personal friend rather than a business associate.

"INDEPENDENT DIRECTOR" shall mean a director of the Company who is not
an officer of the Company, nor included in the Immediate Family of any
Affiliate of the Company nor represents concentrated or family holdings of
its shares, and who, in the view of the Purchaser, is free of any
relationship with respect to the Company that would interfere with the
exercise of independent judgment. For the purposes of this Agreement,
William B. Roberts, Thomas L. Chrystie and Robert A. Simms, each of whom is
a duly elected director of the Company as of the date hereof, shall be
deemed to be Independent Directors.

"INDEBTEDNESS" shall mean, with respect to the Company and its
Subsidiaries, without duplication, (i) any obligations, contingent or
otherwise, for borrowed money; (ii) all obligations evidenced by bonds,
notes, debentures or similar instruments; (iii) all obligations to pay the
deferred purchase price of property or services (excluding trade payables
incurred in the ordinary course of business that are not overdue by more
than sixty (60) days from its due date and that are not being contested in
good faith); (iv) all Capital Lease Obligations; (v) all obligations
secured by a Lien to which any property or assets owned by the Company or
any of its Subsidiaries is subject, whether or not the obligations secured
thereby have been assumed by the Company or any such Subsidiaries; (vi) all
obligations of the Company and its Subsidiaries, contingent or otherwise,
in respect of any letters of credit or bankers' acceptances; (vii) all
obligations under facilities for the discount or sale of receivables;
(viii) the maximum fixed repurchase price of any redeemable stock of the
Company and its Subsidiaries; and

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<PAGE>

(ix) all Guaranties of items which would be included within this definition
(regardless of whether such items would appear upon such balance sheet);
PROVIDED, FURTHER, that the term "Indebtedness" shall be expanded to
include any Indebtedness for Money Borrowed (as such term is defined in the
RISRS Indenture and PENS Indenture) to the extent not already covered by
clauses (i) through (ix) above.

"INDEMNIFIED PARTY" shall have the meaning specified in SECTION 10.2.

"INSTRUMENTS" shall have the same meaning as given to that term in the
Code, and shall include all negotiable instruments, notes secured by
mortgages or trust deeds, and any other writing which evidences a right to
the payment of money and is not itself a security agreement or lease, and
is of a type which is, in the ordinary course of business, transferred by
delivery with any necessary endorsement or assignment.

"INSURANCE AGREEMENT EVENT OF DEFAULT" shall have the meaning set
forth in the Insurance and Indemnity Agreements among the Company, CPSRC
and FSA, as in effect as of the date hereof.

"INTELLECTUAL PROPERTY" shall mean all (i) patents, patent
registrations, patent applications, patent disclosures and any related
continuation, continuation-in-part, divisional, reissue, reexamination,
utility, model and certificate of invention; (ii) trademarks, service
marks, trade dress, logos, trade names and corporate names, and any
registrations and applications for registration thereof; (iii) copyrights
and registrations and applications for copyrights, including, without
limitation, the Company's proprietary scoring and underwriting model;
(iv) computer software, data and documentation; (v) trade secrets,
know-how, processes and techniques, research and development, works,
financial, marketing and business data, pricing and cost information,
business and marketing plans, customer and supplier lists and any other
confidential information; (vi) all proprietary rights relating to any of
the foregoing; and (vii) copies and tangible embodiments thereof.

"INVESTMENTS" shall mean, as applied to any Person, (i) any direct or
indirect acquisition by such Person of any Capital Stock of any other
Person, or all or any substantial part of the business or assets of such
other Person, and (ii) any direct or indirect loan, advance or capital
contribution by such Person to any other Person (including, without
limitation, any Affiliate, officer, director or employee of the Company).

"INVESTOR RIGHTS AGREEMENT" shall mean an Investor Rights Agreement,
in substantially the form of EXHIBIT F, among the Company, the Purchaser,
Charles E. Bradley, Sr., Charles E. Bradley, Jr. and Jeffrey P. Fritz.

10
<PAGE>

"IRC" shall mean the Internal Revenue Code of 1986, as amended, or any
successor statute.

"LICENSES AND PERMITS" shall mean, collectively, all licenses,
franchises, permits, consents, approvals, registrations, certificates and
authorizations of all Governmental Authorities necessary to the conduct of
the businesses of the Company and its Subsidiaries, including, without
limitation, all licenses issued or issuable under the finance laws in each
state in which the activities of the Company and its Subsidiaries,
respectively, would require such licensing, licenses required for the sale
or brokerage of insurance products, compliance with all bonding
requirements of any Governmental Authority and any licenses, franchises,
permits, consents, approvals, registrations, certificates and
authorizations required to be held to comply with or obtain exemptions from
the usury laws of any state.

"LIEN" shall mean any lien, pledge, mortgage, claim, covenant,
restriction, security interest, charge or encumbrance of any kind
(including, without limitation, the interest of a lessor under a Capital
Lease Obligation having substantially the same economic effect).

"LLCP BLOCKED ACCOUNT" shall have the meaning specified in
SECTION 8.15.

"LOSSES" shall have the meaning specified in SECTION 10.2.

"MARGIN REGULATIONS" shall mean Regulations G, T, U and X of the Board
of Governors of the Federal Reserve System, or any successor thereto (the
"FEDERAL RESERVE BOARD"), as amended from time to time.

"MARGIN STOCK" shall mean "margin stock" as defined in the Margin
Regulations.

"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" shall mean a
material adverse effect on or adverse change in, as the case may be,
(i) the business, assets, condition (financial or otherwise), properties,
results of operations and prospects of (A) the Company and any of its
Subsidiaries, individually (excluding CPS Leasing, Inc., LINC Acceptance
LLC and Samco Acceptance Corp.) or taken as a whole, or (B) CPS Leasing,
Inc., LINC Acceptance LLC and Samco Acceptance Corp. taken as a whole
(except as otherwise contemplated by the CPS Operating Plan), or (ii) the
ability of the Company to perform its obligations under this Agreement or
any Related Agreement.

"MATERIAL CONTRACTS" shall have the meaning set forth in SECTION
3.14(a).

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<PAGE>

"NAB LOANS" shall mean the loans or advances made by the Company to
NAB Asset Corporation and outstanding as of the date hereof in the
aggregate principal amount of $2,544,395.

"NASDAQ" shall have the meaning set forth in SECTION 8.23.

"NET AVAILABLE CASH" shall mean, with respect to any Asset Sale, all
cash payments received from such Asset Sale (including cash payments
received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when received, but
excluding any other consideration received in the form of assumption by the
Company or any of its Subsidiaries of Indebtedness relating to the property
that is the subject of such Asset Sale or received in any other non-cash
form), in each case net of (i) all legal, title and recording Tax expenses,
commissions and other fees and expenses incurred, and all federal, state
and local Taxes required to be accrued as a liability under GAAP, as a
consequence of such Asset Sale, and (b) all payments made on any
Indebtedness which is secured by any property subject to such Asset Sale,
in accordance with the terms of any Lien upon such property, or which must
by its terms or in order to obtain a necessary Consent to such Asset Sale,
or under Applicable Laws, be repaid out of the proceeds from such Asset
Sale.

"NEW SENIOR CREDIT FACILITY" shall mean a new senior credit facility
of the Company (whether a revolving credit facility, a term loan facility
or both), the terms and provisions of which are satisfactory to the
Purchaser, entered into after the date hereof between the Company (and/or
its Subsidiaries) and a syndicate of banks or other financial institutions
acceptable to the Purchaser, under which:

(i) All Indebtedness evidenced by such new facility constitutes
Senior Indebtedness of the Company;

(ii) The Purchaser is a lender under such new facility and the
Purchaser's principal term commitment is no less than $25,000,000;
PROVIDED, HOWEVER, that if, prior to the New Senior Facility
Establishment Date, the Company has not held the Shareholder Meeting
or has held the Shareholder Meeting but failed to obtain the approval
of the shareholders to the issuance of the Excess Warrant Shares as
provided in the Primary Warrant, the Purchaser's principal term
commitment will be the lesser of (a) $25,000,000 and (b) the principal
balance of the Note outstanding immediately prior to the New Senior
Facility Establishment Date, in each case LESS the Escrow Deposit (as
contemplated by SECTION 8.21);

(iii) The Company is not permitted to borrow funds thereunder in
an amount in excess of fifty percent (50.0%) of the aggregate cash
balances in the "spread accounts" relating to Securitization
Transactions;

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<PAGE>

(iv) All Indebtedness evidenced thereunder is secured by first
priority valid and perfected Liens in favor of the lenders thereunder
covering all or substantially all "Collateral" (as such term is
defined in the ESFR Agreement);

(v) The Purchaser is entitled to sell to Stanwich a
participation interest in the Purchaser's commitment under such new
facility; and

(vi) The proceeds of such new facility are used by the Company
to pay in full all Indebtedness then outstanding under the ESFR
Agreement.

"NEW SENIOR FACILITY ESTABLISHMENT DATE" shall mean the date upon
which the New Senior Credit Facility shall have been established and the
Company shall have the right to borrow funds thereunder.

"NEW SENIOR FACILITY NOTE" shall mean a note, issued by the Company to
the Purchaser as a lender under the New Senior Credit Facility.

"NOTE" shall have the meaning set forth in SECTION 2.1, and shall also
include, where applicable, any additional note or notes issued by the
Company in connection with any Assignments.

"OBLIGATIONS TO PURCHASER" shall mean any and all Indebtedness,
claims, liabilities or obligations of the Company or any of its
Subsidiaries owing to the Purchaser or any Affiliate of the Purchaser (or
any assignee or transferee of the Purchaser or such Affiliate) under or
with respect to this Agreement, the Note and any other Related Agreement,
and any and all agreements, instruments or other documents heretofore or
hereafter executed or delivered in connection with any of the foregoing, of
whatever nature, character or description (including, without limitation,
any claims for rescission or other damages under federal or state
securities laws and any obligations of the Company to indemnify the
Purchaser), and whether presently existing or arising hereafter, together
with interest, premiums and fees accruing thereon and costs and expenses
(including, without limitation, attorneys' fees) of collection thereof
(including, without limitation, interest, fees, costs and expenses accruing
after the filing of a petition by or against the Company or any
Subsidiaries under the Bankruptcy Laws or any similar federal or state
statute), and any and all amendments, renewals, extensions, exchanges,
restatements, refinancings or refundings thereof.

"OPTION POOL" any Option Rights to purchase shares of Common Stock
which may be granted by the Board of Directors of the Company (or the
compensation committee thereof) to directors, officers and key employees of
the Company or of any Affiliate of the Company under a plan adopted or to
be adopted by the Board of Directors of the Company or the shareholders of
the Company, including, without limitation, the Existing Stock Plans, at an
exercise price per share that is not less than

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<PAGE>

the fair market value of the shares of Common Stock as of the date of
grant, as determined by the Board of Directors of the Company (or the
compensation committee thereof) in good faith and approved (i) in the case
of a grant to any officer (other than a senior executive officer) or
employee of the Company who is not a member of the Board of Directors of
the Company, by a majority vote of the Board of Directors of the Company
(or the compensation committee thereof), and (ii) in the case of any grant
to a senior executive officer or member of the Board of Directors of the
Company, by the unanimous vote of the members of the Board of Directors of
the Company (or the compensation committee thereof) who are not being
granted or receiving such Option Rights, unless such grant (and the number
of shares of Common Stock issuable upon exercise thereof) is consistent
with past grants by the Board of Directors of the Company to such member,
in which case by a majority vote of the Board of Directors (or the
compensation committee thereof) of the Company.

"OPTION RIGHTS" shall have the meaning specified in SECTION 3.8.

"PBGC" shall mean the Pension Benefit Guaranty Corporation.

"PENS" shall mean the "10.50% Participating Equity Notes" due April
15, 2004, issued by the Company in the original principal amount of
$20,000,000.00 pursuant to a First Supplemental Indenture dated as of April
15, 1997, between the Company and Bankers Trust Company, as trustee
thereunder. The PENS is the first series of unsecured subordinated
debentures, notes or other evidences of indebtedness to be issued under an
Indenture, dated as of April 15, 1997 (such Indenture, as supplemented by
the First Supplemental Indenture, being collectively referred to herein as
the "PENS INDENTURE"), between the Company and Bankers Trust Company, as
trustee thereunder.

"PERMITTED INVESTMENTS" shall mean (i) any direct obligations of the
United States of America (including obligations issued or held in
book-entry form on the books of the Department of the Treasury of the
United States of America) or obligations the timely payment of the
principal of and interest on which are fully guaranteed by the United
States of America, all of which mature within three (3) months from the
date of acquisition thereof; (ii) interest-bearing demand or time deposits
that mature no more than thirty (30) days from the date of creation thereof
and that are either (a) insured by the Federal Deposit Insurance
Corporation or (b) held in any United States commercial bank having general
obligations rated at least "AA" or equivalent by Standard & Poor's

14
<PAGE>

Corporation or Moody's Investor Service and having capital and surplus of
at least $500,000,000 or the equivalent; or (iii) certificates of deposit
that mature no more than thirty (30) days from the date of creation thereof
and that are either (a) insured by the Federal Deposit Insurance
Corporation or (b) held in any United States commercial bank having general
obligations rated at least "AA" or equivalent by Standard & Poor's
Corporation or Moody's Investor Service and having capital and surplus of
at least $500,000,000 or the equivalent.

"PERMITTED LIENS" shall mean, collectively, Liens arising by reason of
(i) any attachment, judgment, decree or order of any Governmental
Authority, so long as such Lien is being contested in good faith within
thirty (30) days of such Person's knowledge thereof and is either
adequately bonded or execution thereon has been stayed pending appeal or
review, and any appropriate legal proceedings which may have been duly
initiated for the review of such attachment, judgment, decree or order
shall not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired; (ii) Taxes,
assessments or other governmental charges not yet delinquent or that are
being contested in good faith; (iii) security for payment of workers'
compensation or other insurance; (iv) security for the performance of
leases; (v) deposits to secure public or statutory obligations or in lieu
of surety or appeal bonds entered into in the ordinary course of business;
(vi) operation of law in favor of carriers, warehouse owners, landlords,
storage facilities or mechanics incurred in the ordinary course of business
for sums that are not yet delinquent or are being contested in good faith
by negotiation or by appropriate proceedings that suspend the collection
thereof and, if required by GAAP, are appropriately reserved for on the
books of such Person; (vii) any interest or title of a lessor under any
lease; and (viii) easements, rights-of-way, zoning and similar covenants
and restrictions and other similar encumbrances or title defects that, in
the aggregate, are not material in amount; PROVIDED, HOWEVER, that each of
the Liens described in the foregoing clauses (i) through (viii) inclusive
shall only constitute a Permitted Lien so long as such Lien individually
does not, and so long as all such Liens collectively do not, materially
interfere with the conduct of such Person's business.

"PERSON" shall mean any individual, trustee, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, limited liability
partnership, other business entity or Governmental Authority.

"PLEDGED NOTES" shall have the meaning set forth in the Stanwich
Subordination Agreement.

"POOLE REPLACEMENT NOTE" shall have the meaning set forth in
SECTION 6.7(b).

"PRIMARY WARRANT" shall have the meaning set forth in SECTION 2.1.

"PRIMARY WARRANT SHARES" shall mean the shares of Common Stock issued
or issuable upon exercise of the Primary Warrant.

"PURCHASE PRICE" shall have the meaning specified in SECTION 2.2.

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<PAGE>

"PURCHASER" shall have the meaning set forth in the preamble.

"REAL PROPERTY" shall mean any real property or "facility" (as defined
in the Resource Conversation and Recovery Act (RCRA), 42 U.S.C. Section
6901 ET SEQ.) currently or formerly owned, operated, leased or occupied by
the Company and its Subsidiaries.

"REGISTRATION RIGHTS AGREEMENT" shall have the meaning specified in
SECTION 6.6(d).

"RELATED AGREEMENTS" shall mean the Note, the Primary Warrant, the
Registration Rights Agreement, the Investor Rights Agreement, the Stanwich
Documents, ESFR Amendment No. 2, the Bridge Loan Documents and any and all
agreements, instruments and other documents contemplated hereby or thereby
or relating hereto or thereto, as the same may be amended, supplemented or
otherwise modified from time to time.

"RESTRICTED PAYMENT" shall mean, with respect to any Person, (i) any
dividend or other distribution, direct or indirect, on account of any
Capital Stock of such Person now or hereafter outstanding; (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any Capital
Stock of such Person now or hereafter outstanding; and (iii) any payment or
prepayment of principal of, premium, if any, or interest, fees or other
charges on or with respect to, and any redemption, purchase, retirement,
defeasance, sinking fund or similar payment with respect to any
Subordinated Indebtedness (PROVIDED that any sinking fund payments required
to be made by the Company under the terms of the Existing Indebtedness
shall not constitute a Restricted Payment); PROVIDED, HOWEVER, that the
following shall not constitute a Restricted Payment so long as the Company
is Solvent and no Default or Event of Default has occurred and is
continuing or would occur as a result thereof: (a) any dividend or other
distribution, direct or indirect, on account of any Capital Stock of such
Person now or hereafter outstanding which is payable solely in shares of
Common Stock; (b) any regularly scheduled payments of principal of and/or
interest on any Subordinated Indebtedness made in accordance with the terms
and provisions of the Subordinated Agreements; (c) any sales or transfers
of Automobile Contracts (or pools thereof) between or among the Company and
its Subsidiaries in connection with any Securitization Transactions
(including, without limitation, any warehousing transactions); (d) any
purchases by the Company of its Capital Stock under the Company's Employee
Savings (401(k)) Plan;(e) any dividend or other distribution, direct or
indirect, on account of any Capital Stock (now or hereafter outstanding) of
any of the Company's Subsidiaries to the Company; or (f) the cancellation
or acquisition of any Capital Stock of the Company as payment to the
Company of the exercise price of any Option Rights or Convertible
Securities.

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<PAGE>

"RISRS" shall mean the "Rising Interest Subordinated Redeemable
Security Due 2006" issued by the Company in the original principal amount
of $20,000,000, pursuant to a First Supplemental Indenture dated as of
December 15, 1995, between the Company and Harris Trust and Savings Bank,
as trustee thereunder. The RISRS is the first series of unsecured
subordinated debentures, notes or other evidences of indebtedness to be
issued under the Indenture dated as of December 15, 1995, between the
Company and Harris Trust and Savings Bank, as trustee (such Indenture, as
supplemented by the First Supplemental Indenture, being collectively
referred to herein as the "RISRS INDENTURE"), between the Company and
Bankers Trust Company, as trustee thereunder.

"SEC" shall mean the Securities and Exchange Commission, or any
successor agency.

"SECURITIES" shall have the meaning specified in SECTION 2.1.

"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder, all as the same shall
be in effect at the time.

"SECURITIZATION TRANSACTION DOCUMENTS" shall mean all agreements,
instruments and other documents now existing or hereafter entered into in
connection with the consummation of Securitization Transactions.

"SECURITIZATION TRANSACTIONS" shall have the meaning set forth in
ANNEX A.

"SENIOR INDEBTEDNESS" shall mean the principal amount of, premium, if
any, and interest on (i) any Indebtedness, whether now outstanding or
hereafter created, incurred, assumed or guaranteed, unless in the
instrument creating or evidencing such Indebtedness or pursuant to which
such Indebtedness is outstanding it is provided that such Indebtedness is
subordinate in right of payment or rights upon liquidation to any other
Indebtedness of the Company and (ii) refundings, renewals, extensions,
modifications, restatements, and increases of any such Indebtedness.

"SENIOR SUBORDINATED INDEBTEDNESS" shall mean, collectively, the
RISRS, the PENS, the Stanwich Senior Subordinated Debt, the Indebtedness
evidenced by the Note and any other Indebtedness of the Company heretofore
or hereafter consented to in writing by the Purchaser and which ranks PARI
PASSU with the RISRS, the PENS, the Stanwich Senior Subordinated Debt and
the Indebtedness evidenced by the Note, PROVIDED, HOWEVER, that such other
Indebtedness is evidenced or governed by provisions that are satisfactory
to the Purchaser, in each case as amended, supplemented, modified,
refinanced, renewed, replaced, restructured or exchanged from time to time
in accordance with SECTION 9.11(A).

"SHAREHOLDER MEETING" shall have the meaning specified in
SECTION 8.21.

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<PAGE>

"SOLVENT" shall mean, with respect to any Person, that (i) the total
present fair salable value of such Person's assets on a going concern basis
is in excess of the total amount of such Person's liabilities, including
contingent liabilities; (ii) such Person is able to pay its liabilities and
contingent liabilities as they become due; and (iii) such Person does not
have unreasonably small capital to carry on such Person's business as
theretofore operated and as proposed to be operated.

"STANWICH" shall mean Stanwich Financial Services Corp., a Rhode
Island corporation. The term "Stanwich" shall also mean, where applicable,
Stanwich Partners, Inc.

"STANWICH COMMITMENT" shall have the meaning set forth in SECTION
8.24.

"STANWICH CONSULTING AGREEMENT" shall mean the Consulting Agreement
dated February 14, 1996, between the Company and Stanwich.

"STANWICH DEBT AGREEMENTS" shall mean, collectively, all agreements,
instruments and other documents, whether now existing or hereafter entered
into, evidencing or governing any Stanwich Indebtedness, including, without
limitation, (i) the 1997 Stanwich Notes, (ii) the 1998 Stanwich Notes,
(iii) the Stanwich Replacement Note, (iv) the Poole Replacement Note, (v)
the Stanwich Commitment, (vi) the Stanwich Debt Restructure Agreement and
(vii) the Stanwich Subordination Agreement, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
SECTION 9.11(a).

"STANWICH DEBT RESTRUCTURE AGREEMENT" shall have the meaning set forth
in SECTION 6.7(b).

"STANWICH DOCUMENTS" shall mean the Stanwich Purchase Option and the
Stanwich Debt Agreements, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with SECTION 9.11(a).

"STANWICH INDEBTEDNESS" shall mean, collectively, any and all
Indebtedness of the Company or its Subsidiaries or both owing to Stanwich
or any of its shareholders, officers, directors, employees or Affiliates
(other than the Company and its Subsidiaries), including, without
limitation: (i) the seven (7) "Partially Convertible Subordinated 9%
Notes" dated June 12, 1997 (the "1997 STANWICH NOTES"), issued by the
Company to Stanwich in the aggregate principal amount of $15,000,000; (ii)
the Convertible Promissory Note dated August 13, 1998, issued by the
Company to Stanwich in the principal amount of $500,000, the Convertible
Promissory Note dated August 21, 1998, issued by the Company to Stanwich in
the principal amount of $425,000, and the Convertible Promissory Note dated
September 2, 1998, issued by the Company to Stanwich in the principal
amount of $3,075,000 (collectively, the "1998

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<PAGE>

STANWICH NOTES"); (iii) the Promissory Note dated August 13, 1998, issued
by the Company to John G. Poole ("POOLE") in the aggregate principal amount
of $1,000,000 (the "POOLE NOTE"); and (iv) the Stanwich Replacement Note
and the Poole Replacement Note being issued by the Company and delivered at
the Closing pursuant to SECTION 6.7(b), in each of clauses (i) through (iv)
above as amended, supplemented, modified, refinanced, renewed, replaced,
restructured or exchanged from time to time in accordance with SECTION
9.11(a).

"STANWICH PURCHASE OPTION" shall mean a Securities Option Agreement,
in substantially the form of EXHIBIT D, among the Company, the Purchaser
and Stanwich.

"STANWICH REPLACEMENT NOTE" shall have the meaning set forth in
SECTION 6.7(b).

"STANWICH SENIOR SUBORDINATED DEBT" shall mean all Stanwich
Indebtedness outstanding under the "Pledged Notes" (as such term is defined
in the Stanwich Subordination Agreement); PROVIDED, HOWEVER, that any
Stanwich Indebtedness that is released from the relevant pledge shall be
expressly made subordinate to the same extent as the Stanwich Indebtedness
that is not evidenced by the Pledged Notes.

"STANWICH SUBORDINATION AGREEMENT" shall have the meaning set forth in
SECTION 6.7(d).

"SUBORDINATED AGREEMENTS" shall mean, collectively, the RISRS
Indenture, the PENS Indenture, all Stanwich Debt Agreements and all other
agreements, instruments and other documents evidencing or governing any
Indebtedness of the Company or any of its Subsidiaries, whether now
existing or hereafter entered into, that expressly provides that such
Indebtedness is subordinate in right of payment or rights upon liquidation
to any other Indebtedness of the Company, together with any and all related
agreements, instruments and other documents between or among the Company,
any of its Subsidiaries and/or the Subordinated Lenders, in each case as
amended, supplemented or otherwise modified from time to time in accordance
with SECTION 9.11(a).

"SUBORDINATED INDEBTEDNESS" shall mean Indebtedness that is not Senior
Indebtedness, as such Indebtedness may be refinanced, renewed, replaced,
restructured or exchanged from time to time in accordance with SECTION
9.11(a).

"SUBORDINATED LENDERS" shall mean the lenders of Subordinated
Indebtedness (including, without limitation, Stanwich).

"SUBSIDIARY" and "SUBSIDIARIES" shall mean, with respect to any
Person, any other Person of which more than fifty percent (50%) of the
total voting power of Capital Stock entitled to vote (without regard to the
occurrence of any contingency) in the

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<PAGE>

election directors (or other Persons performing similar functions) are at
the time directly or indirectly owned by such first Person. Unless
otherwise indicated, the term "SUBSIDIARY" refers to a Subsidiary of the
Company.

"TAX" or "TAXES" shall mean any present and future income, excise,
sales, use, stamp or franchise taxes and any other taxes, fees, duties,
levies, withholdings or other charges of any nature whatsoever imposed by
any taxing authority, whether federal, state, local or foreign, together
with any interest and penalties and additions to tax.

"THIRD PARTY INTELLECTUAL PROPERTY RIGHTS" shall have the meaning
specified in SECTION 3.23(a).

"USAP AUDIT" shall mean an audit conducted according to the
requirements and standards set forth in the Uniform Single Attestation
Program promulgated by the Mortgage Bankers Association of America.

2. PURCHASE AND SALE OF THE SECURITIES.

2.1 AUTHORIZATION. The Company has authorized the issuance, sale and
delivery to the Purchaser of (a) a Senior Subordinated Primary Note in the
aggregate principal amount of $25,000,000, in substantially the form of
EXHIBIT A (as the same may be amended, supplemented, modified, renewed,
refinanced or restructured from time to time, the "Note"), and (b) a warrant to
purchase 3,105,000 shares of Common Stock; PROVIDED, HOWEVER, that in lieu of
issuing a warrant to purchase only 3,105,000 shares of Common Stock, the Company
will issue to the Purchaser a single primary warrant to purchase 3,450,000
shares of Common Stock, in substantially the form of EXHIBIT B (as the same may
be amended, supplemented or otherwise modified from time to time, the "Primary
Warrant"), to evidence the right to purchase the 3,105,000 shares of Common
Stock and, in connection with the surrender by the Purchaser of the Bridge
Warrant at the Closing pursuant to SECTION 7.4, the issuance of the 345,000
shares of Common Stock purchasable upon exercise of the Bridge Warrant. The
Note, including the payment of principal of, premium, if any, and interest on
the Note, shall be subordinate and subject in right of payment and rights upon
liquidation, to the extent and in the manner set forth therein, to the prior
payment in full of all Senior Indebtedness and shall rank PARI PASSU in right of
payment with all Senior Subordinated Indebtedness. The Note and the Primary
Warrant are collectively referred to herein as the "Securities."

2.2 PURCHASE OF THE SECURITIES. At the Closing, subject to the terms and
conditions contained herein, and in reliance upon the representations,
warranties, covenants and agreements contained herein, the following
transactions shall be consummated: (a) the Company shall issue and sell to the
Purchaser, and the Purchaser shall purchase from the Company, the Note, and
(b) the Company shall issue and sell to the Purchaser, and the Purchaser shall
purchase from the Company, the Primary Warrant. The aggregate purchase price to
be paid by the Purchaser shall be $25,000,000 (the "Purchase Price"), which will
be

20
<PAGE>

paid in accordance with SECTION 2.3 and allocated between the Note and the
Primary Warrant in the manner set forth on SCHEDULE 2.2. The Company and the
Purchaser shall use such allocation of the Purchase Price for all federal, state
and local tax purposes.

2.3 CLOSING OF SALE OF THE SECURITIES. The closing of the issuance, sale
and delivery of the Securities to be purchased by the Purchaser under this
Agreement (the "Closing") shall take place at the offices of Riordan & McKinzie,
300 South Grand Avenue, Suite 2900, Los Angeles, California 90071, on the date
hereof or as soon as practicable thereafter immediately following the
satisfaction or waiver of the conditions precedent set forth in SECTION 6 and
SECTION 7 (the "Closing Date"). At the Closing, the Company shall deliver to
the Purchaser each of the Note and the Primary Warrant, duly executed by the
Company, in each case against payment of that portion of the Purchase Price
allocated thereto as provided for in SCHEDULE 2.2. The Purchase Price shall be
paid by (a) transfer of the amount provided for in SCHEDULE 2.4 in immediately
available funds to such bank as the Company may request (which request shall be
made in writing at least one (1) Business Day prior to the Closing Date) for
credit to an account designated by the Company in such request, PROVIDED that
such request shall be consistent with the purposes set forth in SCHEDULE 2.4,
and (b) pursuant to SECTION 7.4, surrender of the Bridge Warrant for
cancellation by the Company.

2.4 USE OF PROCEEDS. The proceeds to be received by the Company from the
issuance and sale of the Securities shall be used solely for the purposes set
forth in SCHEDULE 2.4 (and applied in accordance with the terms therein). The
Company will not, directly or indirectly, use any of the proceeds from the issue
and sale of the Note for the purpose, whether immediate, incidental or ultimate,
of purchasing or carrying any Margin Stock or maintaining or extending credit to
others for such purpose or for any other purpose that violates the Margin
Regulations. If requested by the Purchaser, the Company will promptly furnish
to the Purchaser a statement in conformity with the requirements of Federal
Reserve Form U-1 referred to in the Margin Regulations.

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Purchaser that, except as set forth in the
disclosure schedules (the "Disclosure Schedules"), the following statements are
true and correct as of the date hereof:

3.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, and has all requisite power and authority to own or lease and
operate its properties, to carry on its business as now being conducted and as
proposed to be conducted, to enter into this Agreement and each of the Related
Agreements, to issue, sell and deliver the Securities to be issued by it
hereunder and to consummate the transactions contemplated hereby and by the
Related Agreements.

3.2 SUBSIDIARIES. SCHEDULE 3.2 sets forth, as to each Subsidiary, its
name, the jurisdiction of its incorporation, the number of outstanding shares of
its Capital Stock and the

21
<PAGE>

number of such outstanding shares owned by the Company and its Subsidiaries.
Each such Subsidiary is a corporation duly organized, validly existing and, if
applicable, in good standing under the laws of the jurisdiction of its
incorporation and has all requisite power and authority to own or lease and
operate its properties, to carry on its business as now conducted and as
proposed to be conducted. All of the outstanding Capital Stock of each such
Subsidiary has been duly authorized and is validly issued, fully paid and
non-assessable, and is owned by the Company or its Subsidiaries as specified in
SCHEDULE 3.2, in each case free and clear of any Liens and of any other
restrictions (including any restrictions on the right to vote, sell or otherwise
dispose of such Capital Stock) except as set forth on SCHEDULE 3.2.

3.3 QUALIFICATION. The Company and each of its Subsidiaries is duly
qualified or licensed and in good standing as foreign corporations duly
authorized to do business in each jurisdiction in which the character of the
properties owned or the nature of the activities conducted makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed could not have a Material Adverse Effect.

3.4 AUTHORIZATION. The execution, delivery and performance of this
Agreement and of each of the Related Agreements, the issuance, sale and delivery
of the Securities and the consummation of the other transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of the Company and, if required, its Subsidiaries.

3.5 DUE EXECUTION AND DELIVERY; BINDING OBLIGATIONS. This Agreement has
been duly executed and delivered by the Company. This Agreement is, and at the
time of the Closing each of the Related Agreements will be, a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or conveyance or similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability and except as rights of indemnity or contribution may
be limited by federal or state securities or other laws or the public policy
underlying such laws.

3.6 NO VIOLATION; SENIOR SUBORDINATED INDEBTEDNESS; SENIOR INDEBTEDNESS.

(a) The execution, delivery and performance by the Company of this
Agreement and each of the Related Agreements, and the consummation of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance, sale and delivery of the Securities), do not and will not violate
(i) the charter or bylaws of the Company or any of its Subsidiaries, as amended
through the date hereof; (ii) any Applicable Laws; or (iii) any term of any
lease, credit agreement, indenture, note, mortgage, instrument or other
agreement to which the Company or any of its Subsidiaries is a party or by which
any of its or their properties or assets are bound. Neither the Company nor any
of its Subsidiaries is currently in violation of (A) its charter or bylaws, as
amended through the date hereof, (B) any term of any material lease, credit
agreement, note, instrument or other agreement (including, without

22
<PAGE>

limitation, any agreements executed in connection with any Securitization
Transactions) to which it is a party or (C) to the best knowledge of the
Company, any Applicable Laws.

(b) No "default" or "event of default" has occurred and is continuing
under any agreement, instrument or other document to which the Company or any of
its Subsidiaries is a party which evidences or governs any Indebtedness of the
Company or its Subsidiaries, as the case may be (other than such "defaults" or
"events of default" as have been duly waived by the appropriate Person on or
prior to the date hereof), including, without limitation, the Bridge Loan
Documents. Without limiting the generality of the foregoing, the Company was in
full compliance with all of its covenants (financial and otherwise) contained in
such agreements, instruments and other documents at September 30, 1998, and
October 31, 1998.

(c) The Indebtedness evidenced by the Note ranks PARI PASSU with the
RISRS, the PENS and the Stanwich Senior Subordinated Debt. As of the Closing
Date, all Stanwich Indebtedness other than the Stanwich Senior Subordinated Debt
ranks junior, and is subordinate in right to payment and rights upon
liquidation, to the Indebtedness evidenced by the Note. As of the Closing Date,
there is no existing agreement, indenture, instrument or other document to which
the Company or any of its Subsidiaries is a party or by which it or they are
bound that requires the subordination in right of payment or rights upon
liquidation of any Obligations to Purchaser to the repayment of any other
Indebtedness of the Company or any of its Subsidiaries (other than the ESFR
Agreement and the Bank of America Facility), nor are any Obligations to
Purchaser subordinate in right of payment or rights upon liquidation to any
other Indebtedness of the Company or its Subsidiaries (other than the ESFR
Agreement and the Bank of America Facility and trade payables of the Company).

(d) No Credit Trigger or Insurance Agreement Event of Default has
occurred and is continuing under any agreement delivered in connection with any
Securitization Transactions.

3.7 GOVERNMENTAL AND OTHER THIRD PARTY CONSENTS. Except for the Consents
which have already been duly obtained or made, none of the Company, any of its
Subsidiaries or any Affiliate of the Company is required to obtain any Consent,
or required to make any declaration or filing (other than the filing of a
Form 8-K) with, (i) any Governmental Authority or (ii) any trustee, credit
enhancer, rating agency or other party to any Securitization Transaction in
connection with the execution and delivery of this Agreement or any Related
Agreement or the issuance, sale and delivery of the Securities hereunder, or for
the purpose of maintaining in full force and effect any Licenses and Permits
(except where the failure to maintain any License and Permit could not have a
Material Adverse Effect). SCHEDULE 3.7 sets forth a true and correct list of
all Consents which have been obtained or made, each of which is in full force
and effect. The time within which any administrative or judicial appeal,
reconsideration, rehearing or other review of any such Consent may be taken or
instituted has lapsed, and no such appeal, reconsideration or rehearing or other
review has been taken or instituted.

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<PAGE>

3.8 CAPITALIZATION.

(a) The authorized capital stock of the Company consists of
30,000,000 shares of Common Stock and 10,000,000 shares of serial preferred
stock, par value $1.00 per share. As of the date hereof, (i) 15,658,501 shares
of Common Stock were issued and outstanding (including shares of restricted
Common Stock); (ii) no shares of serial preferred stock of the Company were
issued and outstanding; (iii) 4,200,000 shares of Common Stock were reserved for
issuance under the Existing Stock Plans, of which options to purchase 419,200
shares are available for future grants, options to purchase 1,428,400 shares
have been exercised, options to purchase 2,352,400 shares are outstanding and
options to purchase 693,370 shares are exercisable; (iv) an aggregate of
2,412,229 shares of Common Stock were reserved for issuance upon conversion of
the PENS and of the Stanwich Indebtedness; and (e) an aggregate of 345,000
shares of Common Stock were reserved for issuance upon conversion of the Bridge
Warrant. All of the issued and outstanding shares of Capital Stock of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable, and are free of any preemptive or other similar rights to
subscribe for or to purchase any such Capital Stock. Except (A) for the PENS
and the Stanwich Indebtedness, (B) as contemplated by this Agreement and the
Related Agreements and (C) as disclosed in SCHEDULE 3.8, there are: (v) no
outstanding securities or obligations of any Person convertible into or
exchangeable for any shares of Capital Stock of the Company (collectively,
"Convertible Securities"); (w) no outstanding warrants, rights or options to
subscribe for or purchase, or obligations to issue, any shares of Capital Stock
of the Company or any Convertible Securities of the Company (collectively,
"Option Rights"); (x) no voting trusts or other agreements or undertakings with
respect to the voting of the Capital Stock of the Company; (y) no obligations on
the part of the Company to purchase or redeem any outstanding shares of its
Capital Stock, any Convertible Securities or any Option Rights; and (z) no
agreements granting any Person any rights of first offer or first refusal,
registration rights or "drag-along," "tag-along" or similar rights with respect
to any transfer of any Capital Stock of the Company, any Convertible Securities
or any Option Rights. All such shares of Capital Stock, Convertible Securities
and Option Rights have been issued and offered without violation of any
applicable federal or state securities law. No shares of Capital Stock of the
Company will become issuable to any Person pursuant to any "anti-dilution"
provisions of any issued and outstanding securities of the Company on account of
the issuance of the Securities, the exercise of the Primary Warrant or the
application of the "anti-dilution" provisions contained in the Primary Warrant.

(b) The Company has not incurred, and will not incur, any charges to
its statement of operations in connection with the repricing on or about
October 22, 1998, of outstanding stock options issued under its Existing Stock
Plans.

3.9 VALIDITY AND ISSUANCE OF PRIMARY WARRANT SHARES. The Primary Warrant
Shares, when issued, delivered and paid for pursuant to the terms of the Primary
Warrant, will be duly and validly issued, fully paid and nonassessable.

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<PAGE>

3.10 TRANSACTIONS WITH AFFILIATES.

(a) Except as set forth in SCHEDULE 3.10, during the period
commencing January 1, 1996 and ending December 31, 1997, no shareholder,
employee, officer, director or Affiliate of the Company or any of its
Subsidiaries or, to the best knowledge of the Company, Affiliate of any such
Person, and no member of the Immediate Family of any such Person, has engaged in
any transaction or relationship with the Company or any of its Subsidiaries
involving amounts in excess of $60,000 (other than the payment of compensation
to such Persons in the ordinary course of business).

(b) Except as set forth in SCHEDULE 3.10, since January 1, 1998, no
shareholder, employee, officer, director or Affiliate of the Company or any of
its Subsidiaries or, to the best knowledge of the Company, Affiliate of any such
Person, and no member of the Immediate Family of any such Person, has engaged in
any transaction or relationship with the Company or any of its Subsidiaries
(other than the payment of compensation to such Persons in the ordinary course
of business).

(c) SCHEDULE 3.10 sets forth a true, complete and accurate
description of the terms of each transaction or relationship required to be set
forth on SCHEDULE 3.10.

(d) No Subsidiary of the Company loans or advances funds to any of
its officers, directors, employees or, if any, minority shareholders.

(e) This SECTION 3.10 does not apply to transactions or relationships
involving (i) sales or transfers of Automobile Contracts (or interests therein)
between or among the Company and its Subsidiaries in connection with any
Securitization Transactions (including, without limitation, any warehousing
transactions) or (ii) any Investments disclosed on SCHEDULE 3.12.

3.11 FINANCIAL STATEMENTS; DISCLOSURE.

(a) SCHEDULE 3.11 set forth a true and correct list of the Company
SEC Documents and monthly board packages previously furnished by the Company to
the Purchaser, including the financial statements (and related notes thereto)
and other financial information disclosed therein (collectively, the "Financial
Statements"). The Financial Statements have been prepared in accordance with
GAAP applied on a consistent basis (except that, with respect to the monthly
board packages, the Dealer acquisition fees reflected in the financial
statements included therein have not been accounted for in accordance with GAAP)
and fairly present the consolidated and consolidating financial position and
results of operations of the Company and its Subsidiaries as of the dates and
for the periods indicated therein. Except as set forth in SCHEDULE 3.11, since
September 30, 1998, there has not been any Material Adverse Change.

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<PAGE>

(b) All financial statements and other financial information not
included in the Financial Statements and previously furnished by or on behalf of
the Company, its Subsidiaries or any of their representatives or agents to the
Purchaser in connection with this Agreement and the transactions contemplated
hereby adequately reflect the financial position and results of operations of
the Company and its Subsidiaries, as applicable, as of the dates and for the
period indicated therein, and do not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements herein
or therein contained not misleading.

(c) Neither the Company nor any of its Subsidiaries is contemplating
the filing of a petition under the Bankruptcy Law or the liquidation of all or
any major portion of its assets or properties, except as contemplated by the CPS
Operating Plan, and neither the Company nor any of its Subsidiaries is aware of
any Person contemplating the filing of any petition against it under the
Bankruptcy Law.

(d) The Company has furnished to the Purchaser a PRO FORMA balance
sheet of the Company and its Subsidiaries projected as of the Closing Date (the
"Closing Balance Sheet") and adjusted to give effect to the transactions
contemplated by this Agreement. Such Closing Balance Sheet presents fully and
fairly in all material respects the PRO FORMA consolidated financial position of
the Company and its Subsidiaries as of the Closing Date, and properly gives
effect in all material respects to the application of the PRO FORMA adjustments
described therein and contemplated herein.

3.12 EXISTING INDEBTEDNESS; LIENS; INVESTMENTS; GUARANTIES; MATERIAL
LIABILITIES.

(a) SCHEDULE 3.12 sets forth a true and correct list, and describes,
as of the date or dates indicated therein:

(i) all existing Indebtedness of the Company and its
Subsidiaries (collectively,"Existing Indebtedness");

(ii) all existing security interests and other Liens in respect
of any property or assets of the Company and its Subsidiaries other
than Permitted Liens (collectively, "Existing Liens");

(iii) all outstanding Investments (other than Investments made
under any pooling and servicing agreement or insurance agreement with
respect to any Securitization Transaction) of the Company and its
Subsidiaries; and

(iv) all existing Guarantees of the Company and its
Subsidiaries.

(b) Neither the Company nor any of its Subsidiaries has any
liabilities or obligations, whether accrued, absolute, contingent or otherwise
(whether individually or in the aggregate), except for (i) liabilities and
obligations reflected in the Financial Statements and the

26
<PAGE>

related notes thereto; (ii) trade payables and other accrued expenses incurred
in the ordinary course of business; and (iii) liabilities and obligations which,
either individually or in the aggregate, have not had and could not have a
Material Adverse Effect.

3.13 CERTAIN CHANGES. Except as set forth on SCHEDULE 3.13, since
September 30, 1998, there has not been:

(a) any damage or destruction to, or loss of, any asset of the
Company or any of its Subsidiaries, whether or not covered by insurance, which
could have a Material Adverse Effect;

(b) any waiver by the Company or any of its Subsidiaries of a
valuable right or of a material debt owed to it, other than those arising in the
ordinary course of business in connection with the Company's servicing and
collection activities relating to Automobile Contracts;

(c) any satisfaction or discharge of any Lien or payment of any
obligation by the Company or any of its Subsidiaries outside of the ordinary
course of business;

(d) any material change or amendment to any Automobile Contract,
Dealer Agreement or Material Contract by which the Company, any of its
Subsidiaries or any of its or their respective properties or assets is bound or
subject, other than those arising in the ordinary course of business in
connection with the Company's servicing and collection activities relating to
Automobile Contracts;

(e) any material adverse change in the assets, liabilities, condition
(financial or otherwise) or operations of the Company or any of its
Subsidiaries;

(f) any change in the contingent obligations of the Company or any of
its Subsidiaries, by way of Guarantees or otherwise;

(g) any declaration or payment of any dividend or other distribution
of assets of the Company to its shareholders, or the adoption or consideration
of any plan or arrangement with respect thereto;

(h) any resignation or termination of the employment of any director,
officer or key employee of the Company or any of its Subsidiaries;

(i) any Investment by the Company or any of its Subsidiaries in the
Capital Stock of any Person;

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<PAGE>

(j) any offer, issuance or sale of any shares of Capital Stock of the
Company or any Option Rights or Convertible Securities, other than the Bridge
Warrant;

(k) any change in the Company's credit guidelines and policies,
charge-off policies or accounting methods, procedures or policies;

(l) any incurrence of any Indebtedness by the Company or any of its
Subsidiaries, other than the Indebtedness evidenced by the Bridge Note;

(m) any agreement or commitment to do any of the foregoing;

(n) any deterioration in the quality of the portfolio of Automobile
Contracts owned by the Company or any of its Subsidiaries; or

(o) any other event or condition of any character which could have a
Material Adverse Effect.

3.14 MATERIAL CONTRACTS; AUTOMOBILE CONTRACTS.

(a) SCHEDULE 3.14(a) sets forth a true and complete list of all
material contracts, agreements, commitments or arrangements, whether oral or
written, of the Company and any of its Subsidiaries, including, without
limitation, all servicing agreements, sub-servicing agreements, leases (whether
real property or personal property), pooling and servicing agreements,
agreements entered into in connection with any Securitization Transactions,
underwriting agreements, dealer affiliation agreements, employment and other
agreements with management, joint venture agreements, partnership agreements,
agreements, instruments and other documents evidencing Indebtedness (including,
without limitation, the ESFR Agreement and the Subordinated Agreements) and all
other material agreements and commitments (including, without limitation, all
agreements, commitments or arrangements involving, in any instance, any
obligation of the Company or any of its Subsidiaries to pay an amount in excess
of $100,000, or the breach or termination of which could have a Material Adverse
Effect) (all such contracts, agreements, commitments and arrangements being
collectively referred to herein as the "Material Contracts"). Each Material
Contract is legal, valid, binding and enforceable against the parties thereto in
accordance with its terms and is in full force and effect as of the date hereof.
The Company and its Subsidiaries (as applicable) and, to the best knowledge of
the Company, all third parties to the Material Contracts are in substantial
compliance with the terms thereof, and no default or event of default by the
Company or, to the best knowledge of the Company, any such third party, exists
thereunder.

(b) Each Automobile Contract arose from the sale or lease of Goods,
was originated by the Company or any of its Subsidiaries, or by a Dealer or
other Person and subsequently purchased by the Company or such Subsidiary, and
is a BONA FIDE and valid deferred payment obligation of the Automobile Contract
Debtor, providing for the retention of a

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first lien or security interest in the underlying Goods to secure payment of the
obligation evidenced thereby, and is binding and enforceable against the
Automobile Contract Debtor in accordance with its terms, and neither the Company
nor any of its Subsidiaries knows of any fact which impairs or will impair the
validity of any such Automobile Contract, except where the failure of any
Automobile Contracts, individually or in the aggregate, to be BONA FIDE, valid,
binding or enforceable or the impairment of any Automobile Contracts,
individually or in the aggregate, could not have a Material Adverse Effect. The
Automobile Contracts and related Automobile Security Documents are free of any
claim for credit, deduction, discount, allowance, defense (including the defense
of usury), dispute, counterclaim or setoff which, individually or in the
aggregate, could have a Material Adverse Effect. Each Automobile Contract is
free of any Lien in favor of any Person other than the Company. Each Automobile
Contract correctly sets forth the payment terms between the Company and the
Automobile Contract Debtor, including the interest rate applicable thereto. To
the best knowledge of the Company, the signatures of all Automobile Contract
Debtors are genuine and each Automobile Contract Debtor had the legal capacity
to enter into and execute such documents on the date thereof. There is only one
original counterpart of the Automobile Contract executed by the Automobile
Contract Debtor (with the possible exception of one duplicate original
counterpart which, if in existence, is in the Contract Debtor's sole
possession). SCHEDULE 3.14(b) sets forth true and correct portfolio performance
reports.

3.15 TRADE ACCOUNTS PAYABLE. Except to the extent disputed in good faith
by the Company, all trade accounts payable of the Company and its Subsidiaries
were incurred in the ordinary course of business and are valid. SCHEDULE 3.15
sets forth a true and complete list of all trade accounts payable of the Company
and its Subsidiaries as of the date hereof, reflecting agings per trade account
payable in categories of 30, 60, 90 and more than 90 days after the date of
invoice.

3.16 LABOR AGREEMENTS AND ACTIONS. Neither the Company nor any of its
Subsidiaries is bound by or subject to any written or oral, express or implied,
contract, commitment or arrangement with any labor union, and no labor union has
requested or sought to represent any of the employees, representatives or agents
of the Company or any such Subsidiaries. There is no strike or other labor
dispute, including, without limitation, any unfair labor practice, charge or
other proceeding before the National Labor Relations Board, involving the
Company pending or, to the best knowledge of the Company, threatened. Neither
the Company nor any of its Subsidiaries is aware of any labor organization
activity involving the employees of the Company or any of its Subsidiaries, or
of any officer or key employee, or any group of officers or key employees, that
intends to terminate his or her employment with the Company. The Company has no
knowledge of any fact or circumstance which could, with the passage of time or
otherwise, cause this representation and warranty to be no longer true and
correct. Each of the Company and its Subsidiaries is in compliance with all
provisions of the Fair Labor Standards Act, all state wage and hour laws and all
workers compensation laws, except where the failure to be in compliance could
not have a Material Adverse Effect.

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3.17 EMPLOYEE BENEFIT PLANS; ERISA. All pension, retirement, bonus, profit
sharing, stock option, employee and other benefit or welfare plans or
arrangements maintained by the Company or any of its Subsidiaries, or to which
the Company or any of its Subsidiaries contributes or is required to contribute,
to the extent required, comply with the provisions of and have been administered
and maintained in compliance with the provisions of ERISA and all other
Applicable Laws. Neither the Company nor any of its Subsidiaries (a) maintains,
and in the past has never maintained, any "employee pension benefit plan" within
the meaning of Section 3(2) of ERISA or (b) contributes to, and in the past has
never contributed to, any "multiemployer plan," as defined in
Section 4001(a)(3) of ERISA. There are no unpaid liabilities of the Company or
any of its Subsidiaries with respect to, and no unfunded benefits (whether
vested or not) under, any "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA) maintained by the Company or any of its Subsidiaries,
other than unpaid liabilities with respect to the Company's Employee Savings
(401(k) Plan) that do not exceed $50,000 in the aggregate and which are
reflected on the Closing Balance Sheet in accordance with GAAP, and any such
liabilities incurred after the Closing Date will be incurred only in the
ordinary course of business and properly reflected in the financial statements
of the Company in accordance with GAAP. SCHEDULE 3.17 sets forth a list of all
"employee welfare benefit plans" of the Company.

3.18 TAXES. Each of the Company and its Subsidiaries has timely filed
within required time periods, including permitted extensions, all federal, state
and other Tax returns required to have been filed and has paid all Taxes which
were due and payable prior to the date hereof, other than Taxes that are being
contested in good faith and for which reserves have been properly established on
the Closing Balance Sheet. Each of the Company and its Subsidiaries has
withheld and paid all Taxes required to be withheld and paid in connection with
amounts paid or owing to any employee, creditor, shareholder or other third
party. Except as set forth in SCHEDULE 3.18, (a) neither the Company nor any of
its Subsidiaries has been advised that any Tax returns of the Company or any of
its Subsidiaries have been or are being audited by any Governmental Authority,
(b) there are no agreements, waivers or other arrangements providing for an
extension of time with respect to the assessment of any Taxes or deficiency
against the Company or any of its Subsidiaries, (c) there are no actions, suits,
proceedings or claims now pending against the Company or any of its Subsidiaries
in respect of any Taxes or assessments, and (d) there is no pending or, to the
best knowledge of the Company, threatened investigation of the Company or any
Subsidiaries by any Governmental Authority relating to any Taxes or assessments,
or any claims for additional taxes or assessments asserted by any Governmental
Authority. Neither the Company nor any of its Subsidiaries is a party to or
bound by any tax sharing, tax indemnity or tax allocation agreement or other
similar arrangement.

3.19 LITIGATION. Except as set forth on SCHEDULE 3.19 and except with
respect to Automobile Contracts, there are no (a) actions, suits, proceedings or
investigations pending or threatened before any Governmental Authority against
or affecting the Company or any of its Subsidiaries or Affiliates or (b) orders,
decrees, judgments, injunctions or rulings of any Governmental Authority against
the Company or any of its Subsidiaries or Affiliates. All

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claims pending against the Company or any of its Subsidiaries under or with
respect to any Automobile Contracts do not exceed $500,000 in the aggregate.
There is no action, suit or other proceeding pending or threatened which
questions the validity of this Agreement, the Note or the other Related
Agreements or any action taken or to be taken pursuant hereto or thereto, or
which could, individually or in the aggregate, have a Material Adverse Effect.

3.20 GOVERNMENTAL REGULATION; MARGIN STOCK. Neither the Company nor any of
its Subsidiaries is subject to the Investment Company Act of 1940, as amended,
or to any Applicable Laws limiting its ability to incur Indebtedness or to
create Liens on any of its properties or assets to secure such Indebtedness.
Neither the Company nor any of its Subsidiaries is engaged principally, or as
one of its important activities, in the business of extending credit for the
purposes of purchasing or carrying Margin Stock. The value of all Margin Stock
held by the Company and its Subsidiaries constitutes less than 5.0% of the
value, as determined in accordance with the Margin Regulations, of all assets of
the Company and its Subsidiaries.

3.21 COMPLIANCE WITH LAWS; LICENSES AND PERMITS. Each of the Company and
its Subsidiaries is in compliance in all material respects with all Applicable
Laws. SCHEDULE 3.21 sets forth a true and complete list of all Licenses and
Permits held by the Company and its Subsidiaries in connection with the conduct
of their businesses, and such Licenses and Permits constitute all of the
Licenses and Permits required under Applicable Laws to conduct their respective
businesses as now conducted and as proposed to be conducted, except where the
failure to hold the same could not have a Material Adverse Effect. All of
Licenses and Permits are validly issued and in full force and effect, and the
Company and its Subsidiaries have fulfilled and performed all of their
obligations with respect thereto and have full power and authority to operate
thereunder.

3.22 TITLE TO PROPERTIES AND ASSETS; LIENS. Each of the Company and its
Subsidiaries has good and marketable title to all of its properties and assets,
and none of such properties or assets is subject to any Liens except for the
Existing Liens and for Permitted Liens. Each of the Company and its
Subsidiaries enjoys quiet possession under all leases to which they are parties
as lessees, and all of such leases are valid, subsisting and in full force and
effect. None of such leases contains any provision restricting the incurrence
of indebtedness by the lessee or any unusual or burdensome provision materially
adversely affecting the current and proposed operations of the Company and its
Subsidiaries.

3.23 INTELLECTUAL PROPERTY.

(a) Each of the Company and its Subsidiaries owns, or is licensed or
otherwise possesses legally enforceable rights to use, all Intellectual Property
that is used in the conduct of its business as currently conducted and as
proposed to be conducted, except where the failure to own, license or possess
the same could not have a Material Adverse Effect. SCHEDULE 3.23 lists (i) all
patents, patent applications, trademarks, servicemarks, trademark and

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servicemark applications, copyrights and trade names owned or held by the
Company or any of its Subsidiaries and used in the conduct of its or their
businesses, including the jurisdictions in which each such Intellectual Property
right has been issued or registered or in which any such application for such
issuance or registration has been filed; (ii) all material written licenses,
sublicenses and other agreements to which the Company or any of its Subsidiaries
is a party and pursuant to which any Person (other than employees of the Company
in the course of their employment) is authorized to use any such Intellectual
Property rights; and (iii) all material written licenses, sublicenses and other
agreements to which the Company or any of its Subsidiaries is a party and
pursuant to which the Company or any of its Subsidiaries is authorized to use
any third party patents, trademarks or copyrights, including computer software
("Third Party Intellectual Property Rights") which are used in the businesses of
the Company or the Subsidiaries or which form a part of any product or service
of the Company or its Subsidiaries, all of which are in full force and effect.
The Company has made available to the Purchaser correct and complete copies of
all such patents, registrations, applications, licenses and agreements and
related documentation, all as amended to date. Neither the Company nor any of
its Subsidiaries has agreed to indemnify any Person for or against any
infringement, misappropriation or other conflict with respect to any item of
Intellectual Property that the Company owns or uses. Neither the Company nor
any of its Subsidiaries is a party to any oral license, sublicense or agreement
which, if reduced to written form, would be required to be listed in
SCHEDULE 3.23 under the terms of this SECTION 3.23.

(b) Neither the Company nor any of its Subsidiaries will be, as a
result of the execution and delivery of this Agreement or the performance of the
Company's obligations under this Agreement, in breach of any license, sublicense
or other agreement relating to the Intellectual Property or Third Party
Intellectual Property Rights.

(c) Neither the Company nor any of its Subsidiaries has been named in
any suit, action or other proceeding which involves a claim of infringement of
any Intellectual Property rights of any third party. Except as disclosed in
SCHEDULE 3.23, the performance of the services offered by the Company and its
Subsidiaries do not infringe on any Intellectual Property right of any other
Person, and to the best knowledge of the Company, the Intellectual Property
rights of the Company and its Subsidiaries are not being infringed by
activities, products or services of any third party.

3.24 BROKERS; CERTAIN EXPENSES. Neither the Company nor any of its
Subsidiaries has paid or is obligated to pay any fee or commission to any
broker, finder, investment banker or other intermediary in connection with this
Agreement, any Related Agreement or any of the transactions contemplated hereby
or thereby. Except for the monthly fixed advisory fee required to be paid by
the Company under the Stanwich Consulting Agreement, neither the Company nor any
of its Subsidiaries is bound by any agreement or commitment for the provision of
investment banking or financial advisory services with respect to any proposed
recapitalization, issuance of debt or equity securities or other transactions
involving the

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<PAGE>

Company or any of its Subsidiaries or the provision of any other investment
banking or financial advisory services to the Company or any of its
Subsidiaries.

3.25 REAL PROPERTY LEASES. SCHEDULE 3.25 sets forth a true and complete
list of all real property leases, subleases and licenses pursuant to which the
Company or any of its Subsidiaries is a lessor, lessee, sublessor, sublessee,
licensor or licensee of real property, including the term thereof, any extension
and renewal options, and the rent payable thereunder. The Company has delivered
to the Purchaser correct and complete copies of the same (as amended to date).
With respect to each such lease, sublease and license, except as set forth on
SCHEDULE 3.25:

(a) Such lease, sublease and license is legal, valid, binding and
enforceable against the parties thereto;

(b) no party thereto is in breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration thereunder;

(d) neither the Company nor any of its Subsidiaries, as the case may
be, has assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest therein, except as contemplated by the ESFR Agreement;

(e) there are no restrictions therein which prohibit the issuance of
the Securities, prohibit or restrict any merger, sale of assets or other event
which could cause any Change in Control, or otherwise restrict or prohibit any
other financings by the Company, including, without limitation, any public or
private debt or equity financings; and

(f) All parking lots located on any real property subject thereto are
in compliance with Applicable Laws, including, without limitation, zoning
requirements.

3.26 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of the Company or any of its Subsidiaries.

3.27 INSURANCE. SCHEDULE 3.27 sets forth a true and complete list of all
liability and other insurance policies insuring the Company and its Subsidiaries
against losses arising out of or related to the businesses of the Company and
its Subsidiaries (and accurately describes the coverage carried and expiration
dates of such policies). Each of the Company and its Subsidiaries is covered by
insurance in scope and amount customary and reasonable for the businesses in
which it is engaged and will be so covered after consummation of the
transactions contemplated hereby. The insurance policies listed on SCHEDULE
3.27 constitute insurance protection against all liability, claims and risks
occurring in the ordinary course of business

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<PAGE>

customarily included within comprehensive liability coverage and at amounts and
levels customarily maintained for a business of this type. All such policies
are in full force and effect.

3.28 BOOKS AND RECORDS. The minute books and other similar records of the
Company and its Subsidiaries contain true and complete records of all actions
taken at any meetings of the Board of Directors of the Company or any committees
thereof and shareholders of the Company and its Subsidiaries and of all written
consents executed in lieu of the holding of any such meetings. The books and
records of the Company accurately reflect in all respects the assets,
liabilities, business, financial condition and results of operations of the
Company and have been maintained in accordance with good business, accounting
and bookkeeping practices.

3.29 DEALERS. SCHEDULE 3.29 sets forth a true and complete list of all
Dealers. No Dealer accounts for more than five percent (5.0%) of the aggregate
Amount Financed (as defined in ANNEX A) under Automobile Contracts purchased by
the Company during the calendar year ended December 31, 1997 and the ten (10)
month period ended October 31, 1998.

3.30 PERSONAL PROPERTY LEASES. SCHEDULE 3.30 sets forth a true and
complete list and description of all agreements (or group of related agreements)
for the lease of personal property requiring payments by the Company or its
Subsidiaries over the remaining life of the lease of $10,000 or more. Neither
the Company nor its Subsidiaries has breached any agreement pertaining to, is in
default with respect to, or is overdue in payment of, any amounts owing under
any lease agreement disclosed on SCHEDULE 3.30, except where any such breach (or
breaches) or default (or defaults), individually or in the aggregate, could not
have a Material Adverse Effect. No such lease agreement contains any provisions
which restrict or prohibit (a) the issuance of the Securities, (b) any other
financings by the Company or any Subsidiaries, including, without limitation any
public or private debt or equity financings or (c) other than ordinary
restrictions on assignment, any merger, sale of assets or other event which
could cause a Change in Control.

3.31 EMPLOYMENT AND AGENCY AGREEMENTS. SCHEDULE 3.31 sets forth a true and
complete list of all employment, agency, independent contractor or sales
representative agreements, golden parachute agreements and non-competition or
non-solicitation agreements to which the Company or any of its Subsidiaries is a
party, true and complete copies of which have been provided to the Purchaser.
Each such agreement is in writing, is a valid and binding agreement enforceable
in accordance with its terms, and no party to any such agreement is in breach
of, or in default with respect to, its obligations under such agreement nor is
the Company or any of its Subsidiaries aware of any facts or circumstances which
might give rise to a breach or default thereunder.

3.32 SOLVENCY. After giving effect to the transactions contemplated in
this Agreement and each of the Related Agreements, each of the Company and its
Subsidiaries (other than Samco Acceptance Corp.) has a positive net worth and is
Solvent. No transfer of property is being made and no obligation is being
incurred in connection with the transactions contemplated

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by this Agreement and the Related Agreements with the intent to hinder, delay or
defraud either present or future creditors of the Company or any of its
Subsidiaries.

3.33 ENVIRONMENTAL MATTERS. Neither the Company nor any of its
Subsidiaries has ever caused or permitted any Hazardous Materials to be disposed
of on or under any Real Property, and no Real Property has ever been used (by
the Company and/or any Subsidiary or, to the best knowledge of the Company, by
any other Person) as (a) a disposal site or permanent storage site for any
Hazardous Materials or (b) a temporary storage site for any Hazardous Materials.
Each of the Company or its Subsidiaries has been issued and is in compliance
with all material Licenses and Permits relating to environmental matters and
necessary or desirable for its business, and has filed all notifications and
reports relating to chemical substances, air emissions, underground storage
tanks, effluent discharges and Hazardous Materials waste storage, treatment and
disposal required in connection with the operation of its businesses, the
failure to have or comply with which, individually or in the aggregate, has had
or could have a Material Adverse Effect. All Hazardous Materials used or
generated by the Company or any of its Subsidiaries or any business merged into
or otherwise acquired by the Company or any of its Subsidiaries have been
generated, accumulated, stored, transported, treated, recycled and disposed of
in compliance with all Environmental Laws, the violation of which has any
reasonable likelihood of having a Material Adverse Effect. Neither the Company
nor any of its Subsidiaries has any liabilities with respect to Hazardous
Materials, and to the best knowledge of the Company, no facts or circumstances
exist which could give rise to liabilities with respect to the violation
(whether by the Company or any other Person) of any Environmental Laws and/or
Hazardous Materials which could have any Material Adverse Effect.

3.34 PUBLIC HOLDING COMPANY; INVESTMENT COMPANY. Neither the Company nor
any of its Subsidiaries is a "holding company" or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", as such terms are defined in the Public Utility
Holding Company Act of 1935. The Company is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.

3.35 DEPOSITORY AND OTHER ACCOUNTS. SCHEDULE 3.35 sets forth a true and
complete list of all banks and other financial institutions and depositories at
which the Company and its Subsidiaries maintains (or has caused to be
maintained) or will maintain deposit accounts, spread accounts, yield supplement
reserve accounts, operating accounts, trust accounts, trust receivable accounts
or other accounts of any kind or nature into which funds of the Company
(including funds in which the Company maintains a contingent or residual
interest) or any such Subsidiary are deposited from time to time, and such
SCHEDULE 3.35 correctly identifies the name and address of each depository, the
name in which each account is held, the purpose of the account and the account
number. The Company will promptly notify the Purchaser and supplement
SCHEDULE 3.35 as new accounts are established, and the Purchaser is hereby
authorized to attach such supplements to such Schedule delivered by the Company.

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3.36 TAX STATUS OF SECURITIZATION TRANSACTIONS. None of the trusts created
by or on behalf of the Company in connection with any Securitization
Transactions are, or will be, classified as an association taxable as a
corporation under the IRC or is, or will be, otherwise taxed as a separate
entity for federal income tax purposes.

3.37 BURDENSOME OBLIGATIONS; FUTURE EXPENDITURES. Neither the Company nor
any of its Subsidiaries is a party to or bound by any agreement (including,
without limitation, the Material Contracts listed on SCHEDULE 3.14(a)),
instrument, deed or lease or is subject to any charter, bylaw or other
restriction, commitment or requirement which, in the opinion of its management,
is so unusual or burdensome that in the foreseeable future it could have, or
cause or create a material risk of having or causing, a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries anticipates that the future
expenditures, if any, by the Company and its Subsidiaries needed to meet the
provisions of any Applicable Laws will be so burdensome as to have or cause, or
create a material risk of having or causing, a Material Adverse Effect.

3.38 FSA INDEBTEDNESS AND LIABILITIES. None of the Company, any of its
Subsidiaries or any trust maintained in connection with any Securitization
Transactions occurring prior to the Closing Date has any Indebtedness to FSA (or
any Affiliate of FSA) pursuant to any agreement, commitment or arrangement to
which FSA is a party, other than Indebtedness incurred in connection with
Securitization Transactions of the type which the Company believes is customary
in similar securitization transactions insured by FSA, the assets of which
consist solely of Automobile Contracts.

3.39 CHARGES TO NET INTEREST RECEIVABLE. Neither the Company nor any of
its Subsidiaries has taken, or is required by the terms of SFAS 125 to take, any
charge with respect to any portion of the Net Interest Receivables.

3.40 SEC DOCUMENTS; UNDISCLOSED LIABILITIES. The Company has filed all
required registration statements, prospectuses, reports, schedules, forms,
statements and other documents (including exhibits and all other information
incorporated therein) with the SEC since December 31, 1993 (the "Company SEC
Documents"). As of their respective dates, the Company SEC Documents complied
with the requirements of the Securities Act or the Exchange Act, as the case may
be, applicable to the Company SEC Documents, and none of the Company SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company
included in the Company SEC Documents comply as to form, as of their respective
dates of filing with the SEC, in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except, in the case
of unaudited statements, as permitted by Form 10-Q and the SEC) applied on a
consistent basis during the periods involved and fairly present the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations

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<PAGE>

and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Such financial statements
reflect appropriate reserves established for all Automobile Contracts and
general ledger accounts in accordance with GAAP. All material information
regarding the "Year 2000" issue is fully and adequately disclosed in the
Company's SEC Documents.

3.41 DISCLOSURE. After due inquiry of the directors, executive officers
and employees of the Company having knowledge of the matters represented,
warranted or stated herein, no representation, warranty or other statement made
by or on behalf of the Company, its Subsidiaries or its or their respective
representatives and agents to the Purchaser, whether written or oral, whether
included in any materials provided to the Purchaser prior to the date hereof or
included in this Agreement or any Related Agreement or in any Exhibit or
Schedule or in any other document or instrument delivered at any time prior to
the Closing, is, or will be, untrue with respect to any material fact or omits,
or will omit, to state a material fact necessary in order to make the statement
made herein or therein, in light of the circumstances in which such statement
was made, not misleading. The information contained in each of the management
questionnaires completed by certain officers and directors of the Company and
delivered to the Purchaser in connection with the transactions contemplated by
this Agreement is true and correct.

4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Company that the following statements are true
and complete as of the date hereof.

4.1 ORGANIZATION AND GOOD STANDING. The Purchaser is a limited
partnership formed and validly existing under the laws of the State of
California, and has all requisite power and authority to enter into this
Agreement and each Related Agreement to which it is a party and to consummate
the transactions contemplated hereby.

4.2 AUTHORIZATION. The execution, delivery and performance of this
Agreement and of each of the Related Agreements to which the Purchaser is a
party, and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action on the part of the Purchaser.

4.3 DUE EXECUTION AND DELIVERY; BINDING OBLIGATIONS. This Agreement has
been duly executed and delivered by the Purchaser. This Agreement is, and at
the time of the Closing each of the Related Agreements to which the Purchaser is
a party will be, a legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or conveyance or similar laws relating to or
limiting creditors' rights generally or by equitable principles relating to
enforceability and except as rights of indemnity or contribution may be limited
by federal or state securities or other laws or the public policy underlying
such laws.

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4.4 NO VIOLATION. The execution, delivery and performance by the
Purchaser of this Agreement and each of the Related Agreements to which the
Purchaser is a party, and the consummation of the transactions contemplated
hereby, do not violate (a) the limited partnership agreement of the Purchaser as
in effect on the date hereof, (b) any law, statute, rule or regulation
applicable to the Purchaser, (c) any order, ruling, judgment or decree of any
Governmental Authority binding on the Purchaser or (d) any term of any material
indenture, mortgage, lease, agreement or instrument to which the Purchaser is a
party.

4.5 INVESTMENT INTENT. The Purchaser is acquiring the Securities for its
own account, for investment purposes, and not with a view to or for sale in
connection with any distribution thereof. The Purchaser understands that the
Securities have not been registered under the Securities Act or registered or
qualified under any state securities law in reliance upon specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of the Purchaser's investment intent as expressed herein.

4.6 ACCREDITED INVESTOR STATUS. The Purchaser is an "accredited investor"
(as such term is defined in Rule 501 of Regulation D under the Securities Act).
By reason of its business and financial experience, the Purchaser has such
knowledge, sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the investment in the
Securities, has the capacity to protect its own interests and is able to bear
the economic risk of such investment. The Purchaser has had an opportunity to
review the books and records of the Company and to ask questions of
representatives of the Company concerning the terms and conditions of the
transactions contemplated by this Agreement.

4.7 GOVERNMENTAL CONSENTS. The execution and delivery by the Purchaser of
this Agreement and each of the Related Agreements to which it is a party, and
the consummation by the Purchaser of the transactions contemplated hereby, do
not and will not require any Consent of any Governmental Authority.

5. CONDUCT PRIOR TO CLOSING.

5.1 CONDUCT OF BUSINESS PRIOR TO CLOSING. Without the prior written
consent of the Purchaser, from and after the date of this Agreement until the
Closing, the Company shall, and shall cause each of its Subsidiaries to, conduct
its business in the ordinary course. Notwithstanding the foregoing and except
as contemplated hereby, the Company shall not, and shall not permit any of its
Subsidiaries to:

(a) waive or release any right or any debt owed to it;

(b) satisfy or discharge any Lien or pay any obligation;

(c) change or amend any contract or arrangement by which the Company
or any Subsidiary or any of their properties or assets is bound or subject;

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(d) effect any act or omission which could have a Material Adverse
Effect;

(e) create any contingent obligation, by way of guarantees or
otherwise;

(f) declare or pay any dividend or other distribution or payment in
cash, stock or property in respect of shares of its Capital Stock, or adopt or
consider any plan or arrangement with respect thereto or make any direct or
indirect redemption, retirement, purchase or other acquisition of any of its
Capital Stock or split, combine or reclassify its outstanding shares of Capital
Stock;

(g) issue any shares of Capital Stock or any Option Rights or
Convertible Securities (other than shares of Common Stock issued upon the
exercise of (i) stock options issued under the Existing Stock Plans and (ii)
Convertible Securities and Option Rights set forth on SCHEDULE 3.8);

(h) (i) increase the compensation of any officer or key employee;
(ii) adopt any new employee benefit plan; or (iii) enter into any new employment
or consulting agreement;

(i) (i) incur any Indebtedness; (ii) transfer, lease, license, sell,
mortgage, pledge, dispose of, or encumber any asset of the Company with a value
exceeding $10,000 individually, and $50,000 in the aggregate; (iii) purchase or
acquire any business or any securities or assets of a business; (iv) enter into
any joint venture or partnership; (v) settle any material litigation or waive or
relinquish any material right or benefit; or (vi) accelerate payments on any
Indebtedness;

(j) make any Capital Expenditures in excess of $25,000 in the
aggregate;

(k) fail to preserve intact the business organization of the Company
and each of its Subsidiaries, fail to keep available the services of their
operating personnel, or fail to preserve the goodwill of those having business
relationships with the Company or its Subsidiaries, including, without
limitation, customers;

(l) fail to maintain its books and records in accordance with GAAP;
or

(m) take any action which would be prohibited by any of the Related
Agreements determined as if the transactions contemplated by this Agreement had
been consummated.

In addition, the Company shall notify the Purchaser in writing of the
occurrence of any Material Adverse Effect or breach of the representations and
warranties of the Company under this Agreement within one (1) day following the
occurrence thereof.

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5.2 ACCESS TO INFORMATION AND DOCUMENTS. From and after the date of this
Agreement until the Closing, the Company and each of its Subsidiaries shall give
the Purchaser and its representatives and agents full access during normal
business hours to the properties, documents, books and records of the Company
and each of its Subsidiaries, and shall furnish the Purchaser with such
information concerning the Company and each of its Subsidiaries as the Purchaser
may request.

5.3 COVENANT TO CLOSE. Each of the Company and the Purchaser shall use
its best efforts to consummate the transactions contemplated by this Agreement
pursuant to the terms hereof. Without limiting the generality of the foregoing,
the Company shall use its best efforts to obtain all Consents from third
parties which are required to be obtained in connection with the consummation of
each of the transactions contemplated by this Agreement, including, without
limitation, any Consents of the holders of any Indebtedness of the Company or of
its Subsidiaries for the purpose of ensuring the incurrence by the Company of
the Indebtedness evidenced by the Note.

6. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The obligation of the
Purchaser to consummate the transactions contemplated hereby, including, without
limitation, to purchase the Note, is subject to the satisfaction, prior to or at
the Closing, of the conditions set forth in this SECTION 6; PROVIDED, HOWEVER,
that any or all of such conditions may be waived, in whole or in part, by the
Purchaser in its sole and absolute discretion:

6.1 REPRESENTATIONS AND WARRANTIES; NO DEFAULT. Each of the
representations and warranties made by the Company contained in this Agreement
shall be true and correct in all material respects as of the date made, and
shall be true and correct in all material respects as of the Closing Date, with
the same effect as if made on and as of the Closing Date, the Company shall have
performed or satisfied each of its covenants, agreements and obligations
hereunder to be performed or satisfied by it on or prior to the Closing Date,
and there shall not exist on the Closing Date any Default or Event of Default.
The Company shall have delivered to the Purchaser an officers' certificate,
signed by the President and Chief Executive Officer and the Senior Vice
President and Chief Financial Officer of the Company, dated as of the Closing
Date, to such effect and to the effect that each of the applicable conditions
set forth in this SECTION 6 has been satisfied and fulfilled.

6.2 PURCHASE PERMITTED BY APPLICABLE LAWS. The consummation of the
transactions contemplated by this Agreement shall not be prohibited by or
violate any Applicable Laws and shall not subject any party to any Tax, penalty
or liability, under or pursuant to any Applicable Laws, and shall not be
enjoined (temporarily or permanently) under, or prohibited by or contrary to,
any injunction, order or decree. Without limiting the generality of the
foregoing, the consummation of the transactions contemplated hereby shall
otherwise comply with all applicable requirements of federal and state
securities laws.

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6.3 NO MATERIAL ADVERSE CHANGES. Since September 30, 1998, there shall
not have occurred any Material Adverse Change.

6.4 NO JUDGMENT OR ORDER. There shall not be any judgment, ruling or
order of any Governmental Authority which, in the judgment of the Purchaser,
would prohibit the delivery of the Securities or subject the Purchaser to any
penalty if the Securities were to be delivered hereunder.

6.5 OPINION OF COUNSEL. The Purchaser shall have received an opinion
letter of Troy & Gould, special counsel to the Company, dated as of the Closing
Date and addressed to the Purchaser, in form and substance satisfactory to the
Purchaser.

6.6 DELIVERY OF DOCUMENTS. The Company shall have delivered to the
Purchaser the following documents:

(a) This Agreement, duly executed by the Company, together with the
Disclosure Schedules (PROVIDED that the Purchaser will deliver SCHEDULE 2.2);

(b) The Note, duly executed by the Company;

(d) A Registration Rights Agreement, in substantially the form of
EXHIBIT C (the "Registration Rights Agreement"), duly executed by the Company;

(e) The Investor Rights Agreement, duly executed by the Company,
Charles E. Bradley, Sr., Charles E. Bradley, Jr. and Jeffrey P. Fritz;

(f) A second amendment to the ESFR Agreement, in form and substance
satisfactory to the Purchaser ("ESFR Amendment No. 2"), duly executed by the
Company and the ESFR Lenders, pursuant to which, among other things, the ESFR
Lenders consent to or permit the incurrence by the Company of the Indebtedness
evidenced by the Note; and

(g) A Secretary's Certificate of the Company, duly executed by the
Secretary and the President and Chief Executive Officer of the Company, in form
and substance satisfactory to the Purchaser.

6.7 STANWICH TRANSACTIONS.

(a) The Company shall have delivered to the Purchaser the Stanwich
Purchase Option, duly executed by Stanwich and the Company.

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(b) The Company shall have delivered to the Purchaser, in form and
substance satisfactory to the Purchaser and duly executed by the Company,
Stanwich and Poole, as the case may be: (i) a debt restructure agreement, in
substantially the form of EXHIBIT G (the "Stanwich Debt Restructure Agreement");
(ii) copies of the "Stanwich Replacement Note" and the "Poole Replacement Note"
(as such terms are defined in the Stanwich Debt Restructure Agreement); and
(iii) the "Consolidated Registration Rights Agreement" (as such term is defined
in the Stanwich Debt Restructure Agreement);

(c) The Company shall have delivered to the Purchaser the Addendum to
this Agreement, duly executed by Stanwich, with respect to the covenants and
obligations of Stanwich under SECTION 8.24; and

(d) The Company shall have delivered to the Purchaser a Subordination
Agreement, in substantially the form of EXHIBIT H (the "Stanwich Subordination
Agreement"), duly executed by Stanwich, Poole, the Purchaser and the Company.

6.8 CLOSING AND OTHER FEES. The Company shall have paid to the Purchaser,
in immediately available funds, a non-refundable, non-accountable closing fee of
$700,000.00 (which closing fee may be withheld by the Purchaser from the
proceeds of the Note and which withholding shall constitute payment in full of
the Company's obligation with respect to such closing fee), and all costs and
expenses provided for in SECTION 12.15.

6.9 DUE DILIGENCE. The Purchaser shall have completed its due diligence
review of the Company, the Subsidiaries and their respective Affiliates to the
Purchaser's satisfaction.

6.10 CLOSING DATE. The Closing Date shall occur on or before November 18,
1998.

6.11 CERTAIN FSA AND ESFR WAIVERS; ESFR FEES.

(a) The Company shall have delivered to the Purchaser a waiver, in
form and substance reasonably satisfactory to the Purchaser, duly executed by
FSA, under which FSA waives the Insurance Agreement Event of Default occurring
as of September 30, 1998;

(b) The Company shall have delivered to the Purchaser a waiver, in
form and substance reasonably satisfactory to the Purchaser, duly executed by
FSA, under which FSA waives the Insurance Agreement Event of Default occurring
as of October 31, 1998;

(c) The Company shall have delivered to the Purchaser a waiver or
consent, in form and substance reasonably satisfactory to the Purchaser, duly
executed by the ESFR Agent and the ESFR Lenders (such condition precedent may
satisfied if such waiver or consent is included in ESFR Amendment No. 2); and

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(d) The Company shall have delivered to the Purchaser written
evidence of payment by the Company to the ESFR Agent of the fees and expenses
required to be paid by the Company under ESFR Amendment No. 2.

6.12 FINANCIAL PROJECTIONS. The Company shall have delivered to the
Purchaser financial projections of the Company and its Subsidiaries for the
three (3) year period ending December 31, 2001, as previously approved by the
Purchaser, accompanied by an officer's certificate specifying, among other
things, the assumptions on which such financial projections are based, duly
executed by the Chief Financial Officer of the Company, in form and substance
satisfactory to the Purchaser.

6.13 CPS OPERATING PLAN. The Company shall have delivered to the Purchaser
an operating plan, in reasonable detail and on terms acceptable to the Purchaser
(the "CPS Operating Plan"), accompanied by an officer's certificate, duly
executed by the Chief Financial Officer of the Company, in form and substance
satisfactory to the Purchaser.

6.14 BOARD REPRESENTATIVE. The Company shall have caused a representative
of the Purchaser, who shall be designated by the Purchaser prior to the Closing,
to have been duly elected or appointed as a member of the Board of Directors of
the Company prior to or as of the Closing.

6.15 THIRD PARTY CONSENTS. The Company and each of its Subsidiaries shall
have obtained all Consents required to be obtained in connection with the
transactions contemplated by this Agreement (including, without limitation, the
Consents contemplated by SECTION 5.3), including, without limitation, any
Consent under the Bank of America Facility, and the Purchaser shall have
approved the terms and conditions thereof.

6.16 DOCUMENTS IN SATISFACTORY FORM. All proceedings taken by the Company
and any of its Subsidiaries in connection with the transactions contemplated by
this Agreement, all agreements, instruments and other documents specifically
referenced in this SECTION 6, and all other agreements, instruments and other
documentation which the Purchaser may request in connection with the
transactions contemplated by this Agreement, shall be in form and substance
satisfactory to the Purchaser, all such documents, where appropriate, to be
counterpart originals and/or certified by proper authorities, corporate
officials and other Persons. Without limiting the generality of the foregoing,
such arrangements shall have been made as may be requested by the Purchaser to
ensure that the proceeds from the sale of the Note are applied in the manner set
forth in SCHEDULE 2.4, including, without limitation, provision for the direct
payment of the obligations of the Company to be paid from such proceeds as
provided in SECTION 12.15, the withholding of fees payable to the Purchaser as
provided in SECTION 12.15 and the segregation of funds to be paid to third
parties concurrent with or following the Closing.

7. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligation of the
Company to consummate the transactions contemplated hereby is subject to the
satisfaction,

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prior to the Closing, of the conditions set forth in this SECTION 7; PROVIDED,
HOWEVER, that any or all of such conditions may be waived, in whole or in part,
by the Company in its sole and absolute discretion:

7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Purchaser contained in this Agreement shall be true and correct in all
material respects at and as of the Closing Date after giving effect to the
transactions contemplated by this Agreement, as if made on and as of such date,
and the Purchaser shall have performed or satisfied all of its covenants and
agreements hereunder to be performed or satisfied on or prior to the Closing
Date.

7.2 PURCHASE PERMITTED BY APPLICABLE LAWS. The consummation of the
transactions contemplated by this Agreement shall not be prohibited by or
violate any Applicable Laws and shall not subject any party to any Tax, penalty
or liability, under or pursuant to any Applicable Laws, and shall not be
enjoined (temporarily or permanently) under, or prohibited by or contrary to,
any injunction, order or decree. Without limiting the generality of the
foregoing, the consummation of the transactions contemplated hereby shall
otherwise comply with all applicable requirements of federal and state
securities laws.

7.3 NO MATERIAL JUDGMENT OR ORDER. There shall not be any judgment,
ruling or order of any Governmental Authority which, in the reasonable judgment
of the Company, would prohibit the delivery of the Securities or subject the
Company or its Subsidiaries to any material penalty if the Securities were to be
delivered hereunder.

7.4 PAYMENT FOR SECURITIES. The Purchaser shall have (a) paid the
Purchase Price as required by SECTION 2.3 and (b) surrendered the Bridge Warrant
for cancellation by the Company.

7.5 STANWICH PURCHASE OPTION. The Purchaser shall deliver to the Company
the Stanwich Purchase Option, duly executed by the Purchaser.

8. AFFIRMATIVE COVENANTS. The Company covenants and agrees that, so long as
any Obligations to Purchaser remain outstanding or the Purchaser owns or has the
right to acquire at any time, directly or indirectly, five percent (5%) or more
of the issued and outstanding Common Stock, the Company shall perform, comply
with and observe the covenants set forth in this SECTION 8.

8.1 PAYMENTS WITH RESPECT TO THE NOTE. The Company shall pay all
principal of, premium, if any, interest and other amounts due pursuant to the
terms of the Note on the dates and in the manner provided for therein including,
without limitation, all mandatory prepayments of principal of and interest on
the Note as specifically required under the terms of the Note.

8.2 INFORMATION COVENANTS. The Company shall furnish to the Purchaser:

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(a) Within ninety (90) days after the end of each fiscal year of the
Company, (i) the audited consolidated and consolidating balance sheets of the
Company and its Subsidiaries at the end of such year, and (ii) the related
audited consolidated and consolidating statements of income, shareholders'
equity and cash flows for such fiscal year, setting forth in comparative form
with respect to such financial statements figures for the previous fiscal year,
all in reasonable detail, together with the opinion thereon of independent
public accountants selected by the Company and reasonably satisfactory to the
Purchaser (it being understood that the current accountants of the Company are
satisfactory to the Purchaser), which opinion shall be unqualified and shall
state that such financial statements have been prepared in accordance with GAAP
applied on a basis consistent with that of the preceding fiscal year (except for
changes, if any, which shall be specified and approved by the Purchaser in
advance of the delivery of such opinion) and that the audit by such accountants
in connection with such financial statements has been made in accordance with
generally accepted auditing standards; PROVIDED, HOWEVER, that such accountants'
certification may be limited to the consolidated financial statements, in which
case the consolidating financial statements shall be certified by the Chief
Financial Officer of the Company;

(b) (i) Within forty-five (45) days after the end of each of the
first three (3) quarterly accounting periods in each fiscal year of the Company,
(A) the unaudited consolidated and consolidating balance sheets of the Company
and its Subsidiaries as at the end of such period, and (B) the related unaudited
consolidated and consolidating statements of income and cash flows for such
period and for the period from the beginning of the current fiscal year to the
end of such period, all in reasonable detail and signed by the Chief Financial
Officer of the Company; (ii) no later than the ninth business day of each
calendar month, a copy of the ESFR Compliance Certificate required to be
delivered to each ESFR Lender pursuant to Section 5.1(b)(x) of the ESFR
Agreement, together with a statement, signed by the Chief Financial Officer of
the Company, certifying that no event or condition which constitutes a Default
or Event of Default exists; (iii) no later than the seventh Business Day of each
calendar month, a copy of the Pool Summary report (as such term is defined in
the ESFR Agreement) required to be delivered to each ESFR Lender pursuant to
Section 5.1(b)(y) of the ESFR Agreement; and (iv) within thirty (30) days after
the end of each calendar month, a copy of the Company's monthly financial
statement package for the immediately preceding month, including, without
limitation, (A) a balance sheet as of the end of such preceding month, (B)
related unaudited statements of income and cash flows for such preceding month,
setting forth in comparative form with respect to such financial statements
figures for the month immediately preceding such month and for the corresponding
period in the prior year, (C) financial ratios, (D) a headcount analysis, (E) an
executive summary report, (F) an originations report and (G) portfolio
performance data, in each of clauses (A) through (G) in form acceptable to the
Purchaser;

(c) Together with the financial statements delivered pursuant to
SECTION 8.2(a), (i) a copy of the statement required to be delivered to each
ESFR Lender pursuant to Section 5.1(c) of the ESFR Agreement, and (ii) a
statement, signed by the Chief Financial Officer of the Company, to the effect
that he has reviewed the provisions of this Agreement and

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has no knowledge of any event or condition which constitutes a Default or Event
of Default or, if he has such knowledge, specifying the nature and period of
existence thereof;

(d) Promptly (but not later than three (3) Business Days) upon it
becoming available, a copy of the Company's annual USAP Audit;

(e) Promptly (but not later than three (3) Business Days) upon their
becoming available, copies of all filings by the Company or any of its
Subsidiaries, or by any party in connection with any Securitization
Transactions, with the SEC, or any periodic or special reports filed with any
other Governmental Authority, and copies of any material notices and other
material communications from the SEC or from any other Governmental Authority
which specifically relate to the Company or any of its Subsidiaries;

(f) Promptly (but not later than three (3) Business Days) upon
receipt thereof, copies of all audit reports and management letters, if any,
submitted to the Company or any of its Subsidiaries by independent public
accountants in connection with each interim or special audit of the books of the
Company or any of its Subsidiaries made by such accountants and copies of all
financial statements, reports, notices and proxy statements, if any, sent by the
Company to its shareholders;

(g) Immediately, notice of: (i) the institution or commencement of
any action, suit, proceeding or investigation by or against or affecting the
Company, any of its Subsidiaries or any of its or their respective assets,
including, without limitation, any action, suit, proceeding or investigation
involving the SEC or Nasdaq; (ii) any litigation or proceeding instituted by or
against the Company or any of its Subsidiaries, or any judgment, award, decree,
order or determination relating to any litigation or proceeding involving the
Company or any of its Subsidiaries; (iii) the imposition or creation of any Lien
against any asset of the Company or any of its Subsidiaries; (iv) any reportable
event under ERISA, together with a statement of the Chief Executive Officer,
Chief Financial Officer and/or Controller of the Company as to the details
thereof and a copy of its notice thereof to the PBGC; (v) any known release or
threat of release of Hazardous Materials on or onto any Real Property or the
incurrence of any expense or loss in connection therewith or upon the Company's
obtaining knowledge of any investigation, action or the incurrence of any
expense or loss by any Governmental Authority in connection with the containment
or removal of any Hazardous Materials for which expense or loss the Company may
be liable or potentially responsible (all such notices shall describe the nature
of any lawsuit);

(h) Immediately upon receipt or issuance by the Company or any of its
Subsidiaries, copies of all reports, covenant compliance certificates, budgets,
projections, requests for waivers, notices of default, requests for amendments
or other material correspondence issued in connection with or relating to any
agreements, instruments or other documents evidencing or governing any
Subordinated Indebtedness and, to the extent not inconsistent with any
confidentiality provisions, any agreement to which any Credit Enhancer

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(including, without limitation, FSA or any Affiliate of FSA) is a party and any
other agreement to which the Company or any of its Subsidiaries is now or
hereafter a party relating to Indebtedness;

(i) No later than the ninth business day of each calendar month, a
certificate of the Chief Financial Officer and the Secretary of the Company, in
substantially the form of EXHIBIT E (a "Compliance Certificate"), duly completed
and setting forth the calculations required to establish compliance with the
financial covenants set forth in ANNEX A; and

(j) Within ninety (90) days after the end of each fiscal year of the
Company, an analysis that supports the appropriate balance sheet reserves
established against the "on-balance sheet" Automobile Contracts, signed by the
Chief Financial Officer of the Company.

In addition to the financial information described above, the Company
will also furnish or cause to be furnished or made available to the Purchaser
such other information regarding the business, affairs and condition of the
Company and its Subsidiaries as the Purchaser may from time to time reasonably
request.

The documents and other information which are required to be delivered to
the ESFR Lenders under the ESFR Agreement and, under this SECTION 8.2, to the
Purchaser shall be delivered to the Purchaser in accordance with the terms of
this SECTION 8.2, notwithstanding that such documents or other information is no
longer required to be delivered to the ESFR Lenders or the ESFR Agreement is
amended in accordance with SECTION 9.11(a) or terminated after the date hereof.

8.3 FINANCIAL COVENANTS. The Company shall, on a consolidated basis with
its Subsidiaries, maintain the financial covenants set forth in ANNEX A.

8.4 PERFORMANCE OF THE RELATED AGREEMENTS. The Company covenants to
perform, comply with and observe all of its obligations under each of the
Related Agreements to which it is a party.

8.5 CPS OPERATING PLAN. The Company shall, and shall cause its
Subsidiaries to, implement the CPS Operating Plan in accordance with its terms
and provisions and on the time table set forth therein. Without limiting the
generality of the foregoing, the Company shall (a) sell, dissolve or otherwise
dispose of its entire interest in CPS Leasing, Inc., Samco Acceptance Corp. and
LINC Acceptance LLC within the time table set forth therein and (b) restrict
future cash flows from the Company to its Subsidiaries, all in accordance with
the terms of the CPS Operating Plan.

8.6 AGREEMENT WITH FSA.

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(a) Within ten (10) Business Days following the Closing Date, the
Company shall (i) enter into an agreement with FSA with respect to the first
Securitization Transaction to be completed by the Company following the Closing
Date, in form and substance reasonably satisfactory to the Purchaser, providing
for, among other things, no more than a 3.0% initial cash deposit (increasing to
no greater than a 21.0% cash deposit) in the "Spread Account" relating to such
first Securitization Transaction; (ii) use its best efforts to enter into an
agreement with FSA with respect to the second Securitization Transaction to be
completed by the Company following the Closing Date, in form and substance
reasonably satisfactory to the Purchaser, providing for, among other things, no
more than a 3.0% initial cash deposit (increasing to no greater than a 21.0%
cash deposit) in the "Spread Account" relating to such second Securitization
Transaction; and (iii) enter into an agreement with FSA, in form and substance
reasonably satisfactory to the Purchaser, providing for a "AAA"-rated
securitization structure effective through March 31, 1999, allowing for at least
$450,000,000 in cumulative Securitization Transactions.

(b) The Company shall complete its first Securitization Transaction
following the Closing Date prior to or on November 30, 1998, pursuant to the
agreement with FSA referred to in SECTION 8.6(a)(i), in an aggregate amount of
not less than $300,000,000 of Automobile Contract originations.

8.7 REPAYMENT OF NAB LOANS. The Company shall cause the NAB Loans to be
repaid in full on or prior to December 31, 1998.

8.8 KEY-MAN LIFE INSURANCE. On or prior to December 31, 1998, the Company
shall procure a key-man life insurance policy, from a financially sound and
reputable insurance company, on the life of Charles E. Bradley, Jr., the
President and Chief Executive Officer of the Company, in an amount equal to
$10,000,000, and shall cause the Purchaser to be named as the sole loss payee on
such insurance policy. The Company shall be obligated to maintain such
insurance policy so long as any Obligations to Purchaser remain outstanding.

8.9 LEGAL EXISTENCE; FRANCHISES; COMPLIANCE WITH LAWS. The Company shall,
and shall cause its Subsidiaries to, (a) maintain its corporate existence and
business; (b) maintain all properties which are reasonably necessary for the
conduct of such business, now or hereafter owned, in good repair, working order
and condition; (c) take all actions necessary to maintain and keep in full force
and effect all of its Licenses and Permits; and (d) comply in all material
respects with all Applicable Laws in respect of the conduct of its business and
the ownership of its properties in the states in which it conducts its business;
PROVIDED, HOWEVER, that nothing in this SECTION 8.9 shall be interpreted to
restrict or in any manner affect the Company's or any of its Subsidiaries'
ability to elect to discontinue any line of business or to discontinue doing
business in any state if the Board of Directors of the Company or of such
Subsidiary, as the case may be, deems such discontinuance to be in its or their
best interests.

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8.10 BOOKS, RECORDS AND INSPECTIONS. The Company shall, and shall cause
each of its Subsidiaries to, keep proper books of record and account in which
full, true and complete entries in conformity with GAAP and all requirements of
Applicable Laws shall be made of all dealings and transactions in relation to
its business and activities. The Company shall, and shall cause each of its
Subsidiaries to, permit officers and designated representatives and/or agents of
the Purchaser to visit and inspect any of the properties of the Company or such
Subsidiaries, and to examine the books of account of the Company or such
Subsidiaries and discuss the affairs, finances and accounts of the Company or
such Subsidiaries with, and be advised as to the same by, its officers and
independent accountants, all at such reasonable times and intervals and to such
reasonable extent as the Purchaser may request.

8.11 MAINTENANCE OF PROPERTY; INSURANCE. The Company shall, and shall
cause each of its Subsidiaries to, maintain with financially sound and reputable
insurance companies insurance in at least such amounts, of such character and
against at least such risks as is usually maintained by companies of established
repute engaged in the same or a similar business in the same general area. Such
insurance shall include, without limitation, fire and extended coverage, public
liability, property damage, workers' compensation, flood insurance (if the
Purchaser determines that such insurance is required by Applicable Laws),
earthquake loss insurance (if required by the Purchaser in its discretion),
business interruption insurance (either for loss of revenues or for additional
expenses), and insurance insuring for errors and omissions. In addition, the
Company shall procure within thirty (30) days after the Closing Date, and
maintain thereafter, one or more insurance policies providing at least
$10,000,000 in insurance coverage for director liability, including coverage for
claims under federal and state securities laws.

8.12 TAXES. The Company shall, and shall cause each of its Subsidiaries
to, pay and discharge when due all Taxes, except as contested in good faith and
by appropriate proceedings if adequate reserves (in the good faith judgment of
the management of the Company) have been established with respect thereto.

8.13 ERISA. The Company shall, and shall cause its Subsidiaries to,
deliver to the Purchaser, promptly, but in no event more than two (2) Business
Days after any executive officer of the Company or any Subsidiary obtains
knowledge of the occurrence of any "reportable event", as such term is defined
in Section 4043 of ERISA, or "prohibited transaction", as such term is defined
in Section 4975 of the IRC in connection with any plan or trust sponsored by the
Company or any Subsidiary, a written notice specifying the nature of such
reportable event or prohibited transaction, what action has been taken, is being
taken or is proposed to be taken with respect thereto and a copy of any notice
delivered to the PBGC or any excise tax return filed with the Internal Revenue
Service with respect thereto, and, when known, any further action taken or
threatened by the Internal Revenue Service, the Department of Labor or the PBGC
with respect thereto.

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8.14 PERFORMANCE OF SERVICING DUTIES; CLEAN-UP CALLS. The Company shall,
and shall cause ARC and CPSRC to, comply with the provisions of its charter
documents and bylaws and with the terms of the pooling and servicing agreements,
instrument and other documents relating to any Securitization Transactions, and
perform the duties of servicer in compliance with the terms thereof. To the
extent that the Company, ARC or CPSRC has or shall have the right or ability to
make a "CLEAN-UP" call under any Securitization Transaction, the Company, ARC or
CPSRC will not take any such action if it would not be permitted by the terms of
Section 5.9 of the ESFR Agreement.

8.15 MAINTENANCE OF LLCP BLOCKED ACCOUNT. If the ESFR Agreement is
terminated at any time following the date hereof, the Company covenants and
agrees that it will (a) establish a blocked account arrangement (the "LLCP
BLOCKED ACCOUNT") with the Purchaser, on terms and conditions satisfactory to
the Purchaser and with a bank acceptable to the Purchaser, to, among other
things, collect payments due to the Company of proceeds from any "Spread
Accounts" relating to Securitization Transactions, and (b) execute and deliver,
and cause all necessary Persons to execute and deliver, all such agreements,
instruments or other documents as may be necessary (or deemed necessary by the
Purchaser) to ensure that such trustee or paying agent is directed to make
payments due to the Company from such "Spread Accounts" directly into the LLCP
Blocked Account. The Company agrees that it will cooperate with the Purchaser
to establish payment procedures that are substantially similar to the procedures
established under or in connection with the ESFR Agreement.

8.16 COMMUNICATION WITH ACCOUNTANTS. The Company authorizes the Purchaser
to communicate directly with the Company's independent certified public
accountants, and authorizes such accountants to disclose to the Purchaser any
and all financial statements and other supporting financial documents and
schedules as the Purchaser may request.

8.17 COMPLIANCE WITH LEASEHOLDS. The Company shall, and shall cause each
of its Subsidiaries to, make all payments and otherwise perform all of its
obligations under all leases of real property to which the Company or any such
Subsidiary is a party, keep such leases in full force and effect and not permit
such leases to expire, lapse or be terminated (or any rights to renew such
leases to be forfeited or canceled), notify the Purchaser of any default by any
party thereto and cooperate with the Purchaser in all respects to cure any such
default.

8.18 COMPLIANCE WITH MATERIAL CONTRACTS. The Company shall, and shall
cause each of its Subsidiaries to, perform, comply with and observe all terms
and provisions of each Material Contract (including, without limitation, any
Subordinated Debt Agreements) to be performed, complied with or observed by it,
maintain each Material Contract in full force and effect, enforce each Material
Contract in accordance with its terms and take all actions to such end as the
Purchaser may request from time to time. Upon the request of the Purchaser, the
Company shall, and shall cause each of its Subsidiaries to, make such demands or
requests for information and reports or action of each other party to each
Material Contract as the Company shall be entitled to make under such Material
Contract. Without limiting the generality of the

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foregoing, the Company shall, and shall cause each of its Subsidiaries to, take
and cause to be taken all actions necessary to enforce its rights under any
employment agreements, non-competition, non-solicitation and/or confidentiality
agreements to which the Company or any such Subsidiary is a party and file any
action or lawsuit to enforce the same within thirty (30) days of its becoming
aware that any violation of any of the same has occurred.

8.19 FURTHER ASSURANCES. From time to time after the date hereof, the
Company will execute and deliver, and will cause any of its Subsidiaries and any
other Persons to execute and deliver, such additional instruments, certificates
and documents, and will take all such actions, as the Purchaser may reasonably
request, for the purposes of implementing or effectuating the provisions of this
Agreement, the Note or any other Related Agreement. Upon exercise by the
Purchaser of any power, right, privilege or remedy pursuant to this Agreement or
any Related Agreement which requires any Consent, the Company will execute and
deliver, and will cause any of its Subsidiaries and any other Persons to execute
and deliver, all applications, certifications, instruments and other documents
and papers that may be required to be obtained for such Consent.

8.20 FUTURE INFORMATION. All data, certificates, reports, statements,
documents and other information furnished by or on behalf of the Company, any of
its Subsidiaries or any of its or their respective representatives or agents to
the Purchaser in connection with this Agreement, the Related Agreements or the
transactions contemplated hereby and thereby, at the time the information is so
furnished, shall not contain any untrue statement of a material fact, shall be
complete and correct in all material respects to the extent necessary to give
the Purchaser sufficient and accurate knowledge of the subject matter thereof,
and shall not omit to state a material fact necessary in order to make the
statements contained therein not misleading in light of the circumstances under
which such information is furnished.

8.21 NEW SENIOR CREDIT FACILITY.

(a) The Company shall, on or prior to December 31, 1999, enter into
the New Senior Credit Facility, pay all Indebtedness then outstanding under the
ESFR Agreement and cause the termination of the ESFR Agreement and the release
and reconveyance of all Liens created or existing in favor of the ESFR Agent
and/or the ESFR Lenders under the ESFR Agreement; PROVIDED, HOWEVER, that the
Company shall use its reasonable best efforts to perform and complete all such
matters, and cause the New Senior Facility Establishment Date to occur, as soon
as practicable.

(b) At least twenty (20) days prior to the proposed New Senior
Facility Establishment Date, the Company shall notify the Purchaser in writing
that it intends to enter into the New Senior Credit Facility, stating the
material terms thereof and the closing date, and will furnish to the Purchaser
at such time copies of the agreements, instruments and other documents that will
evidence or govern the New Senior Credit Facility. In addition, if the Company
shall not have established an escrow account pursuant to SECTION 5(a) of the
Note

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prior to the date of such written notice, the Company shall, at least fifteen
(15) days prior to the proposed New Senior Facility Establishment Date,
establish a separate interest-bearing escrow account with a bank or other
financial institution, as escrow agent, on terms and conditions satisfactory to
the Purchaser, and deposit therein an aggregate amount (the "Escrow Deposit")
equal to (i) $2,419,985.51 (the "Base Payment"), PLUS (ii) all accrued and
unpaid interest on this Note through and including the proposed New Senior
Facility Establishment Date, PLUS (iii) the premium of $419,790.00 referred to
in SECTION 5(a) of the Note. The terms and conditions of such escrow shall
include, without limitation, that: (A) the Escrow Deposit shall remain in the
escrow account until the next annual meeting of shareholders of the Company (the
"Shareholder Meeting") held for the purposes of, among other things, approving
the issuance by the Company of the Excess Warrant Shares, (B) if, at the
Shareholder Meeting, the shareholders approve the issuance of the Excess Warrant
Shares, the Escrow Deposit shall be released to the Company, and (C) if, at the
Shareholder Meeting, the shareholders fail to approve the issuance of the Excess
Warrant Shares, the Escrow Deposit shall be released to the Purchaser. In
addition, if, at the Shareholder Meeting, the shareholders fail to approve the
issuance of the Excess Warrant Shares, the Purchaser's principal term commitment
under the New Senior Credit Facility will be the lesser of (x) $25,000,000 and
(y) the principal balance of the Note outstanding immediately prior to the New
Senior Facility Establishment Date, in each case LESS the Escrow Deposit.

(c) From and after June 1, 1999 and until the occurrence of the New
Senior Facility Establishment Date, the Company agrees to pay to the Purchaser
in cash, with respect to each calendar month (or portion thereof) set forth
below, an extension payment (the "Extension Payment") in the amount set forth
opposite such calendar month:

Extension
Calendar Month Ending: Payment
---------------------- -------
<S> <C>
June 30, 1999 . . . . . . . . . . . . . . . . . $10,000
July 31, 1999 . . . . . . . . . . . . . . . . . 20,000
August 31, 1999 . . . . . . . . . . . . . . . . 30,000
September 30, 1999 . . . . . . . . . . . . . . 40,000
October 31, 1999 . . . . . . . . . . . . . . . 50,000
November 30, 1999 . . . . . . . . . . . . . . . 60,000
December 31, 1999 . . . . . . . . . . . . . . . 70,000
</TABLE>

Each Extension Payment shall be due and payable on the Interest Payment
Date (as defined in the Note) relating to the applicable calendar month (or
portion thereof). The Extension Payment due with respect to the calendar month
during which the New Senior Facility Establishment Date shall occur shall be
prorated (based upon the number of days prior to the New Senior Facility
Establishment Date).

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(d) The Company shall not, and shall not permit any of its
Subsidiaries to, take any action which would restrict or otherwise prohibit the
occurrence of the New Senior Facility Establishment Date or the establishment of
the New Senior Credit Facility.

8.22 YEAR 2000 COMPATIBILITY. No later than March 31, 1999, the Company
and its Subsidiaries shall have taken all such actions that are necessary to
ensure that the computer-based systems used by the Company and its Subsidiaries
in the conduct of their respective businesses operate with respect to, and
effectively process, data (which includes dates) after December 31, 1999, and
the Company shall, at the request of the Purchaser, demonstrate to the
Purchaser's reasonable satisfaction the Company's compliance with this SECTION
8.22.

8.23 NASDAQ LISTING. The Company shall do or cause to be done all things
necessary to maintain the listing of its Common Stock on the Nasdaq National
Market System ("Nasdaq") (or, if the Company so elects, maintain a listing of
its Common Stock on the New York Stock Exchange).

8.24 STANWICH COMMITMENT.

(a) Stanwich hereby commits to make an investment in the Company, or
will cause an independent third party (I.E., a Person that is not an Affiliate
of, or related to, the Company, Stanwich or any of its shareholders) to make an
investment in the Company, within 120 days following the Closing Date, of not
less than $15,000,000 (whether in the form of debt or equity); PROVIDED,
HOWEVER, that the aggregate net cash proceeds from such investment shall be no
less than $14,400,000 (the provisions of this SECTION 8.24, together with any
agreements, instruments or other documents containing such terms and conditions,
being referred to herein as the "Stanwich Commitment"). The terms and
conditions of the Stanwich Commitment shall be approved by a majority of the
disinterested members of the Board of Directors of the Company, subject to the
terms of this SECTION 8.24; PROVIDED, HOWEVER, that if any such third party
makes such investment in the form of Senior Indebtedness or Senior Subordinated
Indebtedness (which includes Indebtedness evidenced by the Note), the terms and
conditions of the Stanwich Commitment shall also be approved by the Purchaser
(such approval not to be unreasonably withheld). If Stanwich (or any of its
Affiliates) makes such investment in the form of Indebtedness, such Indebtedness
shall be expressly made subordinate to the same extent as Stanwich Indebtedness
other than Stanwich Indebtedness evidenced by the Pledged Notes.
Notwithstanding anything to the contrary, the Stanwich Commitment shall be
subject to the limitations set forth in SECTION 9.1.

(b) If any Pledged Notes are released from the applicable pledge,
Stanwich shall, within five (5) Business Days thereafter, execute and deliver
such agreements, instruments and other documents, and take such actions, at the
request of the Purchaser, to cause the Indebtedness outstanding under such
released Pledged Notes to be expressly made subordinate to the same extent as
Stanwich Indebtedness other than Stanwich Indebtedness evidenced by the Pledged
Notes.

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<PAGE>

(c) It is expressly acknowledged by the Company and Stanwich that the
Purchaser is a third party beneficiary of the agreements and commitments of
Stanwich provided for in this SECTION 8.24.

9. NEGATIVE COVENANTS. In addition, the Company covenants and agrees that, so
long as any Obligations to Purchaser remain outstanding or, with respect to
SECTION 9.7 through SECTION 9.12, the Purchaser owns or has the right to
acquire, directly or indirectly, five percent (5%) or more of the issued and
outstanding Common Stock, the Company shall perform, comply with and observe the
covenants set forth in this SECTION 9.

9.1 LIMITATIONS ON INDEBTEDNESS. The Company shall not, and shall not
permit any of its Subsidiaries to, create, incur, assume or become or remain
liable in respect of any Indebtedness, except:

(a) Obligations to Purchaser;

(b) Existing Indebtedness, including any refinancings, renewals,
replacements, restructurings or exchanges thereof, but subject to SECTION
9.11(a);

(c) Unsecured Subordinated Indebtedness that is expressly made
subordinate in right of payment and rights upon liquidation to all Senior
Indebtedness and Senior Subordinated Indebtedness (including, without
limitation, the Indebtedness evidenced by the Note), in an aggregate amount not
to exceed the Consolidated Net Worth (as defined in the RISRS Indenture) of the
Company at any time outstanding; PROVIDED, HOWEVER, that such unsecured
Subordinated Indebtedness is created or incurred on then-current "market" terms
and conditions applicable to similarly issued subordinated indebtedness;

(d) Indebtedness in the form of Capital Lease Obligations used to
finance the acquisition, construction or improvement of assets of the Company or
any of its Subsidiaries in an aggregate amount not to exceed $5,000,000; and

(e) Indebtedness under the New Senior Credit Facility.

9.2 LIMITATIONS ON LIENS. The Company shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer
to exist, any mortgage, lien, charge or encumbrance on, or security interest in,
or pledge of, or conditional sale or other title retention agreement with
respect to, any real or personal property (tangible or intangible, now existing
or hereafter acquired), except:

(a) Existing Liens;

(b) Permitted Liens;

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<PAGE>

(c) Financing statements filed by any Credit Enhancer (including,
without limitation, FSA) against the Company or any Subsidiary in connection
with any Securitization Transactions;

(d) Any attachment or judgment Lien not constituting an Event of
Default; and

(e) Any Lien constituting a renewal, extension or replacement of any
Existing Lien, PROVIDED that the principal amount of any Indebtedness or other
obligation secured by such renewal, extension or replacement Lien does not
exceed the principal amount of the Indebtedness or other obligation renewed,
extended or replaced.

9.3 LIMITATIONS ON INVESTMENTS. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, make or own any
Investment, EXCEPT:

(a) Permitted Investments;

(b) The Investments and Guarantees set forth on SCHEDULE 3.12;

(d) Automobile Contracts;

(e) Loans and advances to employees of the Company in an amount not
to exceed $1,250,000 in the aggregate at any time outstanding; PROVIDED,
HOWEVER, that (i) such amount shall not exceed $1,000,000 in the aggregate at
any time outstanding during the period commencing on the sixth month anniversary
of the Closing Date and ending on the first year anniversary of the Closing
Date; and (ii) such amount shall not exceed $750,000 in the aggregate at any
time outstanding after the first year anniversary of the Closing Date; and

(f) Indemnification agreements in favor of Credit Enhancers or
underwriters executed in connection with Securitization Transactions.

9.4 LIMITATION ON RESTRICTED PAYMENTS. The Company shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, make any
Restricted Payment.

9.5 SUBSIDIARIES; CHANGES IN BUSINESS. The Company shall not, and shall
not permit any of its Subsidiaries to, create any additional Subsidiaries
(PROVIDED, HOWEVER, that the Company may from time to time create wholly owned,
"bankruptcy remote special purpose" Subsidiaries for the sole purpose of
entering into Securitization Transactions). After giving effect to the terms of
the CPS Operating Plan, the Company shall not, and shall not permit its
Subsidiaries to, engage in any business other than the purchasing, selling and
servicing of Automobile Contracts.

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<PAGE>

9.6 OBSERVANCE OF STANWICH SUBORDINATION PROVISIONS. The Company shall
not make, or cause or permit to be made, any payments in respect of any Stanwich
Indebtedness in contravention of any of the subordination provisions applicable
to such Stanwich Indebtedness.

9.7 ENVIRONMENTAL LIABILITIES. The Company shall not, and shall not
permit any of its Subsidiaries to, violate any material Environmental Laws or
other requirement of law, rule or regulation regarding Hazardous Materials.
Without limiting the generality of the foregoing, the Company shall not, and
shall not permit any of its Subsidiaries to, dispose of any Hazardous Materials
into or onto, or from, any Real Property, nor allow any Lien imposed pursuant to
any Environmental Laws to be imposed or to remain on such Real Property, except
for Liens being contested in good faith by appropriate proceedings and for which
adequate reserves have been established and are being maintained on the books of
the Company or its Subsidiaries, as the case may be.

9.8 AMENDMENTS TO SECURITIZATION TRANSACTION DOCUMENTS. The Company shall
not, and shall not permit any of its Subsidiaries to, amend, modify or change
(or consent to any such amendment, modification or change), in any manner
adverse to the interests of the Purchaser, any of the provisions set forth in
the Securitization Transaction Documents without the prior written consent of
the Purchaser. Without limiting the generality of the foregoing, the Company
shall not, and shall not permit any of its Subsidiaries to, consent or agree,
without the prior written consent of the Purchaser, to any increase in the
amount on deposit in any "Spread Accounts" so as to maintain the rating of the
related Securitization Transaction.

9.9 TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall not
permit any of its Subsidiaries to, enter into any transaction with any officer,
director, employee or Affiliate of the Company at any time on terms that are
less favorable to the Company or such Subsidiary, as the case may be, than those
that might be obtained in an arm's length transaction at such time from a Person
who is not an officer, director, employee or Affiliate of the Company. Any
transaction between the Company, on the one hand, and any Affiliate of the
Company, on the other hand, shall be unanimously approved in advance by all of
the members of the Board of Directors of the Company who are not interested in
the transaction; PROVIDED, HOWEVER, that no such Board approval shall be
required with respect to sales of Automobile Contracts made by the Company to
its Subsidiaries, or by its Subsidiaries to the Company, in the ordinary course
of its business so long as such sales are made on terms that are no less
favorable to the Company than those that might be obtained in an arm's length
transaction with a Person who is not an Affiliate of the Company. This SECTION
9.9 shall not apply to (a) any transactions (or series of related transactions)
between the Company and any officer, director, employee or Affiliate thereof
which involve less than $10,000 (and less than $25,000 to any one Person) or an
aggregate of $100,000 in any rolling twelve (12) month period, (b) any
transactions between the Company and CARS USA, Inc. so long as such transactions
are on terms that are no less favorable to the Company than those that might be
obtained in an arm's length transaction from a Person who is not an Affiliate or
otherwise related to the Company, (c) no more than two (2) independent
transactions in any rolling twelve (12) month period between the Company and any

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<PAGE>

officer, director, employee or Affiliate thereof, each of which involves $10,000
or more, but less than $100,000, if each such transaction is approved by a
majority of the members of the Board of Directors of the Company who are not
interested in the transaction, (d) any transaction (or series of related
transactions) between the Company and any officer, director, employee or
Affiliate thereof that involves $100,000 or more, if such transaction is
unanimously approved by the members of the Board of Directors of the Company who
are not interested in the transaction, (e) payments by the Company to Stanwich
in accordance with the terms of the Stanwich Consulting Agreement, and any
renewal or extension thereof which is approved by the Board of Directors of the
Company, PROVIDED that the term of any such renewal or extension expires no
later than December 31, 1999 and payments to be made by the Company under any
such renewal or extension do not exceed the payments required to be made under
the Stanwich Consulting Agreement as of the date hereof, or (f) compensation
payable by the Company to Charles E. Bradley, Sr., the Chairman of the Company,
and Poole, the Vice Chairman of the Company, at the annual rate of $125,000 and
$75,000, respectively.

9.10 RESTRICTION ON FUNDAMENTAL CHANGES. Without the Purchaser's prior
written consent, the Company shall not, and shall not permit any of its
Subsidiaries to, (a) make any change in its business objectives, purposes,
structure or operations that could in any way adversely affect the repayment of
the Obligations to Purchaser or have a Material Adverse Effect; (b) amend its
charter or bylaws, as applicable; (c) sell, lease, transfer or otherwise dispose
of, in one transaction or a series of transactions, all or a significant portion
of its assets, other than dispositions of assets in the ordinary course of
business consistent with past practice; (d) enter into any merger, acquisition,
consolidation, reorganization or recapitalization; or (e) liquidate, wind up or
dissolve.

9.11 AGREEMENTS AFFECTING CAPITAL STOCK AND INDEBTEDNESS; AMENDMENTS TO
MATERIAL CONTRACTS.

(a) The Company shall not, and shall not permit any of its
Subsidiaries to, without the prior written consent of the Purchaser, (i) enter
into any voting agreement, voting trust, irrevocable proxy or other agreement
affecting the voting rights of shares of the Capital Stock of the Company (other
than revocable proxies in connection with meetings of shareholders of the
Company) or its Subsidiaries, except as contemplated by this Agreement or any
Related Agreement; (ii) refinance, renew, replace, restructure or exchange any
Existing Indebtedness (other than the replacement of the ESFR Agreement with the
New Senior Credit Facility and the replacement or renewal of the two existing
warehouse lines of credit); or (iii) amend, supplement or otherwise modify, or
waive, any term or provision of any agreement, instrument or other document
evidencing or governing any Indebtedness of the Company or any of its
Subsidiaries (including, without limitation, the ESFR Agreement, the
Indebtedness under the Bank of America Facility, any other Senior Indebtedness,
the RISRS Indenture, the PENS Indenture, any Stanwich Debt Agreements or any
other Subordinated Agreements).

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<PAGE>

(b) The Company shall not, and shall not permit any of its
Subsidiaries to, cancel or terminate any Material Contract (or consent to or
accept any cancellation or termination thereof), amend or otherwise modify any
Material Contract or give any consent, waiver or approval thereunder, waive any
breach of or default under any Material Contract, or take any action in
connection with any Material Contract that would impair the value of the
interests or rights of the Company thereunder or that would impair the interest
or rights of the Purchaser hereunder or under this Agreement or any Related
Agreement.

9.12 INDEBTEDNESS TO FSA. The Company shall not, and shall not permit any
of its Subsidiaries to, have outstanding at any time Indebtedness for the
payment of money of any kind or nature (whether matured or unmatured or
contingent or non-contingent) to FSA or any Affiliate of FSA pursuant to any
agreement to which FSA is a party, other than Indebtedness (whether matured or
unmatured or contingent or non-contingent) in connection with Securitization
Transactions of the type which is consistent with past practice and which the
Company reasonably believes is customary in securitization transactions insured
by FSA, the assets of which consist solely of Automobile Contracts.

9.13 PAYMENT RESTRICTIONS AFFECTING CERTAIN SUBSIDIARIES. The Company
shall not, and shall not permit any of its Subsidiaries (other than "bankruptcy
remote special purpose" Subsidiaries formed in connection with any
Securitization Transactions) to, enter into or permit to exist any agreement,
instrument or other document which, directly or indirectly, prohibits or
restricts in any manner, or would have the effect of prohibiting or restricting
in any manner, the ability of any such Subsidiary to (a) pay dividends or make
other distributions in respect of its Capital Stock owned by the Company or any
other such Subsidiary, (b) pay or repay any Indebtedness owed to the Company or
any other such Subsidiary, (c) make loans or advances to the Company or (d)
transfer any of its properties or assets to the Company or any other such
Subsidiary.

9.14 NO INSURANCE AGREEMENT EVENT OF DEFAULT. The Company shall not permit
to exist, and shall cause its Subsidiaries not to permit to exist, any Insurance
Agreement Event of Default (or other event or condition which has a
substantially similar meaning to such term) which is not waived by FSA or any
other Credit Enhancer within the period ending on the earlier to occur of (a)
the "Distribution Date" (as such term is defined in the Securitization
Transaction Documents) and (b) the fifteenth day following the end of the
calendar month during which such Insurance Agreement Event of Default shall
occur.

10. INDEMNIFICATION.

10.1 TRANSFER TAXES. The Company shall pay all stamp, transfer and other
similar Taxes (together in each case with interest and penalties, if any)
payable or determined to be payable in connection with the execution and
delivery of this Agreement or the issuance and sale of the Note and the Primary
Warrant and shall hold harmless the Purchaser from and

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<PAGE>

against any and all liabilities with respect to or resulting from any delay in
paying, or omission to pay, such Taxes.

10.2 LOSSES. Whether or not the transactions contemplated by this
Agreement are consummated, the Company shall indemnify and hold harmless the
Purchaser and its Affiliates, employees, partners, officers, directors,
representatives, agents, attorneys, successors and assigns (the "Indemnified
Parties") from and against any and all losses, claims, damages, liabilities,
expenses and costs, including, without limitation, attorneys' fees and other
fees and expenses incurred in, and the costs of preparing for, investigating or
defending any matter (collectively, "Losses"), incurred by such Indemnified
Party in connection with or arising from any breach of any warranty or the
inaccuracy of any representation made by the Company or the failure of the
Company to fulfill any of its agreements or undertakings under this Agreement or
any Related Agreement (or any other document or instrument executed herewith or
pursuant hereto). The Company shall either pay directly all Losses which it is
required to pay hereunder or reimburse any Indemnified Party within ten (10)
days after any request for such payment. The obligations of the Company to the
Indemnified Parties under this SECTION 10 shall be separate obligations to each
Indemnified Party, and the liability of the Company to such Indemnified Parties
hereunder shall not be extinguished solely because any Indemnified Party is not
entitled to indemnity hereunder. The obligations of the Company to the
Indemnified Parties under this SECTION 10 shall survive (a) the payment of the
Note (whether at maturity, by prepayment or acceleration or otherwise), (b) any
transfer of the Note or any interest therein, (c) the termination of this
Agreement or any Related Agreement and (d) the exercise and/or sale of the
Primary Warrant (or any portion thereof) or the sale of the Primary Warrant
Shares.

10.3 INDEMNIFICATION PROCEDURES. Any Person entitled to indemnification
under this SECTION 10 shall (a) give prompt written notice to the Company of any
claim with respect to which it seeks indemnification and (b) permit the Company
to assume the defense of such claim with counsel selected by the Company and
reasonably acceptable to such Person; PROVIDED, HOWEVER, that any Person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such Person unless (i) the
Company has agreed to pay such fees or expenses; (ii) the Company has failed to
notify such Person in writing within ten (10) days of its receipt of such
written notice of claim that it will assume the defense of such claim and employ
counsel reasonably satisfactory to such Person; or (iii) in the judgment of any
such Person, based upon the written advice of counsel, a conflict of interest
may exist between such Person and the Company with respect to such claims (in
which case, if the Person notifies the Company in writing that such Person
elects to employ separate counsel at the expense of the Company, the Company
shall not have the right to assume the defense of such claim on behalf of such
Person). The Company will not be subject to any liability for any settlement
made without its consent (but such consent may not be unreasonably withheld).
No Indemnified Party may, without the consent (which consent will not be
unreasonably withheld) of the Company, consent to entry of any judgment or enter
into any settlement which does not include as an

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unconditional term thereof the giving by the claimant or plaintiff to the
Company of a release from all liability in respect of such claim or litigation.

10.4 CONTRIBUTION. If the indemnification provided for in this SECTION 10
is unavailable to the Purchaser or any other Indemnified Party in respect of any
Losses, then the Company, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by the Indemnified Party as a result of
such Losses, in such proportion as is appropriate to reflect the relative fault
of the Company, on the one hand, and such Indemnified Party on the other hand,
in connection with the actions, statements or omissions which resulted in such
Losses, as well as any other relevant equitable considerations. The relative
fault of the Company, on the one hand, and such Indemnified Party on the other
hand, shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
taken by, or relates to information supplied by, either the Company or such
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent any such action, statement or
omission. The parties agree that it would not be just and equitable if
contribution pursuant to this SECTION 10.4 were determined by PRO RATA
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.

11. DEFAULTS AND REMEDIES.

11.1 EVENTS OF DEFAULT. An "Event of Default" occurs if:

(a) The Company shall (i) fail to pay as and when due (whether at
stated maturity, upon acceleration or required prepayment or otherwise) any
principal on the Note, or (ii) fail to pay any interest, premium, if any, fees,
costs, expenses or other amounts payable under this Agreement, the Note or any
other Related Agreement within one (1) Business Day after the date due
thereunder; or

(b) The Company shall breach or fail to perform, comply with or
observe any agreement, covenant or obligation required to be performed by it
under this Agreement or any Related Agreement (other than as provided in SECTION
11.1(a)) and, if such breach or failure may be cured, such breach or failure
shall not have been remedied within ten (10) Business Days after any officer of
the Company or any of its Subsidiaries becomes aware or should have become aware
of such failure or breach; or

(c) Any representation or warranty made by the Company under,
relating to or in connection with this Agreement or any Related Agreement shall
be false or misleading when made; or

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<PAGE>

(d) The Company or any of its Subsidiaries (i) shall default in the
payment (whether at stated maturity, upon acceleration or required prepayment or
otherwise), beyond any period of grace provided therefor, of any principal of or
interest on any other Indebtedness with a principal amount in excess of
$100,000, or (ii) shall commit any breach of or default under any term of any
agreement, indenture or instrument evidencing or governing any other
Indebtedness, if the effect of such breach or default is to cause, or to permit
the holder or holders of such other Indebtedness to cause (upon the giving of
notice or the passage of time or both), such other Indebtedness to become or be
declared due and payable, or required to be prepaid, redeemed, purchased or
defeased (or an offer of prepayment, redemption, purchase or defeasance is made)
prior to its stated maturity, unless such breach or default has been waived
within ten (10) days following such breach or default by the Person or Persons
entitled to give such waiver; or

(e) Any material provision of any Related Agreement shall, for any
reason, cease to be valid or enforceable in accordance with its terms, or shall
be repudiated, revoked, renounced or terminated, including by operation of law;
or

(f) There shall be commenced against the Company or any of its
Subsidiaries an involuntary case seeking the liquidation or reorganization of
such Person under the Bankruptcy Code or any similar proceeding under any other
Applicable Law or an involuntary case or proceeding seeking the appointment of a
Custodian or to take possession of all or a substantial portion of its property
or to operate all or a substantial portion of its business, and any of the
following events occur: (i) any such Person consents to the institution of the
involuntary case or proceeding; (ii) the petition commencing the involuntary
case or proceeding is not timely controverted; (iii) the petition commencing the
involuntary case or proceeding remains undismissed and unstayed for a period of
sixty (60) days; or (iv) an order for relief shall have been issued or entered
therein; or

(g) The Company or any of its Subsidiaries shall institute a
voluntary case seeking liquidation or reorganization under the Bankruptcy Code
or any similar proceeding under any other Applicable Law, or shall consent
thereto; or shall consent to the conversion of an involuntary case to a
voluntary case; or shall file a petition, answer a complaint or otherwise
institute any proceeding seeking, or shall consent or acquiesce to the
appointment of, a Custodian or to take possession of all or a substantial
portion of its property or to operate all or a substantial portion of its
business; or shall make a general assignment for the benefit of creditors; or
shall generally not pay its debts as they become due; or the Board of Directors
of

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<PAGE>

any such Person (or any committee thereof) adopts any resolution or otherwise
authorizes action to approve any of the foregoing; or

(h) The Company or any of its Subsidiaries shall suffer any money
judgments, writs, warrants of attachment or other orders that involve an amount
or value in excess of $100,000, and such judgments, writs, warrants or other
orders shall continue unsatisfied and unstayed for a period of thirty (30) days;
or

(i) There shall occur a Material Adverse Change; or

(j) There shall occur a Change in Control; or

(k) There shall occur any "Special Redemption Event" (as defined in
the RISRS Indenture); or

(l) The "LLCP Representative" (as such term is defined in the
Investor Rights Agreement) shall be removed from the Board of Directors of the
Company or, at any future election of directors, the LLCP Representative shall
not be elected to such Board, and in each such case the Company shall not have
caused any other LLCP Representative designated by LLCP to be elected or
appointed as a member of such Board within five (5) days after LLCP shall have
designated such other LLCP Representative (PROVIDED, HOWEVER, that the voluntary
resignation of an LLCP Representative shall not be deemed to constitute an Event
of Default under this clause (l)).

The foregoing Events of Default shall be deemed to have occurred,
respectively, and any adjustments in the interest rate under the Note or other
remedies available to the Purchaser hereunder or thereunder shall begin to
apply, at the following times: (i) in the case of the clause (a) above, as of
12:00 p.m. (noon) (Los Angeles time) on the day on which such payment is due but
has not been paid; (ii) in the case of clause (b) above, as of the close of
business on such tenth Business Day, if such breach or failure shall not have
been cured, or as of the close of business on the day on which such breach or
violation occurs, if such breach or failure cannot be cured; (iii) in the case
of clause (c) above, as of the close of business on the day on which the Company
first became aware, or should have become aware, that such representation or
warranty was false or misleading when made; (iv) in the case of clause (d)(i)
above, as of the close of business on the day on which such payment of principal
or interest is due, or in the case of clause (d)(ii), as of the close of
business on the tenth day following such breach or default if such breach or
default has not been waived by the Person or Persons entitled to give such
waiver; (v) in the case of clause (e) above, as of the close of business on the
day such provision ceases to be enforceable or is repudiated, revoked, renounced
or terminated; (vi) in the case of clause (h) above, as of the close of business
on the last day of such thirty (30) day period if such judgment, writ, warrant
or other order remains unsatisfied or unstayed; (vii) in

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<PAGE>

the case of clauses (f) and (g) above, immediately prior to the occurrence of
any of the events enumerated therein; (viii) in the case of clause (i) above,
immediately upon the occurrence of the Material Adverse Change occurs; (ix) in
the case of clauses (j) or (k) above, immediately upon the occurrence of the
Change in Control or the "Special Redemption Event," as the case may be; and (x)
in the case of clause (l) above, as of the close of business on the last day of
such five (5) day period if the Board of Directors shall not have elected or
appointed such other LLCP Representative to such Board.

11.2 ACCELERATION. If any Event of Default (other than an Event of Default
specified in clause (f) or (g) of SECTION 11.1) occurs and is continuing, the
Purchaser may, by written notice to the Company, declare all outstanding
principal of, and accrued and unpaid interest on, the Note to be due and
payable. Upon any such declaration of acceleration, such principal and interest
shall become immediately due and payable. If an Event of Default specified in
clause (f) or (g) of SECTION 11.1 occurs, all outstanding principal of, and
accrued and unpaid interest on, the Note shall become immediately due and
payable without any declaration or other act on the part of the Purchaser. The
Company hereby waives all presentment for payment, demand, protest, notice of
protest and notice of dishonor, and all other notices of any kind to which it
may be entitled under Applicable Law or otherwise.

11.3 OTHER REMEDIES. If any Default or Event of Default shall occur and be
continuing, the Purchaser may proceed to protect and enforce its rights and
remedies under this Agreement and any Related Agreement by exercising all rights
and remedies available under this Agreement, any Related Agreement or Applicable
Laws (including, without limitation, the Code), either by suit in equity or by
action at law, or both, whether for the collection of principal of or interest
on the Note, to enforce the specific performance of any covenant or other term
contained in this Agreement or any Related Agreement. No remedy conferred in
this Agreement upon the Purchaser is intended to be exclusive of any other
remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter existing at
law or in equity or by statute or otherwise.

11.4 WAIVER OF PAST DEFAULTS. The Purchaser may, by written notice to the
Company, waive any Default or Event of Default and its consequences with respect
to this Agreement, the Note or any other Related Agreement; PROVIDED, HOWEVER,
that no such waiver will extend to any subsequent or other Default or Event of
Default or impair any rights of the Purchaser which may arise as a result of
such Default or Event of Default.

12. MISCELLANEOUS.

12.1 NOTATIONS. Before disposing of the Notes or any portion thereof, the
Purchaser shall make a notation thereon (or on a schedule attached thereto) of
the amount of all principal payments previously made by the Company with respect
thereto.

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<PAGE>

12.2 CONSENT TO AMENDMENTS. No amendment, supplement or other modification
to this Agreement or any Related Agreement shall be effective unless the same
shall be in writing and signed by the Purchaser, and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, if, and only if, the Company shall have obtained the prior
written consent of the Purchaser to such action or omission. No course of
dealing between the Company or its Subsidiaries, on the one hand, and the
Purchaser (or any other Holder), on the other hand, nor any delay in exercising
any rights hereunder or under the Note or any other Related Agreement shall
operate as a waiver of any rights of the Purchaser (or any other Holder).

12.3 REGISTRATION OF NOTES; ASSIGNMENTS. The Company shall maintain at its
principal executive office a register in which it shall register the Note (or
Notes) and any Assignments thereof. Upon surrender at the Company's principal
executive office of the Note for registration of any Assignment, the Company
shall, at its expense and within three (3) Business Days of such surrender,
execute and deliver one or more new notes of like tenor in the requested
principal denominations and register such new note or notes in the register to
be maintained by the Company. At the option of the Purchaser, the Note may be
exchanged for one or more new notes of like tenor in the requested principal
denominations.

12.4 PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment for
registration of any Assignment, the Company may treat the Person in whose name
any Note is registered as the owner and Holder of such Note for all purposes
whatsoever, and the Company shall not be affected by notice to the contrary.
Subject to the preceding sentence, the Purchaser may from time to time grant
participations in all or any part of the Note to any Person on such terms and
conditions as may be determined by the Purchaser in its sole and absolute
discretion. Notwithstanding anything to the contrary contained herein or
otherwise, nothing in this Agreement or in any Related Agreement or otherwise
shall confer upon the participant any rights in this Agreement or any other
Related Agreement, and the Purchaser shall retain all rights with respect to the
administration, waiver, amendment and enforcement of, compliance with and
consent to the terms and provisions of this Agreement and the Related Documents,
and the Purchaser may, without the consent of the participant, give or withhold
its consent or agreement to any amendments to or modifications of this Agreement
or any Related Agreement or any waiver of any of the provisions hereof or
thereof or any consents in respect hereof or thereof, or exercise or refrain
from exercising any other rights or remedies which the Purchaser may have under
this Agreement, any Related Agreement or otherwise, except that the Purchaser
will not give its agreement, without the prior written consent of the
participant (which consent shall be given or affirmatively withheld not later
than three (3) Business Days after the Purchaser's request therefor), (a) to
reduce the principal of or rate of interest on the Note or (b) to postpone the
date fixed for payment of principal of or interest on the Indebtedness evidenced
by the Note. If the participant does not timely reply to the Purchaser's
request for such consent, the participant shall be deemed to have consented to
such agreement and the Purchaser may take such action in such manner as the
Purchaser determines in the exercise of its independent business judgment.

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<PAGE>

12.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties, covenants and agreements contained herein, or made in writing by or
on behalf of the Company pursuant to or in connection herewith, shall survive
the execution and delivery of this Agreement, the issuance, sale and delivery of
the Securities, the repayment of the Note and the exercise of the Primary
Warrant, and any due diligence or other investigation made by or on behalf of
the Purchaser.

12.6 ENTIRE AGREEMENT. This Agreement, together with the Exhibits,
Schedules and ANNEX A, the Note and the other Related Agreements constitute the
full and entire agreement and understanding between the Purchaser and the
Company relating to the subject matter hereof and thereof, and supersede all
prior oral and written, and all contemporaneous oral, agreements and
understandings relating to the subject matter hereof, including, without
limitation, the letter agreements dated September 29, 1998 and October 29, 1998,
by and between the Company and the Purchaser.

12.7 SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.

12.8 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of,
and be binding upon, the parties and their respective successors and permitted
assigns. The Purchaser may assign to any Person this Agreement and any or all
of its rights hereunder without the consent of the Company, and the assignee
thereof shall be entitled to all of the rights so assigned to the same extent as
if such assignee were an original party hereof.

12.9 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given if transmitted by telecopier with
receipt acknowledged, or upon delivery, if delivered personally or by recognized
commercial courier with receipt acknowledged, or upon the expiration of 72 hours
after mailing, if mailed by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:

(i) If to the Purchaser, at:

c/o Levine Leichtman Capital Partners, Inc.
335 North Maple Drive, Suite 240
Beverly Hills, CA 90210
Attention: Arthur E. Levine, President
Telephone: (310) 275-5335
Facsimile: (310) 275-1441

65
<PAGE>

WITH A COPY TO:

Riordan & McKinzie
695 Town Center Drive
Suite 1500
Costa Mesa, CA 92626
Attention: James W. Loss, Esq.
Telecopy: (714) 433-2900

(ii) If to the Company, at:

Consumer Portfolio Services, Inc.
16355 Laguna Canyon Road
Irvine, CA 92618
Attention: Charles E. Bradley, Jr., President
Telephone: (949) 753-6800
Facsimile: (949) 450-3951

WITH A COPY TO:

Troy & Gould
1801 Century Park East, Suite 1600
Los Angeles, CA 90067
Attention: Lawrence P. Schnapp, Esq.
Telephone: (310) 553-4441
Facsimile: (310) 201-4746

or at such other address or addresses as the Purchaser or the Company, as the
case may be, may specify by written notice given in accordance with this
SECTION 12.9.

12.10 ACCOUNTING TERMS. For purposes of this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to them by
GAAP and all accounting determinations hereunder or pursuant hereto shall be
made, and all financial statements required to be delivered by the Company and
its Subsidiaries hereunder shall be prepared in accordance with GAAP.

12.11 DESCRIPTIVE HEADINGS; CONSTRUCTION AND INTERPRETATION. The
descriptive headings of this Agreement are for convenience of reference only and
do not constitute a part of this Agreement and are not to be considered in
construing or interpreting this Agreement. All section, preamble, recital,
exhibit, schedule, annex, addendum, clause and party references are to this
Agreement unless otherwise stated. No party, nor its counsel, shall be deemed
the drafter of this Agreement for purposes of construing the provisions of this
Agreement, and all

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<PAGE>

provisions of this Agreement shall be construed in accordance with their fair
meaning, and not strictly for or against any party.

12.12 EXHIBITS AND DISCLOSURE SCHEDULES. The Exhibits and the
Schedules are incorporated herein and shall be an integral part of this
Agreement.

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

12.14 ASSIGNMENTS OF NOTE. Subject to Applicable Laws, the Purchaser
may, at any time and from time to time and without the consent of the Company,
assign or transfer to one or more Persons the Note or any portion thereof (an
"Assignment"), pursuant to the terms of the Note. After any Assignment of the
Note or any portion thereof, the Holder or Holders that hold at least a majority
in aggregate principal amount of the Note (or Notes) outstanding shall
thereafter have the sole and exclusive right to enforce the rights of the
Purchaser under this Agreement, including, without limitation, the right to
consent to or waive any of the provisions of this Agreement.

12.15 FEES AND EXPENSES. The Company shall pay all actual and
estimated out-of-pocket costs and expenses of every type and nature (including,
without limitation, fees and expenses of counsel, accounting fees and expenses,
fees and expenses related to any due diligence investigation and all other
deal-related costs and expenses) incurred by or on behalf of the Purchaser in
connection with the preparation, negotiation, execution and delivery of this
Agreement, the Note, the Primary Warrant and the other Related Agreements and
the consummation of the transactions contemplated hereby (which costs and
expenses may be withheld by the Purchaser from the proceeds of the Note) and, as
directed by the Purchaser, the Company shall reimburse third party providers
directly for any of such costs and expenses (which withholding and, as the case
may be, such direct reimbursement, shall constitute payment in full of the
Company's obligation with respect to such costs and expenses).

12.16 GOVERNING LAW. In all respects, including all matters of
construction, validity and performance, this Agreement and the rights and
obligations arising hereunder shall be governed by, and construed and enforced
in accordance with, the laws of the State of California applicable to contracts
made and performed in such state, without regard to the choice of law or
conflicts of law principles thereof.

12.17 PUBLICITY. Each party will consult with the other before
issuing, and provide each other the opportunity to review, comment upon and
concur with and use reasonable efforts to agree on, any press release or other
public statement with respect to the transactions contemplated by this
Agreement, and shall not issue any such press release or make such other public
announcement prior to such consultation, except as either party may determine is
required under Applicable Laws or by obligations pursuant to any listing
agreement with any

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<PAGE>

national securities exchange or Nasdaq. The parties agree that the initial
press release to be issued with respect to the transactions contemplated by this
Agreement shall be in the form heretofore agreed to by the parties.

12.18 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO
APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, AND
UNDERSTANDING THEY ARE WAIVING A CONSTITUTIONAL RIGHT, THE PARTIES WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE
ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO, THIS SECURITIES PURCHASE AGREEMENT AND/OR
ANY RELATED AGREEMENT OR THE TRANSACTIONS COMPLETED HEREBY OR THEREBY.

[REST OF PAGE INTENTIONALLY LEFT BLANK]

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<PAGE>

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized representatives as of the date first
written above.

PURCHASER

LEVINE LEICHTMAN CAPITAL PARTNERS, INC.,
a California corporation

On behalf of LEVINE LEICHTMAN CAPITAL
PARTNERS II, L.P., a California limited
partnership

By: /s/ Lauren B. Leichtman
-------------------------------------
Lauren B. Leichtman
Chief Executive Officer

COMPANY

CONSUMER PORTFOLIO SERVICES, INC.,
a California corporation

By: /s/ Charles E. Bradley, Jr.
--------------------------------
Charles E. Bradley, Jr.
President and Chief Executive Officer

By: /s/ Jeffrey P. Fritz
--------------------------------
Jeffrey P. Fritz
Senior Vice President and Chief
Financial Officer

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<PAGE>

ADDENDUM REGARDING STANWICH

The undersigned has reviewed this Agreement and understands its terms and
conditions. Furthermore, the undersigned hereby agrees to the terms of, and to
be bound by, the provisions of SECTION 8.24 of this Agreement as if the
undersigned were a party to this Agreement for all purposes.

STANWICH FINANCIAL SERVICES CORP.,
a Rhode Island corporation

By: /s/ Charles E. Bradley, Sr.
-----------------------------------------------
Name: Charles E. Bradley, Sr.
---------------------------------------------
Title: President
--------------------------------------------

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<PAGE>

ANNEX A

FINANCIAL COVENANTS AND RELATED DEFINITIONS

(a) MAXIMUM MONTHLY RECEIVABLE ORIGINATIONS.

For each calendar month, commencing with the calendar month ending December
31, 1998 through the calendar month ending December 31, 1999, the monthly
average of Automobile Contract originations by the Company and its Subsidiaries
over the three (3) month period ending at the end of such calendar month shall
not exceed $70,000,000.

(b) MAXIMUM MONTHLY OPERATING EXPENSES.

For each calendar month, commencing with the calendar month ending December
31, 1998 through the calendar month ending December 31, 1999, the monthly
average of Operating Expenses incurred by the Company and its Subsidiaries over
the three (3) month period ending at the end of such calendar month shall not
exceed $6,000,000.

From and after the Closing Date, the Company and its Subsidiaries shall not
incur Capital Expenditures during any fiscal year in excess of the amount set
forth opposite such period below:

<TABLE>
<CAPTION>
Maximum Capital
Fiscal Year Ended Expenditures
- ---------------------------------------------- -------------------------
<S> <C>
December 31, 1998 . . . . . . . . . . . . . . $3,500,000
Each fiscal year thereafter . . . . . . . . . $1,500,000
</TABLE>

(d) MINIMUM QUARTERLY NET INCOME.

From and after the Closing Date, the Company and its Subsidiaries shall
achieve Net Income of equal to or greater than $0 for each fiscal quarter.

(e) MAXIMUM PAYABLES OVER 60 DAYS PAST DUE.

The Company and its Subsidiaries shall not permit the sum of all trade
payables which are sixty (60) days past due at the end of any given month to
exceed $500,000.

Annex A - 1
<PAGE>

(f) SECURITIZATION CREDIT TRIGGERS.

The Servicer shall not permit the Average Delinquency Ratio, the Cumulative
Default Rate or the Cumulative Net Loss Rate of any Securitization Transaction
to exceed the levels opposite the monthly periods set forth below:

MONTHS FROM AVERAGE
CLOSING THE DELINQUENCY CUMULATIVE CUMULATIVE NET
SECURITIZATION RATIO DEFAULT RATE LOSS RATE
- ---------------- -------------- --------------- ----------------
<S> <C> <C> <C>
1 - 3 10.00% 3.33% 2.00%
4 - 6 10.00% 8.33% 5.00%
7 - 9 10.00% 11.67% 7.00%
10 - 12 10.00% 15.00% 9.00%
13 - 15 10.00% 18.33% 11.00%
16 - 18 10.00% 21.67% 13.00%
19 - 21 10.00% 24.25% 14.55%
22 - 24 10.00% 26.67% 16.00%
25 - 27 10.00% 28.75% 17.25%
28 - 30 10.00% 30.42% 18.25%
31 - 33 10.00% 32.08% 19.25%
34 - 36 10.00% 33.41% 20.05%
37 - 39 10.00% 34.58% 20.75%
40 - 42 10.00% 35.25% 21.15%
43 - 45 10.00% 35.83% 21.50%
46 - 48 10.00% 36.44% 21.86%
49 - 51 10.00% 36.78% 22.07%
52 - 54 10.00% 36.99% 22.20%
55 - 57 10.00% 37.10% 22.26%
58 - 60 10.00% 37.13% 22.28%
</TABLE>

(g) AMOUNT IN REPOSSESSION

The aggregate amount attributable to repossessed automobiles (where such
repossessions were by or at the Company's or at its Subsidiary's direction)
shall not exceed five percent (5%) of the aggregate Gross Principal Balance of
all Automobile Contracts owned or serviced by the Company or its Subsidiaries.

(h) AMOUNT OF DEFERRAL OR EXTENSION

The aggregate number of accounts with respect to which the Company grants a
deferral or extension in any month shall not exceed two percent (2%) of the
aggregate number of

Annex A - 2
<PAGE>

Automobile Contracts owned or serviced by the Company or its Subsidiaries as of
that month's end.

(i) AMOUNT OF CUMULATIVE DEFERRAL OR EXTENSION

The cumulative number of accounts with respect to which the Company and its
Subsidiaries have granted a deferral or extension shall not exceed eighteen
percent (18.0%) of the aggregate number of Automobile Contracts owned or
serviced by the Company and its Subsidiaries as of that month's end.

(j) DEFINITIONS. For purposes of this ANNEX A only, the following capitalized
terms shall have the meanings set forth below. To the extent that any such
capitalized terms are also defined in SECTION 1 of the Securities Purchase
Agreement, the meanings set forth below shall govern for purposes of this ANNEX
A:

"AGGREGATE PRINCIPAL BALANCE" shall mean, with respect to any Determination
Date and any Securitization Transaction, the sum of the Automobile Principal
Balances (computed as of the end of the related Collection Period) for all
Automobile Contracts (other than (i) any Liquidated Contract and (ii) Purchased
Contract).

"AMOUNT FINANCED" shall mean, with respect to an Automobile Contract, the
aggregate amount advanced under such Automobile Contract toward the purchase
price of the Financed Vehicle and any 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.

"AUTOMOBILE CONTRACT DEBTOR" shall mean, with respect to any Automobile
Contract, any purchaser or co-purchaser of any Financed Vehicle and any other
Person who owes payments under such Automobile Contract.

"AUTOMOBILE CONTRACTS" shall mean retail installment sale contracts for a
Financed Vehicle which are owned by the Company or its Subsidiaries.

"AUTOMOBILE PRINCIPAL BALANCE" shall mean, with respect to any Automobile
Contract, as of the close of business on the last day of a Collection Period,
the Amount Financed minus the sum of the following amounts without duplication:
(i) in the case of a Rule of 78's Automobile Contracts, that portion of all
Scheduled Payments actually received on or prior to such day allocable to
principal using the actuarial or constant yield method; (ii) in the case of a
Simple Interest Receivable, that portion of all Scheduled Payments actually
received on or prior to such day allocable to principal using the Simple
Interest Method; (iii) any payment of the Purchase Amount with respect to the
Automobile Contract allocable to principal; (iv) any Cram Down Loss in respect
of such Automobile Contract; and (v) any prepayment in full or any

Annex A - 3
<PAGE>

partial prepayment applied to reduce the Automobile Principal Balance of the
Automobile Contract.

"AVERAGE DELINQUENCY RATIO" shall mean, with respect to any Securitization
Transaction and any Determination Date, the arithmetic average of the
Delinquency Ratios for such Determination Date and the two immediately preceding
Determination Dates.

"CAPITAL EXPENDITURES" shall mean, with respect to any period, the
aggregate of all expenditures (whether paid in cash or accrued) of the Company
and its Subsidiaries made during such period, including all Capital Lease
Obligations for property, plant and equipment (other than repairs), other fixed
assets and improvements, or for replacements, substitutions or additions
thereto, that are required to be capitalized on the consolidated balance sheet
of the Company in accordance with GAAP.

"COLLATERAL COVERAGE RATIO" shall mean, with respect to any period, a
fraction, expressed as a percentage, the numerator which is equal to aggregate
cash balance in all cash collateral accounts or other escrow or reserve accounts
established in connection with any Securitization Transaction, and the
denominator of which is equal to the principal balance of the Note.

"COLLECTION PERIOD" shall mean (i) with respect to the first Payment Date,
the period commencing at the close of business on the Initial Cut-Off Date and
ending at the close business on the last day of the then current month, and (ii)
with respect to each Subsequent Payment Date, the preceding calendar month. Any
amount stated "as of the close of business of the last day of a Collection
Period" shall give effect to the following calculations as determined as of the
end of the day on such last day: (i) all applications of collections and
(ii) all distributions.

"CRAM DOWN LOSSES" shall mean, with respect to an Automobile Contract, if a
court of appropriate jurisdiction in an insolvency proceeding shall have issued
an order reducing the amount owed on an Automobile Contract or otherwise
modifying or restructuring Scheduled Payments to be made on an Automobile
Contract, an amount equal to such reduction in the net present value (using as
the discount rate the lower of the contract rate or the rate of interest
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 such order is entered.

"CUMULATIVE DEFAULT RATE" shall mean, with respect to any Securitization
Transaction and with respect to any Determination Date, the fraction, expressed
as a percentage, the numerator of which is equal to the Aggregate Principal
Balance of all Automobile Contracts which became Defaulted Contracts from the
Cut-Off Date as of the close of business at the end of the related Collection
Period and the denominator of which is equal to the sum of (a) the original
Aggregate Principal Balance of all Automobile Contracts as of the Cut-Off Date
plus (b) the Aggregate Principal Balance of all Subsequent Contracts conveyed to
such Securitization

Annex A - 4

<PAGE>

Transaction (determined as of the respective Subsequent Cut-Off Dates)
through the last day of the related Collection Period.

"CUMULATIVE NET LOSS RATE" shall mean, with respect to any
Securitization Transaction and with respect to any Determination Date, the
fraction, expressed as a percentage, the numerator of which is equal to the
amount, if any, by which (a) the sum of (i) the Automobile Principal Balance
of all Automobile Contracts which became Liquidated Contracts as of the end
of the related Collection Period since the Cut-Off Date, plus accrued and
unpaid interest thereon at the applicable Annual Percentage Rate to the end
of the related Collection Period, plus (ii) the aggregate of all Cram Down
Losses that occurred as of the end of the related Collection Period since the
Cut-Off Date, exceeds (b) the Net Liquidation Proceeds received as of the end
of the related Collection Period since the Cut-Off Date in respect of all
Liquidated Contracts and the denominator of which is equal to the sum of (i)
the original Aggregate Principal Balance of all Automobile Contracts as of
the Cut-Off Date plus (ii) the Aggregate Principal Balance of all Subsequent
Contracts conveyed to such Securitization Transaction (determined as of the
respective Subsequent Cut-Off Dates) through the last day of the related
Collection Period.

"CUT-OFF DATE" shall mean the date upon which (i) money received under
Automobile Contracts sold in any Securitization Transactions becomes payable to
the trustee or similar Person with respect to the relevant Securitization
Transaction Documents (including, without limitation, principal prepayments
relating to scheduled payments), and (ii) all Net Liquidation Proceeds received
with respect to such Automobile Contracts.

"DEFAULTED CONTRACTS" shall mean any Automobile Contracts with respect to
which (i) any Automobile Contract Debtor has failed to make more than 90% of a
Scheduled Payment of more than ten dollars for 180 days or more, (ii) the
Servicer has repossessed the Financed Vehicle (and any applicable redemption
period has expired), or (iii) the Servicer has determined in good faith that
payments under the Automobile Contracts are not likely to be resumed.

"DELINQUENCY AMOUNT" shall mean, with respect to any Securitization
Transaction, as of any Determination Date, the sum of the Automobile Principal
Balance and Unearned Interest with respect to all Automobile Contracts with
respect to which any Automobile Contract Debtor has failed to make more than 90%
of a Scheduled Payment of more than ten dollars for 30 days or more as of the
close of business on the last day of the related Collection Period or that
became a Purchased Contract as of the close of business on the last day of the
related Collection Period and with respect to which as of such date an
Automobile Contract Debtor has failed to make more than 90% of a Scheduled
Payment of more than ten dollars for 30 days or more.

DELINQUENCY RATIO" shall mean, with respect to any Securitization
Transaction, as of any Determination Date, the fraction (expressed as a
percentage) computed by dividing (a) the Delinquency Amount by (b) the sum of
the (i) Aggregate Principal Balance and (ii) Unearned Interest with respect to
all Automobile Contracts as of the close of business on the last day of the
related Collection Period.

Annex A - 5
<PAGE>

"DETERMINATION DATE" shall mean the earlier of (i) the seventh Business Day
of each calendar month and (ii) the fifth Business Day preceding the related
Payment Date.

"FINANCED VEHICLE" shall mean a new or used automobile, light truck, van or
minivan, together with all accessions thereto, securing any Automobile Contract
Debtor's indebtedness under an Automobile Contract.

"GROSS PRINCIPAL BALANCE" shall mean the outstanding principal balance of
the Automobile Contracts plus Unearned Interest.

"INITIAL CUT-OFF DATE" shall mean the first Cut-Off Date of any
Securitization Transactions.

"LIQUIDATED CONTRACTS" shall mean any Automobile Contract (i) which has
been liquidated by the Servicer through the sale of the Financed Vehicle or
(ii) for which the related Financed Vehicle has been repossessed and 120 days
have elapsed since the date of such repossession or (iii) as to which an
Automobile Contract Debtor has failed to make more than 90% of a Scheduled
Payment of more than ten dollars for 180 or more days as of the end of a
Collection Period or (iv) with respect to which proceeds have been received
which, in the Servicer's judgment, constitute the final amounts recoverable in
respect of such Automobile Contract.

"NET INCOME" shall mean, with respect to any period, net income after
provision for income taxes for such period, as determined in accordance with
GAAP and reported on the financial statements for such period.

"NET LIQUIDATION PROCEEDS" shall mean, with respect to any Securitization
Transaction, as to any Liquidated Contract, all amounts realized with respect to
such Automobile Contract net of (i) reasonable expenses incurred by the Servicer
in connection with the collection of such Automobile Contract and the
repossession and disposition of the Financed Vehicle and (ii) amounts that are
required to be refunded to the Automobile Contract Debtor on such Automobile
Contract; PROVIDED, HOWEVER, that the Net Liquidation Proceeds with respect to
any Automobile Contract shall in no event be less than zero.

"OPERATING EXPENSES" shall mean, with respect to any period, expenses for
such period, as determined in accordance with GAAP and reported on the financial
statements for such period, excluding the following expense items for such
period: (i) Securitization Transaction expenses, (ii) provision for credit
losses, (iii) interest, (iv) depreciation, (v) amortization and (vi) provision
for income taxes.

"PAYMENT DATE" shall mean, with respect to each Collection Period, the 15th
day of the following calendar month, or if such day is not a Business Day, the
immediately following Business Day.

Annex A - 6
<PAGE>

"PURCHASED CONTRACT" shall mean an Automobile Contract purchased as of the
close of business on the last day of a Collection Period by the Servicer.

"SCHEDULED PAYMENT" shall mean, with respect to any Collection Period for
any Automobile Contract, the amount set forth in such Automobile Contract as
required to be paid by the Automobile Contract Debtor in such Collection Period
(without giving effect to deferments of payments or any rescheduling of payments
in any insolvency or similar proceedings).

"SECURITIZATION TRANSACTIONS" shall mean any past, present or future
transactions completed or to be completed by the Company and its Subsidiaries
involving the pooling and sale of Automobile Contracts.

"SERVICING PORTFOLIO" shall mean all Automobile Contracts currently being
serviced by the Servicer.

"SUBSEQUENT CONTRACTS" shall mean Automobile Contracts sold to any existing
Securitization Transactions existing at the time of such sale after the Initial
Cut-Off Date with respect to that Securitization Transaction.

"SUBSEQUENT CUT-OFF DATES" shall mean any Cut-Off Date after the Initial
Cut-Off Date with respect to any Securitization Transaction.

"SERVICER" shall mean the Company, as the servicer of Automobile Contracts,
and each successor Servicer.

"UNEARNED INTEREST" shall mean, with respect to any Automobile Contract as
of any Determination Date, all interest on such Automobile Contract which is
unpaid as of such Determination Date, whether or not such interest is due.

Annex A - 7

<PAGE>

THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT IN
COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH STATE
SECURITIES LAWS OR PURSUANT TO AN EXEMPTION OR QUALIFICATION THEREFROM.

CONSUMER PORTFOLIO SERVICES, INC.

SENIOR SUBORDINATED PRIMARY NOTE

$25,000,000.00 November 17, 1998

FOR VALUE RECEIVED, Consumer Portfolio Services, Inc., a California
corporation (the "Borrower" or the "Company"), hereby promises to pay to the
order of Levine Leichtman Capital Partners II, L.P., a California limited
partnership ("LLCP" or the "Purchaser"), and/or any registered assigns
(collectively, with LLCP, the "Holder"), the sum of Twenty-Five Million Dollars
($25,000,000.00) in immediately available funds and in lawful money of the
United States of America, all as provided below. This Senior Subordinated
Primary Note (this "Note"), due on the Maturity Date (as such term is defined
below), is being issued in connection with the consummation of the transactions
contemplated by the Securities Purchase Agreement, dated of even date herewith,
between the Company and LLCP (as it may be amended, supplemented or otherwise
modified and in effect from time to time, the "Securities Purchase Agreement").

The Indebtedness evidenced by this Note, including the payment of principal
of, premium, if any, and interest on this Note, shall be subordinate and subject
in right of payment, to the extent and in the manner set forth in SECTION 11
hereof, to the prior payment in full of all Senior Indebtedness, and shall rank
PARI PASSU in right of payment with all Senior Subordinated Indebtedness.

1. DEFINITIONS. All capitalized terms used and not otherwise
defined herein shall have the meanings set forth in the Securities Purchase
Agreement.

2. PAYMENT OF INTEREST. The Borrower shall pay interest on the unpaid
principal balance of this Note from the date hereof until fully paid at a rate
per annum equal to 13.50%. Interest shall be payable monthly in arrears on the
last Business Day of each calendar month (or portion thereof), commencing on
November 30, 1998 (each an "Interest Payment Date"). Interest shall be computed
on the basis of the actual number of days elapsed over a 360-day year, including

<PAGE>

the first day and excluding the last day. If (a) the Borrower fails to make any
payment of principal as and when due (whether at stated maturity, upon
acceleration or required prepayment or otherwise), (b) the Borrower fails to
make any payment of interest, premium, if any, fees, costs, expenses or other
amounts due hereunder within one (1) Business Day after the date when due, or
(c) any other Default or Event of Default has occurred and is continuing, then,
in addition to the rights and remedies available to the Holder under the
Securities Purchase Agreement, the other Related Agreements and Applicable Laws,
the outstanding principal balance of, premium, if any, and accrued and unpaid
interest on this Note shall bear interest at the rate of 15.50% per annum (the
"Default Rate") from the date on which such Event of Default is deemed to have
occurred (as provided in SECTION 11.1 of the Securities Purchase Agreement)
until such Event of Default is cured or waived.

3. PAYMENT OF PRINCIPAL. The Borrower shall pay in full the entire
outstanding principal balance of this Note, together with all premium, if any,
accrued and unpaid interest on, and all other amounts due under this Note on the
earlier to occur (the "Maturity Date") of (a) the New Senior Facility
Establishment Date and (b) November 30, 2003.

4. OPTIONAL PREPAYMENTS.

(a) Except as provided in SECTION 5 and SECTION 6 below, the Borrower
shall make no payment of the principal balance of this Note prior to October 31,
2000 (except on the New Senior Facility Establishment Date as provided for in
SECTION 3). Thereafter, this Note may be voluntarily prepaid, at the option of
the Borrower, in whole or in part, as follows: (i) at 103.0% of the principal
amount being prepaid at any time on or after October 31, 2000, and on or prior
to October 31, 2001; (ii) at 101.5% of the principal amount being prepaid at any
time on or after November 1, 2001 and on or prior to October 31, 2002; and (iii)
at 100.0% of the principal amount being prepaid at any time on or after November
1, 2002. (Each percentage set forth above is referred to herein as the
"Prepayment Percentage" applicable to any prepayment.) Any prepayment of the
Note under this SECTION 4 shall also include all accrued and unpaid interest on
the outstanding principal balance of this Note through and including the date of
prepayment.

(b) The Borrower shall give the Holder written notice of each
voluntary prepayment not less than thirty (30) nor more than ninety (90) days
prior to the date of prepayment. Such notice shall specify the principal amount
of this Note to be prepaid on such date. Notice of prepayment having been given
as aforesaid, a payment in an amount equal to (i) the Prepayment Percentage
applicable to such prepayment, if any, MULTIPLIED BY (ii) the principal amount
of the Note specified in such prepayment notice shall become due and payable on
such prepayment date, together with all accrued and unpaid interest on the
outstanding principal balance of this Note through and including the date of
prepayment.

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<PAGE>

MANDATORY PREPAYMENTS. In addition to the mandatory prepayments
required to be made by the Company pursuant to SECTION 6 (and provided that, to
the extent any ESFR Indebtedness remains outstanding at the time any such
prepayments is required to be made, such prepayment would constitute an ESFR
Permitted Payment):

(a) FAILURE TO OBTAIN EXCESS WARRANT SHARE APPROVAL. If the
Shareholder Meeting (as such term is defined in the Securities Purchase
Agreement) occurs prior to the New Senior Facility Establishment Date and the
shareholders of the Company fail to approve the issuance by the Company of the
Excess Warrant Shares (as such term is defined in SECTION 2.5 of the Primary
Warrant), the Company shall make a mandatory prepayment of the outstanding
principal balance of this Note in an amount equal to $2,419,985.51, PLUS (i) all
accrued and unpaid interest on this Note through and including the date of
prepayment, PLUS (ii) a prepayment premium equal to $419,790.00. Such mandatory
prepayment, if due, shall be payable on the first Business Day following the
earlier of (A) the date of the Shareholder Meeting and (B) May 31, 1999. On or
before the earlier to occur of (x) the fifteenth day prior to the date fixed for
the Shareholder Meeting and (y) May 15, 1999, the Company shall establish an
escrow account, on terms and conditions satisfactory to the Purchaser, and
deposit into such account the aggregate amount of such mandatory prepayment.
Such terms and conditions shall include, without limitation, the requirement
that the mandatory prepayment required under this SECTION 5(a) be funded with
the amounts deposited in such escrow account (PROVIDED that such prepayment
constitutes an ESFR Permitted Payment).

(b) ASSET SALE PREPAYMENTS. In addition, if at any time the Company
intends to consummate any Asset Sale, it shall, within ten (10) Business Days
prior to the proposed date of consummation, notify the Holder in writing of the
proposed Asset Sale (including, without limitation, the subject matter and the
material terms thereof and the proposed date of consummation). Promptly
following the Holder's receipt of such written notice, the Holder will furnish
to the Company a written notice directing the Company either (i) to apply all
Net Available Cash derived from such Asset Sale to prepay outstanding
Indebtedness under the Note or (ii) hold such Net Available Cash in a separate
interest-bearing account pending further directions from the Holder. If the
Holder directs the Company to prepay such Indebtedness pursuant to clause (i)
above, the Company shall make such prepayment within three (3) Business Days
following the date of consummation of such Asset Sale. Any Net Cash Available
held in a separate interest-bearing account pursuant to clause (ii) above shall
not be deemed to have been applied as a prepayment to any Indebtedness under the
Note unless and until paid to the Holder pursuant to specific directions
furnished by the Holder to the Company. This SECTION 5(b) shall not apply to
(A) the sale by the Company of the Capital Stock of CPS Leasing, Inc., LINC
Acceptance LLC and Samco Acceptance Corp., as contemplated by the CPS Operating
Plan, (B) the sale or other disposition of the Company's interest in NAB Asset
Corp., or (C) sales of any tangible personal property of the Company that do not
exceed $50,000 in the aggregate in any fiscal year of the Company; PROVIDED,
HOWEVER, that in each of clauses (A), (B) and (C), the Company reinvests the
proceeds of such sales in the operations of its business.

3
<PAGE>

(c) EXCESS CASH PREPAYMENTS. For each twelve (12) month period
ending on July 31st of any fiscal year of the Company, commencing with the
twelve (12) month period ending July 31, 2000, the Company shall prepay the
outstanding principal balance of the Note, together with all accrued and unpaid
interest thereon, in an amount equal to 25.0% of the Excess Cash for such twelve
(12) month period. Such mandatory prepayment shall be paid by the Company to
the Holder not later than November 1st immediately following the end of such
twelve (12) month period (the first payment of which shall be due and payable no
later than November 1, 2000) and, concurrently with such payment, the Company
shall deliver to the Holder an officer's certificate, signed by the Chief
Financial Officer of the Company, which shows in reasonable detail the
calculation of such Excess Cash.

(d) MANDATORY PREPAYMENT FROM PROCEEDS OF KEY MAN LIFE INSURANCE.
The Company shall, within one (1) Business Day of the receipt thereof, apply the
proceeds from any key-man life insurance policy maintained as required by
SECTION 8.8 of the Securities Purchase Agreement to, first, the payment of all
accrued interest on this Note, through the date of such payment, and, second, to
the prepayment of the principal amount of this Note. Any proceeds after the
payment in full as provided above shall be and remain the property of the
Company.

The mandatory prepayments provided for in this SECTION 5 shall be paid at
100.0% of the principal amount required to be prepaid, PLUS premium, if any, and
accrued and unpaid interest, all as provided for above. To the extent that any
payment required by this SECTION 5 is not made because such payment does not
constitute an ESFR Permitted Payment, the obligation to make such payment shall
be deferred until such time as the ESFR Indebtedness is no longer outstanding or
such payment becomes an ESFR Permitted Payment, and such payment shall be made
on the next following Business Day.

6. CHANGE IN CONTROL PREPAYMENT. The Holder may require the Borrower to
prepay this Note, in whole or in part as requested by the Holder, at any time
during the 90-day period following the consummation of a transaction which
constitutes a Change in Control (as such term is defined below), at the
prepayment amounts set forth below (and provided that, to the extent any ESFR
Indebtedness remains outstanding at the time any such prepayments is required to
be made, such prepayment would constitute an ESFR Permitted Payment). For the
purposes of this Note, a "Change in Control" shall mean:

(i) Any transaction or other event (including, without limitation,
any merger, consolidation, sale or other transfer of stock or voting rights
with respect thereto, issuance of stock, death or other transaction or
event) by virtue of which Charles E. Bradley, Jr. fails to own, directly or
indirectly through one or more of his Affiliates, at least 2,250,000 shares
of Common Stock (as adjusted from time to time, the "Base Bradley Shares"),
after giving effect to any shares of Common Stock that may be acquired upon
exercise of any Option Rights owned or held by Mr. Bradley as of the date
hereof, but without giving effect to any stock splits or similar events
occurring after the date hereof; PROVIDED, HOWEVER, that (A) the Base
Bradley Shares shall increase by the number of

4
<PAGE>

shares of Common Stock acquired by Mr. Bradley (whether by purchase,
exercise of Option Rights granted after the date hereof, bequest,
inheritance, gift or otherwise) at any time after the date hereof, (B)
shares of Common Stock owned by Charles E. Bradley, Sr. shall not be
deemed to be owned by Mr. Bradley for purposes of this clause (i) (other
than shares of Common Stock owned by Charles E. Bradley, Sr. which are
subject to certain Option Rights in favor of Mr. Bradley), (C) the Base
Bradley Shares shall be reduced by the number of shares of Common Stock
held by Stanwich which constitute Base Bradley Shares that are sold or
pledged by Stanwich after the date hereof, PROVIDED that Mr. Bradley
does not, directly or indirectly, solicit, initiate, engage in or
encourage in any manner whatsoever any discussions, or participate in
any other activities, relating to such sale or pledge, (D) the Base
Bradley Shares shall be reduced by shares of Common Stock included
therein that are subject to Option Rights which expire at any time after
the date hereof; and (E) the Base Bradley Shares shall not be affected
by (x) any shares of Common Stock purchased by Mr. Bradley on the open
market after the date hereof or (y) any shares of Common Stock purchased
by Mr. Bradley on the open market after the date hereof and thereafter
sold by Mr. Bradley on the open market; or

(ii) (A) The termination (whether voluntary or involuntary) of the
employment of Charles E. Bradley, Jr. as the President and Chief Executive
Officer of the Company with significant daily senior management
responsibilities; or (B) the termination (whether voluntary or involuntary)
of the employment of Jeffrey P. Fritz as the Chief Financial Officer of the
Company with significant daily senior management responsibilities, PROVIDED
that no Change in Control shall be deemed to occur under this clause (ii)
(B) if, within ninety (90) days after the termination of the employment of
Mr. Fritz, the Board of Directors of the Company shall have appointed a new
Chief Financial Officer of the Company who is acceptable to the Purchaser;
or

(iii) Any sale, lease, transfer, assignment or other disposition
of all or substantially all of the assets of the Borrower (excluding assets
sold in connection with an asset securitization transaction in the ordinary
course of the Company's business) or any of its Subsidiaries.

In the case of a Change in Control in respect of clauses (i) or (ii)
above, the Company shall prepay an amount equal to 101.0% of the principal
amount being prepaid, PLUS accrued and unpaid interest through and including
the date of prepayment, and in the case of a Change in Control in respect of
clause (iii) above, the Company shall prepay an amount equal to 100.0% of the
principal amount being prepaid, PLUS accrued and unpaid interest through and
including the date of prepayment. The Borrower shall notify the Holder of
the date on which a Change in Control has occurred within one (1) Business
Day after such date and shall, in such notification, inform the Holder of the
Holder's right to require the Borrower to prepay this Note as provided in
this SECTION 6 and of the date on which such right shall terminate. If the
Holder elects to require the Borrower to prepay this Note pursuant to this
SECTION 6, it shall furnish written notice to the Borrower advising the
Borrower of such election and the amount of principal

5
<PAGE>

of this Note to be prepaid. The Borrower shall prepay this Note in accordance
with this SECTION 6 and such written notice within one (1) Business Day after
its receipt of such written notice. To the extent that any payment required by
this SECTION 6 is not made because such payment does not constitute an ESFR
Permitted Payment, the obligation to make such payment shall be deferred until
such time as the ESFR Indebtedness is no longer outstanding or such payment
becomes an ESFR Permitted Payment, and such payment shall be made on the next
following Business Day.

7. HOLDER ENTITLED TO CERTAIN BENEFITS UNDER SECURITIES PURCHASE
AGREEMENT. This Note is the "Note" referred to in the Securities Purchase
Agreement which provides for, among other things, the acceleration by the
Purchaser of all outstanding principal of, and accrued and unpaid interest on,
this Note upon the occurrence of an Event of Default as specified therein.

8. MANNER OF PAYMENT. Payments of principal, interest and other amounts
due under this Note shall be made no later than 12:00 p.m. (noon) (Los Angeles
time) on the date when due and in lawful money of the United States of America
(by wire transfer in funds immediately available at the place of payment) to
such account as the Holder may designate in writing to the Borrower and, if to
LLCP, to: Bank of America, Century City, Private Banking, 2049 Century Park
East, Los Angeles, California 90067; ABA No. 121000358; Account No. 11546-03239;
Attention: Cheryl Stewart (or such other place of payment that LLCP may
designate in writing to the Borrower). Any payments received after 12:00 p.m.
(noon) (Los Angeles time) shall be deemed to have been received on the next
succeeding Business Day. Any payments due hereunder which are due on a day
which is not a Business Day shall be payable on the first succeeding Business
Day and such extension of time shall be included in the computation.

9. MAXIMUM LAWFUL RATE OF INTEREST. The rate of interest payable under
this Note shall in no event exceed the maximum rate permissible under applicable
law. If the rate of interest payable on this Note is ever reduced as a result
of this SECTION 9 and at any time thereafter the maximum rate permitted under
applicable law exceeds the rate of interest provided for in this Note, then the
rate provided for in this Note shall be increased to the maximum rate provided
for under applicable law for such period as is required so that the total amount
of interest received by the Holder is that which would have been received by the
Holder but for the operation of the first sentence of this SECTION 9.

10. BORROWER'S WAIVERS. The Borrower hereby waives presentment for
payment, demand, protest, notice of protest and notice of dishonor hereof, and
all other notices of any kind to which it may be entitled under applicable law
or otherwise.

11. NOTE SUBORDINATED TO SENIOR INDEBTEDNESS; SUBROGATION.

(a) The Indebtedness evidenced by this Note, including the payment of
principal of, premium, if any, and other amounts on this Note, is hereby
expressly made subordinate and subject in right of payment, to the extent and in
the manner set forth in this SECTION 11, to the prior

6
<PAGE>

payment in full of all Senior Indebtedness, and shall rank PARI PASSU in right
of payment with all Senior Subordinated Indebtedness.

(b) Until all Senior Indebtedness shall have been paid in full, the
Holder shall be permitted to retain only the following payments of principal and
interest paid by the Company with respect to this Note (all such payments being
referred to herein as "Permitted Payments"), and all such payments that do not
constitute Permitted Payments will be turned over by the Holder to the holder or
holders of Senior Indebtedness or any agent therefor (a "Senior Agent") for the
benefit of the holder or holders of Senior Indebtedness:

(i) principal payments on this Note, whether (A) on the Maturity
Date, or (B) as provided for herein (including, without limitation,
pursuant to SECTION 4 (Optional Prepayments), SECTION 5 (Mandatory
Prepayments) or SECTION 6 (Change in Control Prepayments) hereof) or as
required in the Securities Purchase Agreement; PROVIDED, HOWEVER, that all
such principal payments are subject to the restrictions set forth in
SECTION 11(c) and SECTION 11(d) hereof; and

(ii) payments of interest with respect to this Note, so long as no
default has occurred and is then continuing with respect to the payment of
principal of or interest on the Senior Indebtedness (for such purposes, any
such default which has been cured by payment or which has been waived shall
not be deemed to be continuing).

(c) From and after receipt by the Company of a written notice (a
"Default Notice") from the holder or holders of not less than fifty-one percent
(51.0%) in principal amount of the outstanding Senior Indebtedness or any agent
therefor (a "Senior Agent") specifying that a default in the payment of any
obligation on any Senior Indebtedness when due, whether at the stated maturity
of any such payment or by declaration of acceleration, call for redemption,
mandatory repurchase, payment or prepayment or otherwise (a "Senior Payment
Default") has occurred, the Company may not make any principal payments
described in SECTION 11(b)(i) to the Holder, and the Holder may not accelerate
the Maturity Date until the first to occur of the following:

(i) such Senior Payment Default is cured; or

(ii) such Senior Payment Default is waived by the holder or
holders of such Senior Indebtedness or the Senior Agent; or

(iii) the expiration of one hundred eighty (180) days after the
date the Default Notice is received by the Company, if the maturity of such
Senior Indebtedness has not been accelerated at such time or the holder or
holders of not less than fifty-one percent (51.0%) in principal amount of the
outstanding Senior Indebtedness or any Senior Agent shall not have exercised any
judicial or non-judicial remedy with respect to any

7
<PAGE>

collateral securing such Senior Indebtedness at such time, and the provisions of
this SECTION 11 otherwise permit the payment at such time.

(d) So long as any ESFR Indebtedness remains outstanding, the Company
may not make any principal payments on this Note except (i) the Company may pay
any or all of the outstanding principal amount of this Note on the New Senior
Facility Establishment Date if, but only if, arrangements have been made which
are reasonably satisfactory to the ESFR Agent to concurrently borrow funds under
the New Senior Credit Facility established on the New Senior Facility
Establishment Date to pay in full all ESFR Indebtedness then outstanding
substantially concurrently with such principal payment (it being expressly
contemplated that such payment may be effected immediately prior to the
borrowing by the Company of such funds under the New Senior Credit Facility to
the extent that the Holder uses the proceeds from such repayment to purchase a
New Senior Facility Note immediately prior to the payment in full of all
Indebtedness then outstanding under the ESFR Agreement), and (ii) the Company
may make any principal payment required by SECTION 5(d) hereof (Mandatory
Prepayment From Proceeds of Key Man Life Insurance).

(e) Upon a payment or distribution to creditors of the Company in a
liquidation, dissolution, or winding up of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its properties or an assignment for the benefit of creditors or any
marshaling of the Company's assets and liabilities:

(i) the holder or holders of Senior Indebtedness shall be
entitled to receive payment of the full amount of the Senior Indebtedness
before the Holder is entitled to receive any payment on account of the
principal of, premium, if any, or interest on this Note; and

(ii) any payment by, or distribution of assets of, the Company of
any kind or character, whether in cash, property or securities (other than
securities of the Company as reorganized or readjusted or securities of the
Company or any other corporation provided for by a plan of reorganization
or readjustment the payment of which is subordinate, at least to the extent
provided in this SECTION 11 with respect to this Note, to the payment of
all Senior Indebtedness, PROVIDED that the right of the holders of Senior
Indebtedness are not impaired by such reorganization or readjustment) to
which the Holder would be entitled except for the provisions of this
SECTION 11 shall be paid or delivered by the Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the holder or holders of Senior
Indebtedness or any Senior Agent, ratably according to the aggregate
amounts remaining unpaid on account of the Senior Indebtedness held or
represented by each, to the extent necessary to make payment in full of all
Senior Indebtedness remaining unpaid after giving effect to any concurrent
payment or distribution to the holder or holders of Senior Indebtedness,
before any payment or distribution is made to the Holder; and

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<PAGE>

(iii) in the event, notwithstanding the foregoing, any
payment by, or distribution of assets of, the Company of any kind or
character, whether in cash, property or securities (other than securities
of the Company as reorganized or readjusted or securities of the Company or
any other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided in this SECTION 11 with respect to this Note, to the payment of
all Senior Indebtedness, PROVIDED that the rights of the holders of Senior
Indebtedness are not impaired by such reorganization or readjustment) shall
be received by the Holder before all Senior Indebtedness is paid in full,
such payment or distribution shall be paid over to the holder or holders of
such Senior Indebtedness or any Senior Agent, ratably as aforesaid, for
application to the payment of all Senior Indebtedness remaining unpaid
until all such Senior Indebtedness shall have been paid in full, after
giving effect to any concurrent payment or distribution to the holders of
such Senior Indebtedness.

(f) The Holder acknowledges that the holders of Senior Indebtedness
and the Holder, respectively, are entitled to exercise certain rights and powers
with respect to the Company from time to time, whether before or after an
occurrence of an Event of Default, and the exercise of any such right or power
by one creditor may preclude the exercise of a similar right or power by one or
more other creditors (any such right or power being herein called an "Exclusive
Power"). To the extent that any holder or holders of Senior Indebtedness or any
Senior Agent actually exercises any Exclusive Power, the Holder agrees to
refrain from exercising any substantially similar Exclusive Power to the extent
necessary to permit the holder or holders of Senior Indebtedness to benefit from
their actions.

(g) No amendment, modification, extension, replacement, restatement
or substitution of Senior Indebtedness, or of any agreement or note now or
hereafter in effect pertaining to such Senior Indebtedness, shall nullify,
impair, limit, alter or modify the provisions of this SECTION 11.

(h) For purposes of this SECTION 11, Senior Indebtedness shall
include all fees, expenses and costs incurred by or on behalf of the holder or
holders of Senior Indebtedness or the Senior Agent in connection with such
Senior Indebtedness.

(i) Notices to holders of Senior Indebtedness shall be made to each
holder of Senior Indebtedness or, if the holders of Senior Indebtedness have
appointed a Senior Agent, then to such Senior Agent, and shall be made in the
manner specified in the document evidencing such holder's Senior Indebtedness if
such a manner is so specified therein.

(j) Subject to the payment in full of all Senior Indebtedness, the
Holder shall be subrogated to the rights of the holder or holders of Senior
Indebtedness to receive payments or distributions of cash, property or
securities of the Company applicable to such Senior Indebtedness until all
amounts owing on this Note shall be paid in full, and, as between the Company,
its creditors other than holders of Senior Indebtedness and the Holder, no such
payment or

9
<PAGE>

distribution made to the holder or holders of Senior Indebtedness by virtue of
this SECTION 11 which otherwise would have been made to the Holder shall be
deemed to be a payment by the Company on account of any Senior Indebtedness, it
being understood that the provisions of this SECTION 11 are and are intended
solely for the purpose of defining the relative rights of the Holder, on the one
hand, and the holder or holders of Senior Indebtedness, on the other hand.

(k) Nothing contained in this SECTION 11 or elsewhere in this Note is
intended to or shall impair, as between the Company, its creditors other than
the holders of Senior Indebtedness and the Holder, the obligations of the
Company, which are absolute and unconditional, to pay to the Holder the
principal of, premium, if any, and interest on this Note as and when the same
shall become due and payable in accordance with the terms hereof and in the
Securities Purchase Agreement, or is intended to or shall affect the relative
rights of the Holder, on the one hand, and creditors of the Company other than
the holders of Senior Indebtedness, on the other hand, nor shall anything herein
or therein prevent the Holder from exercising all rights and remedies otherwise
permitted by Applicable Laws upon default under this Note or the Securities
Purchase Agreement, subject to the rights, if any, under this SECTION 11 of the
holders of Senior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy.

(l) Upon any payment or distribution of assets of the Company
referred to in this SECTION 11, the Holder shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which any such
dissolution, winding up, liquidation or reorganization proceeding affecting the
affairs of the Company is pending or upon a certificate of the trustee in
bankruptcy, receiver, assignee for the benefit of creditors, liquidating trustee
or agent or other person making any payment or distribution, delivered to the
Holder, for the purpose of ascertaining the Persons entitled to participate in
such payment or distribution, the holders of the Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amounts
paid or distributed thereon and all other facts pertinent thereto or to this
SECTION 11.

12. ASSIGNMENT AND TRANSFER. Subject to Applicable Laws, the Holder may,
at any time and from time to time and without the consent of the Company, assign
or transfer to one or more Persons the entire outstanding principal balance of
this Note or any portion thereof (but not less than $1,000,000 in principal
amount in any single assignment (unless such lesser amount represents the entire
outstanding principal balance hereof)). Upon surrender of this Note at the
Company's principal executive office for registration of any such assignment or
transfer, accompanied by a duly executed instrument of transfer, the Company
shall, at its expense and within three (3) Business Days of such surrender,
execute and deliver one or more new notes of like tenor in the requested
principal denominations and in the name of the assignee or assignees and bearing
the legend set forth on the face of this Note, and this Note shall promptly be
canceled. Each assignment or transfer of this Note, in whole or in part, shall
be registered on the register maintained by the Borrower pursuant to SECTION
12.3 of the Securities Purchase Agreement immediately following the surrender of
this Note. If the entire outstanding principal balance of

10
<PAGE>

this Note is not being assigned, the Borrower shall issue to the Holder hereof,
within three (3) Business Days of the date of surrender hereof, a new note which
evidences the portion of such outstanding principal balance not being assigned.
If this Note is divided into one or more Notes and is held at any time by more
than one Holder, any payments of principal of, or premium, if any, on this Note,
and any payments of interest or other amounts which are not sufficient to pay
all interest or other amounts due thereunder, shall be made PRO RATA with
respect to all such Notes in accordance with the outstanding principal amounts
thereof, respectively.

13. LOSS, THEFT, DESTRUCTION OR MUTILATION OF THIS NOTE. Upon receipt of
evidence reasonably satisfactory to the Borrower of the loss, theft, destruction
or mutilation of this Note and, in the case of any such loss, theft or
destruction, upon receipt of an indemnity agreement or other indemnity
reasonably satisfactory to the Borrower or, in the case of any such mutilation,
upon surrender and cancellation of such mutilated Note, the Borrower shall make
and deliver within three (3) Business Days a new Note, of like tenor, in lieu of
the lost, stolen, destroyed or mutilated Note.

14. COSTS OF COLLECTION. The Borrower agrees to pay all costs and
expenses, including the fees and expenses of any attorneys, accountants and
other experts retained by the Holder, which are expended or incurred by the
Holder in connection with (a) the enforcement of this Note or the collection of
any sums due hereunder, whether or not suit is commenced; (b) any actions for
declaratory relief in any way related to this Note; (c) the protection or
preservation of any rights of the Holder under this Note; (d) any actions taken
by the Holder in negotiating any amendment, waiver, consent or release of or
under this Note; (e) any actions taken in reviewing the Borrower's or any of its
Subsidiaries' financial affairs if an Event of Default has occurred or the
Holder has determined in good faith that an Event of Default may likely occur,
including, without limitation, the following actions: (i) inspect the facilities
of the Borrower and any of its Subsidiaries or conduct audits or appraisals of
the financial condition of the Borrower and any of its Subsidiaries; (ii) have
an accounting firm chosen by the Holder review the books and records of the
Borrower and any of its Subsidiaries and perform a thorough and complete
examination thereof; (iii) interview the Borrower's and each of its
Subsidiaries' employees, accountants, customers and any other individuals
related to the Borrower or its Subsidiaries which the Holder believes may have
relevant information concerning the financial condition of the Borrower and any
of its Subsidiaries; and (iv) undertake any other action which the Holder
believes is necessary to assess accurately the financial condition and prospects
of the Borrower and any of its Subsidiaries; (f) the Holder's participation in
any refinancing, restructuring, bankruptcy or insolvency proceeding involving
the Borrower, any of its Subsidiaries or any other Affiliate of the Borrower;
(g) verifying or perfecting any security interest granted to the Holder; (h) any
effort by the Holder to protect, assemble, complete, collect, sell, liquidate or
otherwise dispose of any collateral, including in connection with any case under
Bankruptcy Law; or (i) any refinancing or restructuring of this Note, including
without limitation any restructuring in the nature of a "work out" or in any
insolvency or bankruptcy proceeding.

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<PAGE>

15. EXTENSION OF TIME. The Holder, at its option, may extend the time for
payment of this Note, postpone the enforcement hereof, or grant any other
indulgences without affecting or diminishing the Holder's right to recourse
against the Borrower, which right is expressly reserved.

16. GOVERNING LAW; INTERPRETATION. In all respects, including all matters
of construction, validity and performance, this Note and the rights and
obligations arising hereunder shall be governed by, and construed and enforced
in accordance with, the laws of the State of California applicable to contracts
made and performed in such state, without regard to choice of law or conflicts
of law principles. The Company and LLCP have each been represented by counsel
in the negotiation and drafting of this Note and neither the Company nor LLCP
nor their respective counsel shall be deemed the drafter of this Note for
purposes of construing the provisions of this Note, and all provisions of this
Note shall be construed in accordance with their fair meaning, and not strictly
for or against the Company or the Holder.

17. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE COMPANY AND THE HOLDER DESIRE
THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, AND UNDERSTANDING THEY ARE WAIVING A CONSTITUTIONAL
RIGHT, THE COMPANY AND THE HOLDER (BY ACCEPTANCE HEREOF) WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED
TO, OR INCIDENTAL TO, THIS NOTE, THE SECURITIES PURCHASE AGREEMENT AND/OR ANY
OTHER RELATED AGREEMENT OR THE TRANSACTIONS COMPLETED HEREBY OR THEREBY.

[REST OF PAGE INTENTIONALLY LEFT BLANK]

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<PAGE>

IN WITNESS WHEREOF, the Borrower has caused this Note to be executed
and delivered by its duly authorized representatives on the date first above
written.

CONSUMER PORTFOLIO SERVICES, INC., a California
corporation

By: /s/ Charles E. Bradley, Jr.
-------------------------------------
Charles E. Bradley, Jr.
President and Chief Executive Officer

By: /s/ Jeffrey P. Fritz
-------------------------------------
Jeffrey P. Fritz
Senior Vice President and Chief
Financial Officer

AGREED TO AND ACCEPTED BY:

LEVINE LEICHTMAN CAPITAL PARTNERS, INC.,
a California corporation

On behalf of LEVINE LEICHTMAN CAPITAL
PARTNERS II, L.P., a California limited
partnership

By: /s/ Lauren B. Leichtman
---------------------------------
Lauren B. Leichtman
Chief Executive Officer

<PAGE>

EXECUTION COPY

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT IN
COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH STATE
SECURITIES LAWS OR PURSUANT TO AN EXEMPTION OR QUALIFICATION THEREFROM.

WARRANT NO. LL-2 November 17, 1998

PRIMARY WARRANT TO PURCHASE 3,450,000 SHARES OF COMMON STOCK
OF CONSUMER PORTFOLIO SERVICES, INC.

FOR VALUE RECEIVED, Consumer Portfolio Services, Inc., a California
corporation (the "Company"), hereby certifies that Levine Leichtman Capital
Partners II, L.P., a California limited partnership, or assigns (the "Holder"),
is entitled to purchase, on the terms and subject to the conditions contained
herein, 3,450,000 shares (the "Warrant Shares") of the Company's common stock,
no par value per share ("Common Stock"), at the exercise price of $3.00 per
Warrant Share (the "Warrant Purchase Price") at any time and from time to time
during the Exercise Period (as such term is defined below), provided that the
number of Warrant Shares that may be exercised hereunder may be restricted
pursuant to SECTION 2.5. The number of Warrant Shares and the Warrant Purchase
Price are subject to adjustment as set forth in SECTION 3.

This Warrant is subject to the following terms and conditions:

1. DEFINITIONS. For the purposes of this Warrant, (a) unless otherwise set
forth herein, capitalized terms or matters of construction deemed or established
in the Securities Purchase Agreement (as such term is defined herein) shall be
applied herein as defined or established therein, and (b) the following
additional capitalized terms shall have the respective meanings set forth below:

"COMMON STOCK" has the meaning set forth in the preamble of this Warrant.

"COMPANY" has the meaning set forth in the preamble of this Warrant.

"CONVERTIBLE SECURITIES" means any securities issued or issuable by the
Company that are exercisable or exchangeable for, or convertible into, shares of
Common Stock.

"CURRENT MARKET PRICE" per share of Common Stock means, as of any specified
date on which the Common Stock is publicly traded, the average of the daily
market prices of the Common Stock over the twenty (20) consecutive trading days
immediately preceding (and not including) such date.

<PAGE>

The 'daily market price' for each such trading day shall be (i) the closing
sales price on such day on the principal stock exchange on which the Common
Stock is then listed or admitted to trading or on Nasdaq, as applicable, (ii) if
no sale takes place on such day on any such exchange or system, the average of
the closing bid and asked prices, regular way, on such day for the Common Stock
as officially quoted on any such exchange or system, (iii) if the Common Stock
is not then listed or admitted to trading on any stock exchange or system, the
last reported sale price, regular way, on such day for the Common Stock, or if
no sale takes place on such day, the average of the closing bid and asked prices
for the Common Stock on such day, as reported by Nasdaq or the National
Quotation Bureau, (iv) if the Common Stock is not then listed or admitted to
trading on any securities exchange and if no such reported sale price or bid and
asked prices are available, the average of the reported high bid and low asked
prices on such day, as reported by a reputable quotation service, or a newspaper
of general circulation in the City of Los Angeles customarily published on each
Business Day. If the daily market price cannot be determined for the twenty (20)
consecutive trading days immediately preceding such date in the manner specified
in the foregoing sentence, then the Common Stock shall not be deemed to be
publicly traded as of such date.

"DESIGNATED OFFICE" has the meaning set forth in SECTION 2.1 of this
Warrant.

"EFFECTIVE DATE" means November 17, 1998.

"EXERCISE PERIOD" means the period commencing on the Effective Date and
ending on the Expiration Date.

"EXPIRATION DATE" means November 30, 2005.

"FAIR MARKET VALUE" per share of Common Stock as of any specified date
means (i) if the Common Stock is publicly traded on such date, the Current
Market Price per share, or (ii) if the Common Stock is not publicly traded (or
deemed not to be publicly traded) on such date, the fair market value per share
of Common Stock as determined in good faith by the Board of Directors of the
Company and set forth in a written notice to the Holder, subject to the Holder's
right to dispute such determination under SECTION 3.8(e); PROVIDED, HOWEVER,
that with respect to the grant of Option Rights pursuant to the Option Pool,
"FAIR MARKET VALUE" means the average of the high and low selling prices of a
share of Common Stock as reported in The Wall Street Journal (or other readily
available public source designated by the compensation committee of the Board of
Directors) for the last trading day for which such prices are available prior to
the applicable transaction date, and if the compensation committee of the Board
of Directors or such other committee as is designated by the Board of Directors
determines that there is no readily available source of information regarding
transactions in the Common Stock, then "FAIR MARKET VALUE" shall mean the fair
market value of a share of Common Stock as determined by the compensation
committee of the Board of Directors or such other committee as is designated by
the Board of Directors.

"HOLDER" has the meaning set forth in the preamble of this Warrant.

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<PAGE>

"NASDAQ" means the Nasdaq, Inc. National Market System or SmallCap Market,
as the case may be, or any successor reporting system thereof.

"OPTION RIGHTS" means all warrants, rights or options to subscribe for or
purchase, or obligations to issue, any shares of Common Stock, or any
Convertible Securities.

"OTHER PROPERTY" has the meaning set forth in SECTION 3.5 of this Warrant.

"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, limited liability partnership, institution, public benefit
corporation, entity or government (whether federal, state, county, city,
municipal or otherwise, including, without limitation, any instrumentality,
political subdivision, agency, body or department thereof).

"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder, all as the same shall
be in effect at the time.

"SECURITIES PURCHASE AGREEMENT" means the Securities Purchase Agreement,
dated as of the date hereof, by and between the Company and the initial Holder
of this Warrant, and as it may be amended, supplemented or otherwise modified
and in effect from time to time.

"WARRANT PURCHASE PRICE" has the meaning set forth in the preamble of this
Warrant (as adjusted in accordance with the terms of this Warrant).

"WARRANT" means this Warrant, any amendment of this Warrant, and any
warrants issued upon transfer, division or combination of, or in substitution
for, this Warrant or any other such warrant. All such Warrants shall at all
times be identical as to terms and conditions and date, except as to the number
of Warrant Shares for which they may be exercised.

"WARRANT SHARES" has the meaning set forth in the preamble of this Warrant.

2. EXERCISE.

2.1 EXERCISE; DELIVERY OF CERTIFICATES. Subject to the provisions of
SECTION 2.4 and SECTION 2.5, this Warrant may be exercised in whole or in part,
at the option of the Holder, at any time and from time to time during the
Exercise Period, by (a) delivering to the Company at its principal executive
office (the "Designated Office") (i) a notice of exercise, in substantially the
form attached hereto (the "Exercise Notice"), duly completed and signed by the
Holder, and (ii) this Warrant, and (b) paying the Warrant Purchase Price
pursuant to SECTION 2.2 for the number of Warrant Shares being purchased.
Subject to the provisions of SECTION 2.4, the Warrant Shares being purchased
under this Warrant will be deemed to have been issued to the Holder, as the
record owner of such Warrant Shares, as of the close of business on the date on
which payment

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<PAGE>

therefor is made by the Holder pursuant to SECTION 2.2. Stock certificates
representing the Warrant Shares so purchased shall be delivered to the Holder
within three (3) Business Days after this Warrant has been exercised (or, if
applicable, after the conditions set forth in SECTION 2.4 have been satisfied);
PROVIDED, HOWEVER, that in the case of a purchase of less than all of the
Warrant Shares issuable upon exercise of this Warrant, the Company shall cancel
this Warrant and, within three (3) Business Days after this Warrant has been
surrendered, execute and deliver to the Holder a new Warrant of like tenor for
the number of unexercised Warrant Shares. Each stock certificate representing
the number of Warrant Shares purchased pursuant to this Warrant shall be
registered in the name of the Holder or, subject to compliance with Applicable
Laws, such other name as shall be designated by the Holder.

2.2 PAYMENT OF WARRANT PRICE. Payment of the Warrant Purchase Price may be
made, at the option of the Holder, by (i) certified or official bank check,
(ii) wire transfer, (iii) instructing the Company to withhold and cancel a
number of Warrant Shares then issuable upon exercise of this Warrant with
respect to which the excess of the Fair Market Value over the Warrant Purchase
Price for such canceled Warrant Shares is at least equal to the Warrant Purchase
Price for the shares being purchased, (iv) to the extent permitted under the
agreements, instruments or other documents existing on the date hereof
evidencing or governing Indebtedness of the Company, surrender to the Company of
shares of Common Stock previously acquired by the Holder with a Fair Market
Value equal to the Warrant Purchase Price for the shares being purchased or
(v) any combination of the foregoing.

2.3 NO FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares of Common Stock upon the exercise of this Warrant. If any
fraction of a share of Common Stock would, except for the provisions of this
paragraph, be issuable on the exercise of this Warrant (or specified portion
thereof), the Company shall pay to the Holder an amount in cash calculated by it
to be equal to the then Fair Market Value per share of Common Stock multiplied
by such fraction computed to the nearest whole cent.

2.4. ANTITRUST NOTIFICATION. If the Holder determines, in its sole
judgment upon the advice of counsel, that an exercise of the Warrant pursuant to
the terms hereof is subject to the provisions of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the Company and the Holder
shall, prior to the payment of the Warrant Purchase Price, file with the United
States Federal Trade Commission (the "FTC") and the United States Department of
Justice (the "DOJ") the notification and report form, if any, required in
connection with the exercise of the Warrant, and any supplemental information
required in connection therewith, pursuant to the HSR Act. Any such
notification, report form and supplemental information will be in substantial
compliance with the requirements of the HSR Act. The Company and the Holder
will furnish to each other such necessary information and such reasonable
assistance as the other may reasonably request in connection with the
preparation of any filing or submission which is necessary under the HSR Act.
The Company and the Holder shall keep each other apprised of the status of any
communications with, and any inquiries or requests for additional information
from, the FTC or the DOJ, and shall respond promptly to any such inquiries or
requests. The Company

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<PAGE>

and the Holder shall each bear fifty percent (50%) of the filing fees required
to be paid by the Company and the Holder (or the "ultimate parent entity" of the
Holder, if any) under the HSR Act and the Company and the Holder shall bear
their own respective costs and expenses (including, without limitation,
attorneys' fees) incurred by the Company and the Holder (or the "ultimate parent
entity" of the Holder, if any) in connection with such filings. In the event
that this SECTION 2.4 is applicable to any exercise of this Warrant, the
purchase of the Warrant Shares subject to the Exercise Notice, and the payment
of the Warrant Purchase Price, will be subject to the expiration or earlier
termination of the waiting period under the HSR Act.

2.5 RESTRICTIONS ON EXERCISE; EXCESS WARRANT SHARES.

(a) This Warrant may be exercised at any time and from time to time
during the Exercise Period, commencing on the Effective Date, with respect to
all or any portion of the number of Warrant Shares purchasable hereunder (the
"Base Warrant Shares") that equals or is less than 19.9% of the number of shares
of Common Stock issued and outstanding as of the date hereof. This Warrant may
also be exercised at any time during the Exercise Period, commencing on or after
the Shareholder Approval Date (as such term is defined below) with respect to
all or any portion of the number of Warrant Shares purchasable hereunder in
excess of the Base Warrant Shares (the "Excess Warrant Shares").

(b) The Company hereby covenants and agrees that it will actively and
diligently seek and solicit the affirmative vote or written consent of the
shareholders of the Company (the "Shareholders") to, and shall recommend to the
Shareholders, all in accordance with Applicable Laws (including, without
limitation, the proxy rules promulgated under the Exchange Act), the approval by
the Shareholders of the issuance by the Company of the Excess Warrant Shares
upon exercise of this Warrant ("Excess Warrant Share Approval"). Without
limiting the generality of the foregoing, the Company shall (i) call, give
notice of and hold a meeting (whether regular or special) of Shareholders for
the purpose of, among other things, voting upon the Excess Warrant Share
Approval or (ii) solicit written consents with respect to the Excess Warrant
Share Approval. The Company shall cause the Shareholders to act with respect to
the Excess Warrant Share Approval as soon as practicable, but in any event not
later than May 31, 1999 (the date upon which Excess Warrant Share Approval is
obtained, if at all, is referred to herein as the "Shareholder Approval Date").
Notwithstanding any other provision of this Warrant, the Holder may not exercise
this Warrant with respect to all or any portion of the Excess Warrant Shares
unless and until the Company shall have obtained, if at all, Excess Warrant
Share Approval.

(c) If, at any time prior to the Shareholder Approval Date, the
Company engages in a transaction that is subject to the provisions of SECTION
3.5 or a majority of the outstanding shares of Common Stock is sold in one
transaction or a series of related transactions (a "Transaction"), then the
Company shall either (i) obtain the Excess Warrant Share Approval prior to or
upon the consummation of such Transaction or (ii) pay to the Holder prior to or
upon the consummation of such Transaction an amount in cash equal to the product
of (A) the difference between the fair value of the consideration to be received
for each share of Common Stock

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<PAGE>

pursuant to such Transaction the Warrant Purchase Price then in effect,
MULTIPLIED BY (B) the number of Excess Warrant Shares.

(d) If the exercise or sale or other disposition of this Warrant or
any Warrant Shares pursuant to or in connection with any Transaction would be
subject to the provisions of Section 16(b) of the Exchange Act, then the Company
shall pay to the Holder prior to or upon the consummation of such Transaction,
in lieu of such exercise, sale or disposition and in satisfaction of this
Warrant to the extent of the number of Warrant Shares set forth in clause (b) of
this sentence, an amount in cash equal to the product of (a) the difference
between the fair value of the consideration to be received for each share of
Common Stock pursuant to such Transaction and the Warrant Purchase Price then in
effect, multiplied by (b) the number of Warrant Shares, the sale or other
disposition of which would then be subject to the provisions of Section 16(b) of
the Exchange Act.

3. ADJUSTMENTS TO THE NUMBER OF WARRANT SHARES AND TO THE WARRANT PURCHASE
PRICE. The number of Warrant Shares for which this Warrant is exercisable and
the Warrant Purchase Price shall be subject to adjustment from time to time as
set forth in this SECTION 3.

3.1 STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time the
Company:

(a) pays a dividend or other distribution on its Common Stock in
shares of Common Stock or shares of any other class or series of Capital Stock,

(b) subdivides its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or

then the number of Warrant Shares purchasable upon exercise of this Warrant
immediately prior to the record date for such dividend or distribution or the
effective date of such subdivision or combination shall be adjusted so that the
Holder shall thereafter be entitled to receive upon exercise of this Warrant the
kind and number of shares of Common Stock that the Holder would have owned or
have been entitled to receive immediately after such record date or effective
date had this Warrant been exercised immediately prior to such record date or
effective date. Any adjustment made pursuant to this SECTION 3.1 shall become
effective immediately after the effective date of such event, but be retroactive
to the record date, if any, for such event.

Upon any adjustment of the number of Warrant Shares purchasable upon the
exercise of this Warrant as herein provided, the Warrant Purchase Price per
share shall be adjusted by multiplying the Warrant Purchase Price immediately
prior to such adjustment by a fraction, the numerator of which shall be the
number of Warrant Shares purchasable upon the exercise of this

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Warrant immediately prior to such adjustment and the denominator of which shall
be the number of Warrant Shares so purchasable immediately thereafter.

3.2 RIGHTS; OPTIONS; WARRANTS. If at any time the Company issues (without
payment of any consideration) to all holders of outstanding Common Stock any
rights, options or warrants to subscribe for or purchase shares of Common Stock
or securities convertible into or exchangeable for Common Stock, then the
Company shall also distribute such rights, options, warrants or securities to
the Holder as if this Warrant had been exercised immediately prior to the record
date for such issuance.

3.3 DISTRIBUTION OF ASSETS OR SECURITIES. If at any time the Company makes
a distribution to all holders of outstanding Common Stock of any asset (other
than cash) or security other than those referred to in SECTIONS 3.1, 3.2 OR 3.5,
and other than in connection with the liquidation, dissolution or winding up of
the Company, then and in each such case, the Warrant Purchase Price shall be
adjusted to equal the number determined by multiplying the Warrant Purchase
Price in effect immediately prior to the close of business on the date fixed for
the determination of stockholders entitled to receive such distribution by a
fraction (which shall not be less than zero), the numerator of which shall be
the Fair Market Value per share of the Common Stock on the date fixed for such
determination less the then fair market value of the portion of the assets, or
the Fair Market Value of the portion of the securities, as the case may be, so
distributed applicable to one share of Common Stock, and the denominator of
which shall be such Fair Market Value per share of Common Stock, such adjustment
to become effective immediately prior to the opening of business on the day
following the date fixed for the determination of stockholders entitled to
receive such distribution. Upon any adjustment in the Warrant Purchase Price as
provided in the foregoing, the number of shares of Common Stock purchasable upon
the exercise of this Warrant shall also be adjusted and shall be that number
determined by multiplying the number of Warrant Shares issuable upon exercise
immediately prior to such adjustment by a fraction, the numerator of which is
the Warrant Purchase Price in effect immediately prior to such adjustment and
the denominator of which is the Warrant Purchase Price as so adjusted.

3.4 ISSUANCE OF EQUITY SECURITIES AT LESS THAN FAIR MARKET VALUE. If at
any time the Company sells or issues shares of Common Stock, or rights, options,
warrants or convertible or exchangeable securities representing the right to
subscribe for or purchase shares of Common Stock (excluding (i) shares, rights,
options, warrants or convertible or exchangeable securities issued in any of the
transactions described in SECTIONS 3.1, 3.2, 3.3 OR 3.5, (ii) shares issued
after the date hereof upon conversion, exercise or exchange of (A) rights,
options, warrants or convertible or exchangeable securities outstanding on the
date hereof, (B) rights, options, warrants or convertible or exchangeable
securities issued after the date hereof for which an adjustment was made
pursuant to this SECTION 3.4 or for which no adjustment is required under this
SECTION 3.4, (iii) the issuance of this Warrant or any securities issued upon
exercise hereof, and the issuance of Common Stock upon the exercise or
conversion of Option Rights or Convertible Securities outstanding on the date
this Warrant was first issued, (iv) shares of Common Stock issued pursuant

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to a BONA FIDE public offering pursuant to an effective registration statement,
or (v) the issuance of any warrant or warrants issued in connection with the
agreement with FSA contemplated by SECTION 8.6 of the Securities Purchase
Agreement, provided that the exercise price of such warrant or warrants is not
less than $3.00 per share, and any shares of Common Stock issued or issuable
upon the exercise of any such warrant or warrants) at a price per share of
Common Stock (determined in the case of such rights, options, warrants or
convertible or exchangeable securities, by dividing (x) the total amount
receivable by the Company in consideration of the sale and issuance of such
rights, options, warrants or convertible or exchangeable securities, plus the
total consideration payable to the Company upon exercise, conversion or exchange
thereof, by (y) the maximum number of shares of Common Stock issuable upon
conversion, exercise or exchange of such rights, options, warrants or
convertible or exchangeable securities ), that is lower than the Fair Market
Value per share of Common Stock in effect immediately prior to such sale and
issuance, then the Warrant Purchase Price shall be adjusted (calculated to the
nearest $.001) so that it shall equal the price determined by multiplying the
Warrant Purchase Price in effect immediately prior thereto by a fraction, the
numerator of which shall be an amount equal to the sum of (A) the number of
shares of Common Stock outstanding immediately prior to such sale and issuance
plus (B) the number of shares of Common Stock which the aggregate consideration
received by the Company (determined as provided below) for such sale or issuance
would purchase at such Fair Market Value per share, and the denominator of which
shall be the total number of shares of Common Stock outstanding (or deemed to be
outstanding as provided below) immediately after such sale or issuance.
Adjustments shall be made successively whenever such an issuance is made. The
foregoing notwithstanding, if any such sale or issuance of shares Common Stock,
rights, options, warrants or convertible or exchangeable securities is effected
pursuant to the terms of a bona fide agreement, commitment or letter of intent
which is entered into or made prior to the date of such issuance and which
specifies the "price per share of Common Stock" (as such phrase is used in this
Section 3.4) to be paid in such issuance, then the determination of whether or
not the "price per share of Common Stock" in such issuance is "lower than the
Fair Market Value per share of Common Stock" required by this SECTION 3.4 shall
be made as of close of business on the date such agreement or letter of intent
is entered into or such commitment is made and shall not be made "immediately
prior to such sale and issuance" as provided above. (For example, if the Company
enters into an agreement to sell shares of Common Stock in a private placement
and the price per share of Common Stock to be paid pursuant to such agreement is
equal to or greater than the Fair Market Value per share of Common Stock as of
the close of business on the date on which such agreement is entered into, then
no adjustment shall be required under this SECTION 3.4 even if such price is
less than the Fair Market Value per share of Common Stock on the date such
private placement is consummated.)

For the purposes of such adjustments, the shares of Common Stock which the
holder of any such rights, options, warrants or convertible or exchangeable
securities shall be entitled to subscribe for or purchase shall be deemed to be
issued and outstanding as of the date of the sale and issuance of the rights,
warrants or convertible or exchangeable securities and the consideration
received by the Company therefor shall be deemed to be the consideration
actually received by the Company for such rights, options, warrants or
convertible or exchangeable securities, plus the

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consideration or premiums stated in such rights, options, warrants or
convertible or exchangeable securities to be paid to acquire the shares of
Common Stock covered thereby.

Upon any adjustment in the Warrant Purchase Price as provided in the
penultimate paragraph above, the number of shares of Common Stock purchasable
upon the exercise of this Warrant shall also be adjusted and shall be that
number determined by multiplying the number of Warrant Shares issuable upon
exercise immediately prior to such adjustment by a fraction, the numerator of
which is the Warrant Purchase Price in effect immediately prior to such
adjustment and the denominator of which is the Warrant Purchase Price as so
adjusted.

Upon the expiration of any rights, options, warrants or convertible or
exchangeable securities for which an adjustment was made pursuant to this
SECTION 3.4, such adjustment shall be recomputed on the basis of the actual
number of shares of Common Stock sold or issued pursuant to such rights,
options, warrants or convertible or exchangeable securities and the actual
consideration received by the Company for such rights, options, warrants or
convertible or exchangeable securities plus the actual consideration or premium
received by the Company for such sale or issuance of Common Stock.

If at any time the Company sells and issues shares of Common Stock or
rights, options, warrants or convertible or exchangeable securities containing
the right to subscribe for or purchase shares of Common Stock for a
consideration consisting, in whole or in part, of property other than cash or
its equivalent, then in determining the "price per share of Common Stock" and
the "consideration received by the Company" for purposes of the preceding
paragraphs of this SECTION 3.4, the Board of Directors of the Company shall
determine, in good faith, the fair market value of property, subject to the
Holder's rights under SECTION 3.8(e). There shall be no adjustment of the
Warrant Purchase Price in respect of the Common Stock pursuant to this
SECTION 3.4 if the amount of such adjustment is less than $0.001 per share of
Common Stock; PROVIDED, HOWEVER, that any adjustments which by reason of this
provision are not required to be made shall be carried forward and taken into
account in any subsequent adjustment.

3.5 REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR DISPOSITION
OF ASSETS. If at any time the Company reorganizes its capital, reclassifies its
capital stock, consolidates, merges or combines with or into another Person
(where the Company is not the surviving corporation or where there is any change
whatsoever in, or distribution with respect to, the outstanding Common Stock),
or the Company sells, transfers or otherwise disposes of all or substantially
all of its property, assets or business to another Person, other than in a
transaction provided for in SECTION 3.1, 3.2, 3.3, 3.4 OR 3.6, and, pursuant to
the terms of such reorganization, reclassification, consolidation, merger,
combination, sale, transfer or other disposition of assets, (i) shares of common
stock of the successor or acquiring Person or of the Company (if it is the
surviving corporation) or (ii) any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring Person or the Company ("Other Property") are to be received by or
distributed to the holders of Common Stock who are

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<PAGE>

holders immediately prior to such transaction, then the Holder shall have the
right thereafter to receive, upon exercise of this Warrant, the number of shares
of Common Stock, common stock of the successor or acquiring Person, and/or Other
Property which holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event would have owned or
received immediately after and as a result of such event. In such event, the
aggregate Warrant Purchase Price otherwise payable for the Warrant Shares
issuable upon exercise of this Warrant shall be allocated among such securities
and Other Property in proportion to the respective fair market values of such
securities and Other Property as determined in good faith by the Board of
Directors of the Company, subject to the Holder's rights under SECTION 3.8(e).

In case of any such event, the successor or acquiring Person (if other than
the Company) shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant to be
performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modifications as the Holder may approve in writing
(as determined by resolution of the Board of Directors of the Company) in order
to provide for adjustments of any shares of common stock of such successor or
acquiring Person for which this Warrant thus becomes exercisable, which
modifications shall be as equivalent as practicable to the adjustments provided
for in this SECTION 3.5. For purposes of this SECTION 3, "common stock of the
successor or acquiring Person" shall include stock or other equity securities,
or securities that are exercisable or exchangeable for or convertible into
equity securities, of such corporation, or other securities if such Person is
not a corporation, of any class that is not preferred as to dividends or assets
over any other class of stock of such corporation or Person and that is not
subject to redemption and shall also include any evidences of indebtedness,
shares of stock or other securities that are convertible into or exchangeable
for any such stock, either immediately or upon the arrival of a specified date
or the happening of a specified event and any warrants or other rights to
subscribe for or purchase any such stock. The foregoing provisions of this
SECTION 3.5 shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales, transfers and other
dispositions of assets.

3.6 DISSOLUTION, TOTAL LIQUIDATION OR WINDING-UP. If at any time there is
a voluntary or involuntary dissolution, total liquidation or winding-up of the
Company, other than as contemplated by SECTION 3.5, then the Company shall cause
to be mailed (by registered or certified mail, return receipt requested, postage
prepaid) to the Holder at the Holder's address as shown on the Warrant register,
at the earliest practicable time (and, in any event, not less than thirty (30)
calendar days before any date set for definitive action) written notice of the
date on which such dissolution, liquidation or winding-up shall take place, as
the case may be. Such notice shall also specify the date as of which the record
holders of shares of Common Stock shall be entitled to exchange their shares for
securities, money or other property deliverable upon such dissolution,
liquidation or winding-up, as the case may be. On such date, the Holder shall be
entitled to receive upon surrender of this Warrant the cash or other property,
less the Warrant Purchase Price for this Warrant then in effect, that the Holder
would have been entitled to receive had this Warrant been exercised immediately
prior to such dissolution, liquidation or winding-up. Upon receipt of the cash
or other property, any and all rights of the Holder to exercise this Warrant
shall terminate

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<PAGE>

in their entirety. If the cash or other property distributable in the
dissolution, liquidation or winding-up has a fair market value which is less
than the Warrant Purchase Price for this Warrant then in effect, this Warrant
shall terminate and be of no further force or effect upon the dissolution,
liquidation or winding-up.

3.7 OTHER DILUTIVE EVENTS. If any event occurs as to which the other
provisions of this SECTION 3 are not strictly applicable but as to which the
failure to make any adjustment would not protect the purchase rights represented
by this Warrant in accordance with the intent and principles hereof then, in
each such case, the Holder (or if the Warrant has been divided up, the Holders
of Warrants exercisable for the purchase of more than fifty percent (50%) of the
aggregate number of Warrant Shares then issuable upon exercise of all of the
then exercisable Warrants) may appoint an independent investment bank or firm of
independent public accountants which shall give its opinion as to the
adjustment, if any, on a basis consistent with the intent and principles
established herein, necessary to preserve the purchase rights represented by
this Warrant (or such Warrants). Upon receipt of such opinion, the Company will
mail (by registered or certified mail, return receipt requested, postage
prepaid) a copy thereof to the Holder within three (3) Business Days and shall
make the adjustments described therein. The fees and expenses of such investment
bank or independent public accountants shall be borne by the Company.

3.8 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION. The
following provisions shall be applicable to the adjustments provided for
pursuant to this SECTION 3:

(a) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by this
SECTION 3 shall be made whenever and as often as any specified event requiring
such an adjustment shall occur. For the purpose of any such adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.

(b) RECORD DATE. If the Company fixes a record date of the holders of
Common Stock for the purpose of entitling them to (i) receive a dividend or
other distribution payable in shares of Common Stock or in shares of any other
class or series of capital stock or securities convertible into or exchangeable
for Common Stock or shares of any other class or series of capital stock or
(ii) subscribe for or purchase shares of Common Stock or such other shares or
securities, then all references in this SECTION 3 to the date of the issuance or
sale of such shares of Common Stock or such other shares or securities shall be
deemed to be references to that record date.

(c) WHEN ADJUSTMENT NOT REQUIRED. If the Company fixes a record date
of the holders of its Common Stock for the purpose of entitling them to receive
a dividend or distribution or subscription or purchase rights to which the
provisions of SECTION 3.1 would apply, but shall, thereafter and before the
distribution to stockholders, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then thereafter no
adjustment shall be required by reason of the taking of such record and any such
adjustment previously made in respect thereof shall be rescinded and annulled.

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<PAGE>

(d) NOTICE OF ADJUSTMENTS. Whenever the number of shares of Common
Stock for which this Warrant is exercisable or the Warrant Purchase Price shall
be adjusted or recalculated pursuant to this SECTION 3, the Company shall
immediately prepare a certificate to be executed by the chief financial officer
of the Company setting forth, in reasonable detail, the event requiring the
adjustment or recalculation and the method by which such adjustment or
recalculation was calculated, specifying the number of shares of Common Stock
for which this Warrant is exercisable and (if such adjustment was made pursuant
to SECTION 3.5) describing the number and kind of any other shares of stock or
Other Property for which this Warrant is exercisable, and any related change in
the Warrant Purchase Price, after giving effect to such adjustment,
recalculation or change. The Company shall mail (by registered or certified
mail, return receipt requested, postage prepaid) a signed copy of the
certificate to be delivered to the Holder within three (3) Business Days of the
event which caused the adjustment or recalculation. The Company shall keep at
the Designated Office copies of all such certificates and cause them to be
available for inspection at the Designated Office during normal business hours
by the Holder or any prospective transferee of this Warrant designated by the
Holder.

(e) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board of
Directors of the Company is required to make a determination in good faith of
the fair market value of any item under this Warrant, or any item that may
affect the value of this Warrant, that determination may be challenged in good
faith by the Holder (or if the Warrant has been divided up, the Holders of
Warrants exercisable for more than fifty percent (50%) of the aggregate number
of Warrant Shares then issuable upon exercise of all of the then exercisable
Warrants), and any dispute shall be resolved promptly, but in no event in more
than thirty (30) days, by an investment banking firm of recognized national
standing or one of the five (5) largest national accounting firms agreed upon by
the Company and the Holders and whose decision shall be binding on the Company
and the Holders. If the Company and the Holders cannot agree on a mutually
acceptable investment bank or accounting firm, then the Holders, jointly, and
the Company shall within five (5) Business Days each choose one investment bank
or accounting firm and the respective chosen firms shall within five (5)
Business Days jointly select a third investment bank or accounting firm, which
shall make the determination promptly, but in no event in more than thirty (30)
days, and such determination shall be binding upon all parties thereto. The
Company shall bear all costs in connection with such determination, including
without limitation, fees of the investment bank(s) or accounting firm(s).

(f) INDEPENDENT APPLICATION. Except as otherwise provided herein, all
subsections of this SECTION 3 are intended to operate independently of one
another (but without duplication). If an event occurs that requires the
application of more than one subsection, all applicable subsections shall be
given independent effect without duplication.

4. MISCELLANEOUS.

4.1 RESTRICTIVE LEGEND. This Warrant, any Warrant issued upon transfer of
this Warrant and any Warrant Shares issued upon exercise of this Warrant or any
portion thereof shall be

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<PAGE>

imprinted with the following legend, in addition to any legend required under
applicable state securities laws:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE ASSIGNED EXCEPT IN COMPLIANCE WITH THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH STATE SECURITIES LAWS OR PURSUANT TO
AN EXEMPTION OR QUALIFICATION THEREFROM.

The legend shall be appropriately modified upon issuance of certificates
for shares of Common Stock.

Upon request of the holder of a Common Stock certificate, the Company shall
issue to that holder a new certificate free of the foregoing legend, if, with
such request, such holder provides the Company with an opinion of counsel
reasonably acceptable to the Company (provided that Riordan & McKinzie, a
professional law corporation, shall be deemed to be acceptable to the Company)
to the effect that the securities evidenced by such certificate may be sold
without restriction under Rule 144 (or any other rule permitting resales of
securities without restriction) promulgated under the Securities Act.

4.2 HOLDER ENTITLED TO BENEFITS UNDER OTHER AGREEMENTS. The Holder is
entitled to certain benefits and privileges with respect to this Warrant and the
Warrant Shares pursuant to the terms of the Securities Purchase Agreement.

4.3 OTHER COVENANTS. Without limiting the generality of SECTION 4.2, the
Company covenants and agrees that, as long as the Warrant remains outstanding or
any Warrant Shares are issuable with respect to this Warrant, the Company will
perform all of the following covenants for the express benefit of the Holder:
(a) the Warrant Shares shall, upon issuance, be duly authorized, validly issued,
fully paid and non-assessable shares of Common Stock; (b) each Holder shall,
upon the exercise thereof in accordance with the terms hereof, receive good and
marketable title to the Warrant Shares, free and clear of all voting and other
trust arrangements to which the Company is a party or by which it is bound,
preemptive rights of any stockholder, liens, encumbrances, equities and claims
whatsoever, including, but not limited to, all Taxes, Liens and other charges
with respect to the issuance thereof; (c) at all times prior to the Expiration
Date, the Company shall have reserved for issuance a sufficient number of
authorized but unissued shares of Common Stock, or other securities or property
for which this Warrant may then be exercisable, to permit this Warrant (or if
this Warrant has been divided, all outstanding Warrants) to be exercised in
full; (d) the Company shall deliver to each Holder the information and reports
described in SECTION 8.2 of the Securities Purchase Agreement; (e) the Company
shall extend to the initial Holder the management rights set forth in the
Investor Rights Agreement; and (f) the Company shall provide each Holder with
notice of all corporate actions in the same manner and to the same extent as the

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<PAGE>

shareholders of the Company; provided, however, that the Company shall not be
obligated to perform the covenants in the foregoing clauses (d) and (e) of this
SECTION 4.3 at any time that the sum of the Warrant Shares plus the number of
shares of Common Stock held by the Holder is less than 345,000; provided,
further, that notwithstanding the foregoing proviso the Company shall remain
obligated to perform the covenants in the foregoing clauses (d) and (e) of this
SECTION 4.3 if such performance is necessary in order to enable the Holder to
satisfy the criteria then established for a "Venture Capital Operating Company"
pursuant to ERISA.

4.4 ISSUE TAX. The issuance of shares of Common Stock upon the exercise of
this Warrant shall be made without charge to the Holder for any issue tax in
respect thereof.

4.5 CLOSING OF BOOKS. The Company will at no time close its transfer books
against the transfer of this Warrant or of any Warrant Shares in any manner
which interferes with the timely exercise hereof unless required by Applicable
Laws.

4.6 NO VOTING RIGHTS; LIMITATION OF LIABILITY. Except as expressly set
forth in this Warrant and in the Securities Purchase Agreement, nothing
contained in this Warrant shall be construed as conferring upon the Holder (i)
the right to vote or to consent as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or any other matter,
(ii) the right to receive dividends except as set forth in SECTION 3; or (iii)
any other rights as a stockholder of the Company except as set forth in SECTION
4.2 and SECTION 4.3 hereof and in the Investor Rights Agreement. No provisions
hereof, in the absence of affirmative action by the Holder to purchase shares of
Common Stock, and no mere enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of the Holder for the Warrant Purchase
Price or as a shareholder of the Company, whether such liability is asserted by
the Company or by its creditors.

4.7 MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement is sought.

4.8 NOTICES. All notices, requests, demands and other communications which
are required or may be given under this Warrant shall be in writing and shall be
deemed to have been duly given if transmitted by telecopier with receipt
acknowledged, or upon delivery, if delivered personally or by recognized
commercial courier with receipt acknowledged, or upon the expiration of
seventy-two (72) hours after mailing, if mailed by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:

(a) If to the Holder, at:

c/o Levine Leichtman Capital Partners, Inc.
335 North Maple Drive, Suite 240
Beverly Hills, CA 90210

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<PAGE>

Attention: Arthur E. Levine, President
Telephone: (310) 275-5335
Facsimile: (310) 275-1441

(b) If to any other Holder, at:

such Holder's address as shown on the books of the Company.

Consumer Portfolio Services, Inc.
16355 Laguna Canyon Road
Irvine, CA 92618
Attention: Charles E. Bradley, Jr., President
Telephone: (949) 753-6800
Facsimile: (949) 450-3951

or at such other address or addresses as the Holder or the Company, as the case
may be, may specify by written notice given in accordance with this SECTION 4.8.

4.9 SUCCESSORS AND ASSIGNS. Subject to the requirements of Applicable
Laws, the Holder may assign all or any portion of this Warrant at any time or
from time to time without the consent of the Company. Each assignment of this
Warrant, in whole or in part, shall be registered on the books of the Company to
be maintained for such purpose, upon surrender of this Warrant at the Designated
Office, together with appropriate instruments of assignment, duly filled in and
executed. Upon such surrender and delivery, the Company shall, at its own
expense, within three (3) Business Days execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees specified in such assignment
and in the denominations specified therein and this Warrant shall promptly be
canceled. If any portion of this Warrant is not being assigned, the Company
shall, at its own expense, within three (3) Business Days issue to the Holder a
new Warrant evidencing the portion not so assigned. This Warrant shall be
binding upon and inure to the benefit of the Company, the Holder and their
respective successors and permitted assigns, and shall include, with respect to
the Company, any Person succeeding the Company by merger, consolidation,
combination or acquisition of all or substantially all of the Company's assets,
and in such case, except as expressly provided herein, all of the obligations of
the Company hereunder shall survive such merger, consolidation, combination or
acquisition.

4.10 DESCRIPTIVE HEADINGS. The descriptive headings of the paragraphs of
this Warrant are for convenience of reference only and do not constitute a part
of this Warrant and are not to be considered in construing or interpreting this
Warrant. No party, nor its counsel, shall be deemed the drafter of this
Agreement for purposes of construing the provisions of this Agreement, and all
provisions of this Agreement shall be construed in accordance with their fair
meaning, and not strictly for or against any party.

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<PAGE>

4.11 LOST WARRANT OR CERTIFICATES. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant or of a stock certificate evidencing Warrant Shares and, in the
case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company or, in the case of any such mutilation,
upon surrender and cancellation of the Warrant or stock certificate, the Company
shall make and deliver to the Holder, within three (3) Business Days of receipt
by the Company of such documentation, a new Warrant or stock certificate, of
like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock
certificate.

4.12 TERMINATION OF THIS WARRANT. This Warrant shall terminate and shall no
longer be exercisable after the Expiration Date.

4.13 NO IMPAIRMENT. The Company shall not by any action, including, without
limitation, amending its charter documents or regulations or through any
reorganization, reclassification, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder against impairment. Without limiting the
generality of the foregoing, the Company will (i) not increase the par value (if
any) of any shares of Common Stock receivable upon the exercise of this Warrant
above the amount payable therefor upon such exercise immediately prior to such
increase in par value, (ii) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, free
and clear of all liens, encumbrances, equities and claims, and (iii) use its
best efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be necessary to enable
the Company to perform its obligations under this Warrant.

4.14 GOVERNING LAW. In all respects, including all matters of construction,
validity and performance, this Warrant and the rights and obligations arising
hereunder shall be governed by, and construed and enforced in accordance with,
the laws of the State of California applicable to contracts made and performed
in California, without regard to principles thereof regarding conflicts of laws.

4.15 REMEDIES. If the Company fails to perform, comply with or observe any
covenant or agreement to be performed, complied with or observed by it under
this Warrant, the Holder may proceed to protect and enforce its rights by suit
in equity or action at law, whether for specific performance of any term
contained in this Warrant or for an injunction against the breach of any such
term or in aid of the exercise of any power granted in this Warrant or to
enforce any other legal or equitable right, or to take any one or more of such
actions. The Company agrees to pay all fees, costs, and expenses, including,
without limitation, fees and expenses of attorneys, accountants and other
experts retained by the Holder, and all fees, costs and expenses of appeals,
incurred or expended by the Holder in connection with the enforcement of this
Warrant or the

16
<PAGE>

collection of any sums due hereunder, whether or not suit is commenced. None of
the rights, powers or remedies conferred under this Warrant shall be mutually
exclusive, and each right, power or remedy shall be cumulative and in addition
to any other right, power or remedy whether conferred by this Warrant or now or
hereafter available at law, in equity, by statute or otherwise.

4.16 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE COMPANY AND THE HOLDER WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE COMPANY AND
THE HOLDER DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, AND UNDERSTANDING THEY ARE WAIVING A
CONSTITUTIONAL RIGHT, THE COMPANY AND THE HOLDER (BY ACCEPTANCE HEREOF) WAIVE
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE
ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO, THIS WARRANT, THE SECURITIES PURCHASE
AGREEMENT AND/OR ANY RELATED AGREEMENT OR THE TRANSACTIONS COMPLETED HEREBY OR
THEREBY.

[REST OF PAGE INTENTIONALLY LEFT BLANK]

17
<PAGE>

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed and
issued by its duly authorized representatives on the date first above written.

CONSUMER PORTFOLIO SERVICES, INC.,
a California corporation

By: /S/ CHARLES E. BRADLEY, JR.
----------------------------------------------
Charles E. Bradley, Jr.,
President and Chief Executive Officer

By: /S/ JEFFREY P. FRITZ
----------------------------------------------
Jeffrey P. Fritz
Senior Vice President and Chief
Financial Officer

18
<PAGE>

FORM OF EXERCISE SUBSCRIPTION

(To be signed only upon exercise of this Warrant)

The undersigned hereby irrevocably elects to exercise its Warrant to
purchase __________________________________________________ (_______) shares of
Common Stock for an aggregate Warrant Purchase Price
of_________________________________ Dollars ($______). [If the Holder has
determined upon advice of counsel that compliance with the HSR Act is required,
include the following sentences: "The undersigned has determined that this
exercise is subject to the HSR Act and requests that the Company file the
requisite notification and report form with, and pay fifty percent (50%) of the
requisite fee to, the FTC and the DOJ as promptly as possible. The purchase of
the shares described above and the payment of the Warrant Purchase Price are
subject to the expiration or earlier termination of the waiting period under the
HSR Act."] The Warrant Purchase Price to be paid as follows (check as
applicable):

___ Certified or official bank check in the amount of $_________;
___ Wire transfer in the amount of $_________;
___ Cancellation of _________________________ Warrant Shares; or
___ Surrender of __________________ shares of Common Stock.

The undersigned hereby requests that [if the Holder has determined upon
advice of counsel that compliance with the HSR Act is required, include the
following phrase: "upon the expiration or earlier termination of the waiting
period under the HSR Act"] a certificate(s) for the shares of Common Stock be
issued in the name of_________________________, and delivered to,
____________________, whose address is __________________________________.

The undersigned represents that it is acquiring such shares of Common Stock
for its own account for investment purposes only and not with a view to or for
sale in connection with any distribution thereof, and, as to the undersigned,
the representations and warranties of the Purchaser set forth in SECTION 4 of
the Securities Purchase Agreement are true and correct on the date hereof as if
made by the undersigned on this date.

Dated:
--------------- --------------------------------------------------
Name of the Holder (must conform precisely to the
name specified on the face of the Warrant)

--------------------------------------------------
Signature of authorized representative of the
Holder

--------------------------------------------------
Print or type name of authorized representative

Social Security Number or Employer:
Tax Identification Number of the Holder:
----------
Address of the Holder:
-------------------------

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

<PAGE>

INVESTOR RIGHTS AGREEMENT

THIS INVESTOR RIGHTS AGREEMENT (this "AGREEMENT") is entered into as of
November 17, 1998 is entered into by and among Consumer Portfolio Services,
Inc., a California corporation (the "COMPANY"), Charles E. Bradley, Sr., an
individual ("C. E. BRADLEY, SR."), Charles E. Bradley, Jr., an individual ("C.E.
BRADLEY, JR." and, together with C.E. Bradley, Sr., the "Bradleys"), Jeffrey P.
Fritz, an individual ("MR. FRITZ" and, together with the Bradleys, the "SENIOR
OFFICERS"), and Levine Leichtman Capital Partners II, L.P., a California limited
partnership ("LLCP").

RECITALS

A. Pursuant to that certain Bridge Loan Agreement dated as of November 2,
1998 between LLCP and the Company, the Company issued to LLCP a warrant to
purchase 345,000 shares of Common Stock for a purchase price of $3.00 per share
(the "BRIDGE WARRANT").

B. LLCP and the Company are parties to that certain Securities Purchase
Agreement of even date herewith (the "PURCHASE AGREEMENT") pursuant to which
the Company has agreed to issue to LLCP, and LLCP has agreed to purchase from
the Company, (i) a promissory note in the principal amount of $25,000,000 (the
"NOTE") and (ii) a warrant to purchase 3,105,000 shares of Common Stock for a
purchase price of $3.00 per share. (Pursuant to the terms of the Purchase
Agreement, in lieu of issuing a warrant evidencing such right to purchase
3,105,000 shares of Common Stock, the Company will issue, against delivery of
the Bridge Warrant for cancellation, a single warrant to purchase 3,450,000
shares of Common Stock (the "WARRANT") to evidence both the right to purchase
345,000 shares of Common Stock originally evidenced by the Bridge Warrant and
such right to purchase 3,105,000 shares of Common Stock.) The shares of Common
Stock issued or issuable upon exercise of the Warrant are referred to herein as
the "Warrant Shares" and the holder of the Warrant or any portion thereof shall
be deemed to be the holder of the Warrant Shares issuable upon the exercise
thereof.) Capitalized terms not defined herein shall have the meanings given to
such terms in the Purchase Agreement.

C. The execution of this Agreement by the Company and the Senior Officers
is a condition precedent to the obligation of LLCP to consummate the
transactions contemplated by the Purchase Agreement.

D. In consideration of the substantial direct and indirect benefits which
the Company and the Senior Officers will realize from the consummation of the
transactions contemplated by the Purchase Agreement, the Company and the Senior
Officers desire to enter into this Agreement and to be bound by the terms and
conditions hereof.

<PAGE>

AGREEMENT

In consideration of the mutual covenants and agreements set forth herein,
and for good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:

1. MANAGEMENT RIGHTS.

1.1 ELECTION TO BOARD. The Company has taken all action required to cause
Arthur E. Levine, as a representative of LLCP, to be elected to the Board of
Directors (the "BOARD") of the Company effective as of the close of business on
the date hereof. At each future election of members to the Board, the Company
shall nominate a person designated by LLCP (an "LLCP REPRESENTATIVE") for
election as a Director at each annual meeting of shareholders and shall
otherwise use its best efforts to cause an LLCP Representative to be elected to
and remain as a member of the Board. In furtherance of the foregoing, each of
C.E. Bradley, Sr. and C.E. Bradley, Jr. shall vote all shares of Common Stock as
to which he has the right to vote and shall, to the extent he has the power to
do so, cause each of his respective affiliates to vote, all shares of Common
Stock as to which such affiliate has the right to vote, for the election of the
LLCP Representative at each election of Directors; provided, however, that it
shall not constitute a violation of this covenant to the extent that a pledgee
of any such shares of Common Stock acquires the right to vote such shares
pursuant to the terms of any pledge agreement under which such shares have been
pledged by C.E. Bradley, Sr., C.E. Bradley, Jr. or any of their respective
affiliates, as the case may be. In the event of the death or resignation of the
LLCP Representative at any time, or in the event the LLCP Representative shall
not be elected to the Board at any election of directors for any reason, the
Company shall, upon request of LLCP, promptly (and in any event within five (5)
days of such request), take such steps as may be necessary, including increasing
the size of the Board and filling the resulting vacancy with an LLCP
Representative, as may be necessary to cause an LLCP Representative to become a
member of the Board. To the extent that the Board delegates any of its duties
to an executive committee or other similar committee, the LLCP Representative
shall, upon request, be elected to such committee. The agreement to vote
provided in this Section 1.1 is intended to constitute an enforceable voting
agreement within the scope of Section 706 of the General Corporation Law of the
State of California.

1.2 OBSERVATION RIGHTS. If at any time, no LLCP Representative is serving
on the Board for any reason, LLCP shall receive notice of and be entitled to
have one (1) representative and one advisor to such representative (or, at
LLCP's election, two (2) representatives) attend as observers at all meetings of
the Board and of all committees thereof and at all meetings of the shareholders
of the Company. Notice of such meetings shall be given to LLCP in the same
manner and at the same time as to the members of the Board or such committees
(which shall not be less than 48 hours prior to such meeting unless otherwise
agreed to by LLCP) and at the same time as to the shareholders of the Company,
as the case may be. LLCP shall be provided with copies of (i) a meeting agenda,
if any is prepared, (ii) all information which is provided to the

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<PAGE>

members of the Board or such committees or to the shareholders of the Company
(whether prior to, at, or subsequent to any such meetings), as the case may be,
at the same time as such materials are provided to the members of the Board or
such committee or to the shareholders of the Company, as the case may be, and
(iii) copies of the minutes of all meetings of the Board and such committees and
of all meetings of shareholders concurrently with the distribution of such
minutes to one or more members of the Board or such committees or shareholders,
as the case may be, but in no event later than forty-five (45) days after each
such meeting.

1.3 OPERATING COMMITTEE. The Company shall establish an operating
committee (the "OPERATING COMMITTEE") to, among other things, (i) review the
annual operating and capital budget of the Company and its subsidiaries; (ii)
compare budgeted versus actual performance; (iii) analyze working capital
management; and (iv) review the cash flow performance of the Company and its
subsidiaries. The Operating Committee shall also consider such additional
financial matters as the Operating Committee shall deem advisable. The
Operating Committee shall not constitute a committee designated by the Board
pursuant to the Company's Bylaws or Section 311 of the California Corporations
Code, and shall not have any authority to act in the name of or on behalf of the
Company or any subsidiary, but the Operating Committee shall have the right to
make suggestions and to recommend actions to the Board or to the Board of
Directors of any subsidiary of the Company or to any committee of any such Board
of Directors, either in writing or by attending, through a representative, a
meeting of such Board of Directors or such committee. The Operating Committee
shall at all times be comprised of at least two (2) members of senior management
of the Company, who initially shall be C.E. Bradley, Jr. and Mr. Fritz, and two
(2) members designated by LLCP. The financial officers of the Company and other
members of senior management shall be available at each meeting of the Operating
Committee to review financial information and discuss other matters. Regular
meetings of the Operating Committee shall take place on or about the fourth
Wednesday of each month (or the next succeeding Business Day, if the fourth
Wednesday is not a Business Day). The foregoing notwithstanding, the first
meeting of the Operating Committee shall be held on Monday, December 14, 1998.
Meetings may be conducted by telephone so long as each of the persons attending
can hear each of the other persons attending the meeting. The Company's
financial officers shall prepare a financial package for delivery to all
Operating Committee members at least forty-eight (48) hours prior to each
regularly scheduled monthly meeting. The financial package shall include, among
other things, (i) a consolidated and consolidating balance sheet, statement of
operations and statement of cash flows for the Company and its consolidated
subsidiaries for the most recent one-month period and for the year-to-date
period, (ii) a comparison of the actual results of operations for such periods
to the same periods in the prior year and to the budget and forecast, (iii) an
explanation of any variances in such actual results of operations from such
budget and forecast, and (iv) such other information as any member of the
Operating Committee may from time to time request.

1.4 COMPENSATION. For services rendered under this Section 1, the Company
shall pay to LLCP an annual consulting fee of $275,000, payable in monthly
installments of $22,917 each, which shall be paid in advance by wire transfer
to: Bank of America, Century City, Private Banking, 2049 Century Park East, Los
Angeles, California 90067, ABA No. Bank of America, Century City,

-3-
<PAGE>

Private Banking, 2049 Century Park East, Los Angeles, California 90067, ABA No.
121000358, Account No. 11546-03239, Attention: Cheryl Stewart (or such other
account as LLCP shall designate in writing) on the first business day of each
month, commencing December 1, 1998, with the final payment hereunder to be made
on November 1, 1999. In no event shall LLCP be obligated to refund any portion
of the consulting fee paid to it for any reason.

1.5 TERMINATION OF RIGHTS UNDER SECTION 1.1, 1.2 AND 1.3. LLCP's rights
under Sections 1.1, 1.2 and 1.3 shall continue so long as either of the
following two conditions is satisfied: (i) LLCP continues to hold, directly or
indirectly, at least $2,500,000 in principal amount of the Note; or (ii) LLCP
continues to hold (or is deemed to hold), directly or indirectly, at least
345,000 Warrant Shares. LLCP's rights under Sections 1.1, 1.2 and 1.3 shall
terminate when neither of the foregoing two conditions is satisfied; provided,
however, that even if neither of such conditions is satisfied, LLCP's rights
under Sections 1.1, 1.2 and 1.3 shall continue to the extent LLCP holds any
portion of the Note or any Warrant Shares if LLCP informs the Company in writing
that it believes in good faith that it is required to retain such rights to
qualify as a "venture capital operating company" for purposes of complying with
the requirements of the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated thereunder.

1.6 INDEMNIFICATION AND INSURANCE. The Company shall, to the maximum
extent permitted by law, indemnify and hold the LLCP Representative, each LLCP
representative on the Operating Committee, LLCP and LLCP's employees, general
and limited partners, principals, agents, attorneys, accountants,
representatives and affiliates (collectively, the "LLCP PARTIES") harmless from
all costs, expenses, liabilities, claims, damages and losses, including without
limitation, attorneys' fees and the cost of any investigation and preparation
incurred in connection therewith (collectively, "LIABILITIES AND COSTS") arising
out of or in any way related to the fact that any LLCP Party is or was a
director or other agent of the Company or any subsidiary of the Company, served
on the Operating Committee or, while a director or other agent, is or was
serving at the request of the Company as a director, officer, employee, trustee,
agent or fiduciary of another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise. Upon request by any LLCP Party, the
Company shall advance (within 10 business days of such request) any and all
expenses, including without limitation, any and all attorneys' fees and the cost
of any investigation and preparation incurred in connection with any matter for
which such LLCP Party is or may be entitled to indemnification hereunder;
provided, that, if and to the extent that a court of competent jurisdiction
finally determines that such LLCP Party is not permitted to be indemnified with
respect to such matter under applicable law, the Company shall be entitled to be
reimbursement of any expenses so advanced. The Company shall also indemnify
each LLCP Party from and against any and all Liabilities and Costs incurred in
connection with any claim or action brought to enforce such LLCP Party's rights
under this SECTION 1.5, or under applicable law or the Company's Articles of
Incorporation or Bylaws now or hereafter in effect relating to indemnification,
or for recovery under directors' and officers' liability insurance policies
maintained by the Company, regardless of whether such LLCP Party is ultimately
determined to be entitled to such indemnification or insurance recovery, as the
case may be. If for any reason

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<PAGE>

the foregoing indemnification is not available for any reason or is not
sufficient to indemnify and hold the LLCP Parties harmless from all such
Liabilities and Costs, then the Company shall contribute to the amount of all
such Liabilities and Costs paid or payable by any LLCP Party in such proportion
as is appropriate to reflect not only the relative benefits received by the
Company, on the one hand, and LLCP, on the other hand, but also the relative
fault of each, as well as any other equitable considerations. The Company's
reimbursement, indemnity and contribution obligations shall be in addition to
any liability the Company may otherwise have at law or under any other
agreement, including without limitation, the Purchase Agreement, and such
obligations shall extend, upon the same terms, to all LLCP Parties. This
SECTION 1.5 shall survive indefinitely the termination of this Agreement. At
any time that an LLCP Representative is serving on the Board, the Company shall
maintain in force and effect one or more insurance policies providing at least
$10,000,000 in insurance coverage for director liability, including coverage for
claims under federal and state securities laws. The Company shall procure
within 30 days of the date hereof, and shall thereafter maintain in effect, one
or more insurance policies providing at least $10,000,000 in insurance coverage
for director liability, including coverage for claims under federal and state
securities laws.

2. TAG ALONG RIGHTS.

2.1 TAG ALONG RIGHT. Subject to the provisions of SECTION 2.8, in the
event that C.E. Bradley, Jr. or any affiliated person or entity controlled by
him (a "SELLING HOLDER") receives a bona fide offer from any person or entity
(the "BUYER") to purchase any shares of Common Stock from such Selling Holder
and such Selling Holder desires to sell or otherwise transfer any such shares of
Common Stock pursuant to such bona fide offer, then LLCP shall be given an
opportunity to sell or otherwise transfer to the Buyer LLCP's Pro Rata Share
(determined in accordance with SECTION 2.2 below) of any shares of Common Stock
which the Buyer agrees to purchase (including, for purposes of this Agreement,
Warrant Shares) held or beneficially owned by LLCP as provided in this Agreement
(the "TAG ALONG RIGHTS").

2.2 TAR OFFER. At least 15 days prior to the consummation of any sale or
other transfer by a Selling Holder of any shares of Common Stock, the Selling
Holder shall cause the bona fide offer from the Buyer to purchase or otherwise
acquire such Selling Holder's shares to be reduced to writing (the "TAR OFFER")
and shall deliver written notice of the TAR Offer, together with a true copy of
the TAR Offer (the "TAR NOTICE"), to LLCP (a "TAR SALE"). Each TAR Offer shall
require the Buyer to offer to purchase or otherwise acquire from LLCP, at the
same time, at the same price and on the same terms as apply to the sale or other
disposition by the Selling Holder to the Buyer and according to the terms and
subject to the conditions of this Agreement, not less than the number of Warrant
Shares held by LLCP as shall be equal to the product of (i) the total number of
shares of Common Stock which the Buyer desires to purchase or otherwise acquire,
multiplied by (ii) a fraction, the numerator of which is the total number of
shares of Warrant Shares held by LLCP (collectively, the "LLCP SHARES") on the
date of the TAR Notice and the denominator of which is the total number of
shares of Common Stock held on such date by the Selling Holder plus the number
of LLCP Shares. Pursuant to SECTION 2.4, the Selling

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<PAGE>

Holder may then sell to the Buyer the number of shares of Common Stock remaining
after the shares of Common Stock to be sold by LLCP are subtracted from the
total number of shares of Common Stock which the Buyer desires to purchase or
otherwise acquire. For example, if a Buyer offers to purchase 100,000 shares of
Common Stock from C. E. Bradley, Jr., and he desires to accept such offer, then
the aggregate number of Shares which LLCP shall be entitled to sell to the Buyer
upon the exercise of the Tag Along Rights shall be equal to 100,000 multiplied
by the number of LLCP Shares divided by the sum of the number of LLCP Shares
plus the number of shares of Common Stock held by C.E. Bradley, Jr. In no event
shall LLCP be required to make any representation or warranty in connection with
the sale to any Buyer other than as to organization and authority of LLCP, title
to the shares of Common Stock to be sold by LLCP, and the absence of conflict
with laws or material agreements of LLCP.

2.3 ACCEPTANCE NOTICE. If LLCP desires to accept the TAR Offer with
respect to any shares of Common Stock held by LLCP or issuable upon exercise of
the Warrant, LLCP shall deliver to the Selling Holder within fifteen (15) days
after receipt of the TAR Notice by LLCP, a written notice stating such
acceptance of the TAR Offer and setting forth the number of shares of Common
Stock that LLCP desires to sell to the Buyer (the "ACCEPTANCE NOTICE"). If LLCP
does not deliver an Acceptance Notice to the Selling Holder in accordance with
the provisions of this SECTION 2.3, LLCP shall be deemed to have rejected the
TAR Offer. The timely delivery of the Acceptance Notice shall constitute LLCP's
agreement to sell to the Buyer the lesser of (i) the number of shares of Common
Stock which LLCP is entitled to sell to the Buyer pursuant to this SECTION 2 and
(ii) the number of shares of Common Stock which LLCP desires to sell to the
Buyer as set forth in the Acceptance Notice. The Acceptance Notice shall also
include (i) a written undertaking of LLCP to deliver, at least two business days
prior to the expected date of the consummation of such sale or other disposition
to the Buyer as indicated in the TAR Notice, such documents (including stock
assignments and stock certificates, if any) as shall be reasonably required to
transfer the shares of Common Stock to be sold by LLCP to the Buyer pursuant to
the TAR Offer and (ii) a limited power-of-attorney authorizing the Selling
Holder to transfer such shares to the Buyer pursuant to the terms of the TAR
Offer

2.4 CONSUMMATION. If there is a decrease in the price to be paid by the
Buyer for the shares to be purchased from the price set forth in the TAR Offer,
which decrease is acceptable to the Selling Holder, or any other material change
in terms which are less favorable to the Selling Holder but which are acceptable
to the Selling Holder, the Selling Holder shall immediately, but in any event
within two (2) business days, notify LLCP of such decrease or other change, and
LLCP shall have five (5) business days from the date of receipt of the notice of
such decrease to modify the number of shares of Common Stock it will sell to the
Buyer, as previously indicated in the applicable Acceptance Notice, or decline
the TAR Offer. If the Selling Holder does not complete any proposed sale or
other transfer for any reason, the Selling Holder shall immediately return to
LLCP all documents (including stock assignments and stock certificates, if any)
and powers-of-attorney which LLCP delivered to the Selling Holder pursuant to
this SECTION 2 or otherwise in connection with such sale or other transfer.

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<PAGE>

2.5 CLOSING. The delivery of the stock certificate by the Selling Holder
and LLCP to the Buyer in consummation of the sale of shares of Common Stock
pursuant to the terms and conditions specified in the TAR Offer, and the payment
by the Buyer to the Selling Holder and LLCP in immediately available funds of
that portion of the sale proceeds to which the Selling Holder and LLCP are
respectively entitled by reason of their participation in such sale shall occur
simultaneously at a closing at the principal office of the Company, or such
place as the Buyer and the selling parties may agree, at a time and at a date
mutually agreeable to the Buyer and the selling parties.

2.6 SUBSEQUENT OFFERING. The exercise or nonexercise of the Tag Along
Rights by LLCP with respect to any sale or transfer shall not affect adversely
the right of LLCP to exercise the Tag Along Rights with respect to any
subsequent sale or transfer.

2.7 PROHIBITED SALE. In the event of any purported sale of shares of
Common Stock by C.E. Bradley, Jr. or any affiliated person or entity controlled
by him in contravention of this SECTION 2 (a "PROHIBITED TRANSFER"), LLCP shall
have the right to (i) require that the Company, or the Company's transfer agent,
not enter such transfer on the books and records of the Company or (ii) sell to
the Selling Holder the number of shares of Common Stock equal to the number of
shares of Common Stock that LLCP could have sold in connection with the sale by
the Selling Holder on the following terms and conditions:

(a) The price per share which such shares are to be sold to
such Selling Holder shall be equal to the price per share paid to such
Selling Holder by the Buyer of such Selling Holder's shares of Common
Stock;

(b) LLCP shall deliver to such Selling Holder within not
more than ten (10) business days after receiving notice from such
Selling Holder of the Prohibited Transfer, the certificate or
certificates representing the shares of Common Stock to be sold, each
certificate being properly endorsed for transfer; and

(c) Such Selling Holder, upon receipt of the share
certificates delivered pursuant to SECTION 2.7(b) above, shall within
one (1) business day pay in cash (regardless of the form of
consideration paid to such Selling Holder by the Buyer) the purchase
price therefor, by wire transfer to such account as directed by LLCP
or such other means of payment as is directed by LLCP, and shall
reimburse LLCP for any additional expenses, including legal fees and
expenses, incurred in effecting such purchase and resale.

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<PAGE>

2.8 PERMITTED TRANSFERS. Notwithstanding the foregoing, the following
transactions shall not be subject to the provisions of this SECTION 2: (i) sales
in a public offering registered under the Securities Act of 1933, as amended
(the "ACT"); (ii) sales pursuant to Rule 144 or any similar successor rule
promulgated under the Act; (iii) sales of shares of Common Stock which do not
constitute "restricted securities" as such term is defined in Rule 144(a)(3) to
the extent C.E. Bradley, Jr. is not an affiliate of the Company at the time of
such sale; (iv) sales effected pursuant to a margin call by a broker holding
shares of Common Stock as collateral for a margin account; (v) the pledge of
shares pursuant to the terms of a bona fide pledge agreement to secure
obligations of C.E. Bradley, Jr., provided that no more than 600,000 shares are
subject to pledge at any time (which number shall be reduced by the number of
shares sold as permitted by the following clause (vi)); (vi) sales effected by a
bona fide pledgee pursuant to the terms of a pledge agreement permitted under
the foregoing clause (v); (vii) sales by the estate of the holder to a spouse or
other family member ("FAMILY MEMBER") within one year of the holder's death;
(viii) transfers to a trust for the benefit of a Family Member of the
transferor, or to an executor, administrator or other personal representative
pending distribution to such Family Member or trust; or (ix) by INTER VIVOS
transfer to a Family Member of the transferor or to a trust primarily for the
transferor's benefit or the benefit of a Family Member of a transferor;
provided, however, that the transferee in each of the foregoing clauses (vii),
(viii) and (ix) shall be bound by the provisions of this Agreement with respect
to such transferred shares and shall, upon request, execute and deliver to LLCP
and the Company an instrument, in form and substance reasonably acceptable to
LLCP, agreeing to be bound by the provisions of this Agreement with respect to
any future transfer.

2.9 TERMINATION OF TAG-ALONG-RIGHTS. The Tag-Along-Rights provided for in
this Section 2 shall terminate (i) in their entirety at such time as the number
of Warrant Shares directly or indirectly held by LLCP is less than two percent
(2%) of the number of shares of Common Stock then outstanding and (ii) shall
terminate as to sales or other transfers by C.E. Bradley, Jr. at such time as he
shall hold less than ten percent (10%) of the number of shares of Common Stock
held on the date of this Agreement (including all shares of Common Stock
issuable upon the conversion or exercise of all securities held on the date of
this Agreement which can be converted into or exercised for shares of Common
Stock).

2.10 REPRESENTATION, WARRANTY AND COVENANT OF C.E. BRADLEY, JR. C.E.
Bradley, Jr. shall give LLCP written notice within two (2) days in the event
that he acquires, directly or indirectly, any additional shares of Common Stock,
which shares shall, upon such acquisition, be legended as required by Section
5.1 (to the extent required to be so legended pursuant to Section 5.1) and shall
immediately become subject to the terms and provisions of this Section 2.

3. RIGHTS UPON ISSUANCE OF ADDITIONAL SECURITIES.

3.1 RIGHT TO PURCHASE. The Company shall not issue any Common Stock or
warrants, rights or options to subscribe for or purchase, or obligations to
issue, or other securities exercisable or exchangeable for or convertible into
any shares of Common Stock of the Company

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<PAGE>

("OPTION RIGHTS") without first offering in writing to LLCP the right to
purchase at the same price applicable to such issuance (which offer must remain
open for a period of at least thirty (30) days) an amount of such newly-issued
equity securities equal to LLCP's pro rata share of the newly-issued equity
securities such that, if LLCP exercised its right to first refusal in full, its
pro rata share would not have changed from its Pro Rata Share (as defined below)
prior to such issuance.

3.2 EXCEPTIONS. Section 3.1 shall not apply to (i) the issuance of any
equity security by the Company pursuant to a public offering registered under
the Act, provided such security is listed at the time of issuance on a
recognized national securities exchange or on the NASDAQ National Market, (ii)
the issuance of Common Stock upon the exercise or conversion of the Warrant or
of any Option Rights (A) which are outstanding as of the date of this Agreement
or (B) which are issued after the date of this Agreement in compliance with the
provisions of this Section 3, (iii) the issuance of that certain Convertible
Subordinated 12.5% Note dated the date hereof in the principal amount of
$4,000,000 issued by the Company to SFSC and of that certain Convertible
Subordinated 12.5% Note dated the date hereof in the principal amount of
$1,000,000 issued by the Company to John G. Poole, and, in each case, the
issuance of any securities issued upon the conversion thereof, (iv) the issuance
of any Option Rights granted pursuant to the Option Pool (as defined below) or
the issuance of Common Stock issued upon the exercise of any such Option Rights
or (v) the issuance of any warrant or warrants issued in connection with the
agreement with Financial Security Assurance Inc. contemplated by Section 8.6 of
the Purchase Agreement, provided the exercise of such warrant or warrants is
greater than $3.00 per share, and any shares of Common Stock issued or issuable
upon the exercise of any such warrant or warrants.

3.3 DEFINITIONS. As used in this Section, the following terms shall have
the meanings indicated:

(a) "PRO RATA SHARE" as of a specified date shall mean the percentage
equal to the fraction, the numerator of which is the number of shares of Common
Stock held by LLCP or issuable upon the exercise of Option Rights held by LLCP
as of such date and the denominator of which is the sum of (i) the number of
shares of Common Stock outstanding as of such date, plus (ii) the number of
shares of Common Stock issuable upon the exercise of Option Rights outstanding
as of such date (but only to the extent such Option Rights are exercisable as of
such date).

(b) Option Rights granted pursuant to the "OPTION POOL" shall mean any
Option Rights to purchase shares of Common Stock granted by the Company, whether
before or after the date of this Agreement, to directors, officers and key
employees of the Company or of any affiliate of the Company under a plan adopted
or to be adopted by the Board or the shareholders of the Company, including,
without limitation, the Company's 1991 Stock Option Plan, as amended, and the
Company's 1997 Long-Term Incentive Stock Plan, at an exercise price per share
that is not less than the fair market value of the shares of Common Stock as of
the date of grant, as determined by the Board in good faith and approved (i) in
the case of a grant to any officer (other than a senior executive officer) or
employee of the Company who is not a member of the Board,

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<PAGE>

by a majority vote of the Board, and (ii) in the case of any grant to a
senior executive officer or member of the Board, by the unanimous vote of the
members of the Board who are not being granted or receiving such Option
Rights, unless such grant (and the number of shares of Common Stock issuable
upon exercise thereof) is consistent with past grants by the Company to such
member, in which case by a majority vote of the Board.

3.4 TERMINATION. This SECTION 3 shall terminate on the earlier to occur
of (i) the seventh anniversary date of this Agreement and (ii) the date upon
which the number of Warrant Shares directly or indirectly held by LLCP is less
than five percent (5.0%) of the number of shares of Common Stock outstanding at
any time.

4. COVENANTS OF THE SENIOR OFFICERS.

4.1 PROTECTION AND USE OF CONFIDENTIAL INFORMATION. Each Senior Officer
severally acknowledges and agrees that, in the course of the performance of his
duties for the Company he has come into the possession of and will continue to
come into possession of confidential information which is valuable to the
Company by virtue of the fact that such information is not generally known to
the public or to the Company's competitors ("CONFIDENTIAL INFORMATION"). The
Confidential Information includes, but is not limited to, trade secrets,
business records, vendor lists, dealer lists, information concerning financing
sources, information concerning employees, information concerning the Company's
products and services, technical data, know how, specifications, processes,
computations, development work, business plans, financial projections and other
internal financial information, pricing information, information concerning the
Company's sales and marketing programs, training materials and computer programs
and routines. Each Senior Officer severally agrees that (i) he will not, at any
time either during or after his employment with the Company, in any manner,
either directly or indirectly divulge, disclose or communicate any Confidential
Information to any person, firm or corporation or any other business entity,
(ii) he will not use any Confidential Information for his own benefit or for any
other purpose other than for the exclusive benefit of the Company and its
subsidiaries, (iii) all Confidential Information is and shall remain the
exclusive property of the Company, (iv) upon the termination of his employment
with the Company, he will not, without the prior written approval of the
Company, keep or remove any books, drawings, documents, records or other written
or printed, photographic, encarded, taped, electrostatically or
electromagnetically encoded data or information of whatever nature of the
Company, and shall immediately return all such material and other Company
property in his possession to the Company; provided, however, that foregoing
shall not prohibit any Senior Officer from disclosing Confidential Information
(i) to the extent such Senior Officer reasonably believes in good faith that the
disclosure of such Confidential Information is in the best interests of the
Company or otherwise necessary or appropriate to the effective and efficient
discharge of such Senior Officer's duties to the Company or (ii) to the extent
such disclosure is required under applicable law or pursuant to the order of a
court or other governmental agency.

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<PAGE>

4.2 NONSOLICITATION. Each Senior Officer severally agrees that during any
period during which he is employed by the Company and for a period of five (5)
years after termination of such employment, he shall not, directly or
indirectly, either for himself or for any other person or entity, (i) hire or
offer employment to or seek to hire or offer employment to, or otherwise engage
as an employee or independent contractor (collectively, an "EMPLOYMENT OFFER"),
any employee of the Company or any subsidiary of the Company, or any former
employee having been employed by the Company or any subsidiary of the Company
within one year prior to such Employment Offer, or in any other way interfere
with the relationship between the Company or any subsidiary of the Company and
any employee of the Company, or (ii) request, advise or encourage any customer,
dealer, financing source, client, vendor or other person with whom the Company
or any subsidiary of the Company conducts business to withdraw, curtail, reduce
or cancel its business with the Company.

5. MISCELLANEOUS.

5.1 LEGENDS. Each certificate representing the Shares now or hereafter
owned by C.E. Bradley, Jr. shall be endorsed with the following legend:

THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO THE TERMS AND CONDITIONS OF AN INVESTOR RIGHTS AGREEMENT
BY AND AMONG CONSUMER PORTFOLIO SERVICES, INC., LEVINE LEICHTMAN
CAPITAL PARTNERS II, L.P., AND THE OTHER PARTIES NAMED THEREIN.
COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
SECRETARY OF THE COMPANY.

Each certificate representing the Shares now or hereafter owned by C.E. Bradley,
Sr. or C.E. Bradley, Jr. shall be endorsed with the following legend:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A VOTING
AGREEMENT AS SET FORTH IN AN INVESTOR RIGHTS AGREEMENT BY AND AMONG
CONSUMER PORTFOLIO SERVICES, INC., LEVINE LEICHTMAN CAPITAL PARTNERS
II, L.P., AND THE OTHER PARTIES NAMED THEREIN. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
COMPANY.

The foregoing notwithstanding, a certificate evidencing Shares which are, as of
the date hereof, pledged to a third party need not be legended as provided in
this Section 5.1. To the extent the certificate evidencing any Shares bears a
legend required by this Section 5.1 and the holder of such

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<PAGE>

certificate desires to pledge such Shares to a third party (and, in the case of
C.E. Bradley, Jr., such pledge is permitted by clause (v) of the first sentence
of Section 2.8), the Company shall promptly issue a new certificate evidencing
the Shares to be so pledged without any legend upon written request of such
holder certifying such holder's intent to pledge such Shares (and, in the case
of any such request by C.E. Bradley, Jr., certifying that such pledge will not
violate clause (v) of the first sentence of Section 2.8). A copy of any such
request shall be concurrently provided to LLCP.

5.2 STOCK TRANSFER RECORDS. The Company shall make appropriate notations
in its stock transfer records of the restrictions on transfer provided for in
this Agreement and shall not record any transfers of capital stock not made in
strict compliance with the terms of this Agreement. The Company acknowledges
that any such transfer shall constitute an Event of Default under the Purchase
Agreement.

5.3 SUCCESSORS AND ASSIGNS. The rights and obligations of LLCP under this
Agreement shall be freely assignable in connection with any transfer of the
Warrant or any portion thereof or of any shares of Common Stock issued upon the
exercise thereof in whole or in part; provided, however, that the rights of LLCP
under Section 1 of this Agreement may not be assigned except in connection with
any such transfer to an affiliate of LLCP. Any assignee of such rights shall be
entitled to all of the benefits of this Agreement as if such assignee were an
original party hereto. The rights and obligations of the Bradleys hereunder may
only be assigned, and shall automatically be assigned, to any person who takes
and holds such shares through a private transaction other than one in which a
TAR Sale was made or by will or by the laws of descent and distribution. Such
persons shall be conclusively deemed to have agreed to and be bound by all the
terms and provisions of this Agreement.

5.4 ENTIRE AGREEMENT. This Agreement and the other agreements referenced
herein or furnished pursuant hereto or thereto or in connection herewith or
therewith constitute the full and entire agreement and understanding between the
parties hereto relating to the subject matter hereof.

5.5 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given if transmitted by telecopier with
receipt acknowledged, or upon delivery, if delivered personally or by recognized
commercial courier with receipt acknowledged, or upon the expiration of 72 hours
after mailing, if mailed by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:

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<PAGE>

If to LLCP:

c/o Levine Leichtman Capital Partners, Inc.
335 North Maple Drive, Suite 240
Beverly Hills, CA 90210
Attention: Arthur E. Levine, President
Telephone: (310) 275-5335
Facsimile: (310) 275-1441

If to any assignee of LLCP:

At such assignee's address as shown on the books of the Company.

If to the Company:

Consumer Portfolio Services, Inc.
16355 Laguna Canyon Road
Irvine, CA 92618
Attention: Charles E. Bradley, Jr., President and
Chief Executive Officer
Telephone: (949) 753-6800
Facsimile: (949) 753-6805

or at such other address or addresses as LLCP, such assignee or the Company, as
the case may be, may specify by written notice given in accordance with this
Section 5.5.

5.6 SEVERABILITY. In case any provision of this Agreement 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.

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

5.8 DESCRIPTIVE HEADINGS, CONSTRUCTION AND INTERPRETATION. The
descriptive headings of the several paragraphs of this Agreement are for
convenience of reference only and do not constitute a part of this Agreement and
are not to be considered in construing or interpreting this Agreement. All
section, preamble, recital and party references are to this Agreement unless
otherwise stated. No party, nor its counsel, shall be deemed the drafter of
this Agreement for purposes of construing the provisions of this Agreement, and
all provisions of this Agreement shall be construed in accordance with their
fair meaning, and not strictly for or against any party.

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<PAGE>

5.9 WAIVERS AND AMENDMENTS. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally or by course of
dealing, but only by a statement in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought.

5.10 REMEDIES. In the event that the Company or any Senior Officer fails
to observe or perform any covenant or agreement to be observed or performed
under this Agreement, LLCP may proceed to protect and enforce its rights by suit
in equity or action at law, whether for specific performance of any term
contained in this Agreement or for an injunction against the breach of any such
term or in aid of the exercise of any power granted in this Agreement or to
enforce any other legal or equitable right of LLCP, or to take any one or more
of such actions. The Company agrees to pay all fees, costs, and expenses,
including without limitation, fees and expenses of attorneys, accountants and
other experts retained by LLCP, and all fees, costs and expenses of appeals,
incurred or expended by LLCP in connection with the enforcement of this
Agreement or the collection of any sums due hereunder, whether or not suit is
commenced. None of the rights, powers or remedies conferred under this
Agreement shall be mutually exclusive, and each such right, power or remedy
shall be cumulative and in addition to any other right, power or remedy whether
conferred by this Agreement or now or hereafter available at law, in equity, by
statute or otherwise.

5.11 GOVERNING LAW. In all respects, including all matters of
construction, validity and performance, this Agreement and the rights and
obligations arising hereunder shall be governed by, and construed and enforced
in accordance with, the laws of the State of California applicable to contracts
made and performed in such state, without regard to principles thereof regarding
conflicts of laws.

5.12 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX COMMERCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSONS AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, AND UNDERSTANDING THEY ARE WAIVING A CONSTITUTIONAL RIGHT, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR
OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS
AGREEMENT OR THE TRANSACTIONS COMPLETED HEREBY.

[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

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<PAGE>

IN WITNESS WHEREOF, the parties have caused this Investor Rights Agreement
to be executed and delivered as of the date first above written.

THE COMPANY: LLCP:

CONSUMER PORTFOLIO SERVICES, LEVINE LEICHTMAN CAPITAL
INC., a California corporation PARTNERS, INC., a California
corporation

By: /s/ Charles E. Bradley, Jr.
--------------------------- on behalf of LEVINE LEICHTMAN
Charles E. Bradley, Jr., CAPITAL PARTNERS II, L.P.,
President and Chief Executive Officer a California limited partnership

By: /s/ Jeffrey P. Fritz By: /s/ Lauren B. Leichtman
---------------------------- -----------------------------
Jeffrey P. Fritz, Lauren B. Leichtman,
Senior Vice President and Chief Chief Executive Officer
Financial Officer

THE SENIOR OFFICERS:

/s/ Charles E. Bradley, Sr.
- ------------------------------------
CHARLES E. BRADLEY, SR.

/s/ Charles E. Bradley, Jr.
- ------------------------------------
CHARLES E. BRADLEY, JR.

/s/ Jeffrey P. Fritz
- ------------------------------------
JEFFREY P. FRITZ

-15-

<PAGE>

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is entered into as of
November 17, 1998 by and between Consumer Portfolio Services, Inc., a California
corporation (the "COMPANY"), and Levine Leichtman Capital Partners II, L.P., a
California limited partnership ("LLCP").

RECITALS

B. LLCP and the Company are parties to that certain Securities Purchase
Agreement of even date herewith (the "PURCHASE AGREEMENT") pursuant to which
the Company has agreed to issue to LLCP, and LLCP has agreed to purchase from
the Company, (i) a promissory note in the principal amount of $25,000,000 (the
"NOTE") and (ii) a warrant to purchase 3,105,000 shares of Common Stock for a
purchase price of $3.00 per share. (Pursuant to the terms of the Purchase
Agreement, in lieu of issuing a warrant evidencing such right to purchase
3,105,000 shares of Common Stock, the Company will issue, against delivery of
the Bridge Warrant for cancellation, a single warrant to purchase 3,450,000
shares of Common Stock (the "WARRANT") to evidence both the right to purchase
345,000 shares of Common Stock originally evidenced by the Bridge Warrant and
such right to purchase 3,105,000 shares of Common Stock.) The shares of Common
Stock issued or issuable upon exercise of the Warrant are referred to herein as
the "WARRANT SHARES" and the holder of the Warrant or any portion thereof shall
be deemed to be the holder of the Warrant Shares issuable upon the exercise
thereof.) Capitalized terms not defined herein shall have the meanings given to
such terms in the Purchase Agreement.

C. The execution of this Agreement by the Company is a condition
precedent to the obligation of LLCP to consummate the transactions contemplated
by the Purchase Agreement.

D. In consideration of the substantial direct and indirect benefits which
the Company will realize from the consummation of the transactions contemplated
by the Purchase Agreement, the Company desires to enter into this Agreement and
to be bound by the terms and conditions hereof.

AGREEMENT

In consideration of the mutual covenants and agreements set forth herein,
and for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
<PAGE>

1. DEFINITIONS. For purposes of this Agreement, the following terms shall
have the meanings specified below:

"BUSINESS DAY" shall mean any day that is not a Saturday, Sunday or other
day on which banks in the State of California are authorized or required to
close.

"COMMISSION" shall mean the Securities and Exchange Commission or any other
Federal agency at the time administering the 1933 Act.

"COMMON STOCK" shall mean the common stock, no par value, of the Company.

"COMPANY" shall have the meaning set forth in the preamble of this
Agreement.

"DEMANDING HOLDERS" shall mean LLCP or, if LLCP does not hold a majority of
the Registrable Securities at any time, the holders of a majority of Registrable
Securities.

"DEMAND REGISTRATION" shall have the meaning specified in SECTION 2.1(a).

"FSA" shall mean Financial Security Assurance, Inc.

"FSA REGISTRATION RIGHTS AGREEMENT" shall mean any agreement entered into
by the Company and FSA in connection with the transactions contemplated by
Section 8.6 (AGREEMENT WITH FSA) of the Purchase Agreement which grants to FSA
registration rights with respect to the shares of Common Stock issued to (or
issuable upon the exercise of other securities issued to) FSA in connection with
such transactions; provided that such registration rights (i) may not provide
for more than two demand registration rights, (ii) may not permit the exercise
of any demand registration right prior to the first anniversary of the date
hereof and (iii) shall otherwise be on terms and conditions consistent with this
Agreement.

"INDEMNIFIED PARTY" shall have the meaning specified in SECTION 4.3.

"INDEMNIFYING PARTY" shall have the meaning specified in SECTION 4.3.

"INSPECTORS" shall have the meaning specified in SECTION 3.1(h).

"LLCP" shall have the meaning set forth in the preamble of this Agreement.

"LLCP INDEMNIFIED PARTY" shall have the meaning specified in SECTION 4.1.

"MAXIMUM NUMBERS OF SHARES" shall have the meaning specified in
SECTION 2.1(d).

"1933 ACT" shall mean the Securities Act of 1933, as amended, and the rules
and regulations of the Commission thereunder, all as the same shall be in effect
at the time.

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<PAGE>

"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission thereunder, all as the same shall be
in effect at the time.

"PIGGY-BACK REGISTRATION" shall have the meaning specified in
SECTION 2.2(a).

"PURCHASE AGREEMENT" shall have the meaning set forth in the recitals to
this Agreement.

"REGISTER", "REGISTERED" and "REGISTRATION" shall mean a registration
effected by preparing and filing a registration statement or similar document in
compliance with the 1933 Act, and the applicable rules and regulations
thereunder, and such registration statement becoming effective.

"REGISTRABLE SECURITIES" shall mean, collectively, the Shares and any
securities issued or issuable upon any stock dividend, stock split,
recapitalization, merger, consolidation or similar event with respect to the
Shares. As to any particular Registrable Securities, such securities shall
cease to be Registrable Securities when (i) a registration statement covering
such securities shall have become effective under the 1933 Act and such
securities shall have been sold pursuant to such registration statement,
(ii) such securities shall have been distributed to the public pursuant to
Rule 144 or Rule 144A (or any successor provisions) under the 1933 Act,
(iii) such securities shall have ceased to be outstanding, or (iv) such
Registrable Securities are sold pursuant to that certain Securities Option
Agreement of even date herewith among LLCP, Stanwich and the Company.

"SHARES" shall mean the shares of Common Stock issued or issuable upon
exercise of the Warrant. As used in this Agreement, the holder of the Warrant
or any portion thereof shall be deemed to be the holder of the shares of Common
Stock issuable upon exercise thereof and, to the extent such shares constitute
Registrable Securities, such holder shall be deemed to be the holder of such
Registrable Securities.

"STANWICH" shall mean Stanwich Financial Services Corp., a Rhode Island
corporation.

"STANWICH REGISTRATION RIGHTS AGREEMENT" shall mean that certain
Consolidated Registration Rights Agreement between the Company and Stanwich of
even date herewith which (i) supersedes and replaces (A) that certain Amended &
Restated Registration Rights Agreement between the Company and Stanwich made
originally as of June 12, 1997 and was amended and restated as of July 21, 1998
and (B) that certain Registration Rights Agreement between the Company and
Stanwich made as of July 21, 1998 and (ii) grants to Stanwich two demand
registration rights (commencing on the first anniversary of the date hereof) and
piggy-back registration rights on terms and conditions consistent with this
Agreement with respect to certain shares of Common Stock held by Stanwich or
issuable to Stanwich upon the conversion of certain securities held by Stanwich.

"UNDERWRITER" shall mean a securities dealer who purchases any Registrable
Securities as principal in an underwritten offering and not as part of such
dealer's market-making activities.

3
<PAGE>

"WARRANT" shall mean the warrant to purchase 3,450,000 shares of Common
Stock issued pursuant to the Purchase Agreement, as such warrant may be amended,
restated or amended and restated at any time and shall include (i) any new
warrant or warrants issued upon the transfer of all or any portion of the
warrant issued pursuant to the Purchase Agreement and (ii) any warrant or
warrants issued upon the further transfer, division or combination of any such
new warrant or warrants.

Capitalized terms not otherwise defined herein shall have the meaning given
to them in the Purchase Agreement.

2. REGISTRATION RIGHTS.

2.1 DEMAND REGISTRATION.

(a) REQUEST FOR REGISTRATION. At any time and from time to time on
or after the first anniversary of the date of this Agreement, the Demanding
Holders may make a written request for registration under the 1933 Act of all or
part of their Registrable Securities (a "DEMAND REGISTRATION"). Such request
for a Demand Registration must specify the number of shares of Registrable
Securities proposed to be sold and must also specify the intended method of
disposition thereof. Upon any such request, the Demanding Holders shall be
entitled to have their Registrable Securities included in the Demand
Registration, subject to Section 2.1(d) and the proviso set forth in Section
3.1(a). The Company shall not be obligated to effect more than two Demand
Registrations with respect to the Shares under this SECTION 2.1(a).

(b) EFFECTIVE REGISTRATION. Except in the case of a withdrawal
governed by the last sentence of SECTION 2.1(e), a registration will not count
as a Demand Registration until it has become effective and the Company has
complied with its obligations under this Agreement with respect thereto;
provided, however, that, after it has been declared effective, if the offering
of Registrable Securities pursuant to a Demand Registration is interfered with
by any stop order, injunction or other order or requirement of the Commission or
any other governmental agency or court, such Demand Registration will be deemed
not to have become effective during the period of such interference.

(c) UNDERWRITTEN OFFERING. If the Demanding Holders so elect, the
offering of such Registrable Securities pursuant to such Demand Registration
shall be in the form of an underwritten offering. The Demanding Holders shall
select one or more firms of investment bankers to act as the managing
Underwriter or Underwriters in connection with such offering and shall select
any additional managers to be used in connection with the offering.

(d) REDUCTION OF OFFERING. If the managing Underwriter or
Underwriters for a Demand Registration that is to be an underwritten offering
advises the Company and the Demanding Holders, in writing, that the dollar
amount or number of shares of Registrable Securities which the Demanding Holders
desire to sell, taken together with all other shares of Common Stock or

4
<PAGE>

securities which the Company desires to sell and the shares of Common Stock, if
any, as to which registration has been requested pursuant to the piggy-back
registration rights under the FSA Registration Rights Agreement and the Stanwich
Registration Rights Agreement or which other shareholders of the Company desire
to sell, exceeds the maximum dollar amount or number that can be sold in such
offering without adversely affecting the proposed offering price, the timing,
the distribution method or the probability of success of such offering (the
"MAXIMUM NUMBER OF SHARES"), then the Company shall include in such
registration: (i) first, the Registrable Securities as to which Demand
Registration has been requested by the Demanding Holders (pro rata in accordance
with the number of shares of Registrable Securities held by each Demanding
Holder, regardless of the number of shares of Registrable Securities which such
Demanding Holder has requested be included in such registration) that can be
sold without exceeding the Maximum Number of Shares, (ii) second, to the extent
the Maximum Number of Shares has not been reached under the foregoing clause
(i), the shares of Common Stock for the account of other persons that the
Company is obligated to register pursuant to the FSA Registration Rights
Agreement and the Stanwich Registration Rights Agreement (to be allocated among
the persons requesting inclusion in such registration pursuant to such
agreements pro rata in accordance with the number of shares of Common Stock with
respect to which such person has the right to request such inclusion under such
agreements, regardless of the number of shares which such person has actually
requested be included in such registration) that can be sold without exceeding
the Maximum Number of Shares, (iii) third, to the extent the Maximum Number of
Shares has not been reached under the foregoing clauses (i) and (ii), the shares
of Common Stock that the Company desires to sell that can be sold without
exceeding the Maximum Number of Shares and (iii) fourth, to the extent the
Maximum Number of Shares has not been reached under the foregoing clauses (i),
(ii) and (iii), the shares of Common Stock that other shareholders desire to
sell that can be sold without exceeding the Maximum Number of Shares.

(e) WITHDRAWAL. If the Demanding Holders or any of them disapprove
of the terms of any underwriting or are not entitled to include all of their
Registrable Securities in any offering, such Demanding Holders may elect to
withdraw from such offering by giving written notice to the Company and the
Underwriter of their request to withdraw prior to the effectiveness of the
registration statement. If the Demanding Holders or any of them withdraw from a
proposed offering relating to a Demand Registration and, solely as a result of
such withdrawal the registration statement is withdrawn prior to being declared
effective, such registration shall count as a Demand Registration provided for
in SECTION 2.1(a) unless the withdrawing Demanding Holders pay their pro rata
share (based upon the number of shares to be included in such registration
statement) of the expenses incurred in connection with such registration
statement.

2.2 PIGGY-BACK REGISTRATION.

(a) PIGGY-BACK RIGHTS. If at any time the Company proposes to file a
registration statement under the 1933 Act with respect to an offering of equity
securities, or securities convertible or exchangeable into equity securities, by
the Company for its own account or by shareholders of the Company for their
account (or by the Company and by shareholders of the Company) other than

5
<PAGE>

a registration statement (i) on Form S-4 or S-8 (or any substitute or successor
form that may be adopted by the Commission), (ii) filed in connection with any
employee stock option or other benefit plan, (iii) for an exchange offer or
offering of securities solely to the Company's existing shareholders, or
(iv) for a dividend reinvestment plan, then the Company shall (x) give written
notice of such proposed filing to the holders of Registrable Securities as soon
as practicable but in no event less than 30 days before the anticipated filing
date, which notice shall describe the amount and type of securities to be
included in such offering, the intended method(s) of distribution, and the name
of the proposed managing Underwriter or Underwriters, if any, of the offering;
and (y) offer to the holders of Registrable Securities in such notice the
opportunity to register such number of shares of Registrable Securities as such
holders may request in writing within 15 days following receipt of such notice
(a "PIGGY-BACK REGISTRATION"). The Company shall cause such Registrable
Securities to be included in such registration and shall use its best efforts to
cause the managing Underwriter or Underwriters of a proposed underwritten
offering to permit the Registrable Securities requested to be included in a
Piggy-Back Registration to be included on the same terms and conditions as any
similar securities of the Company and to permit the sale or other disposition of
such Registrable Securities in accordance with the intended method of
distribution thereof.

(b) REDUCTION OF OFFERING.

(i) If the managing Underwriter or Underwriters for a Piggy-Back
Registration that is to be an underwritten offering of shares for the Company's
account advises the Company and the holders of Registrable Securities in writing
that the dollar amount or number of shares of Common Stock which the Company
desires to sell, taken together with the Registrable Securities as to which
registration has been requested hereunder and the shares of Common Stock, if
any, as to which registration has been requested pursuant to the piggy-back
registration rights under the FSA Registration Rights Agreement or the Stanwich
Registration Rights Agreement or which other shareholders of the Company desire
to sell, exceeds the Maximum Number of Shares, then the Company shall include in
such registration: (i) first, the shares of Common Stock or other securities
that the Company desires to sell that can be sold without exceeding the Maximum
Number of Shares, (ii) second, to the extent the Maximum Number of Shares has
not been reached under the foregoing clause (i), the Registrable Securities as
to which registration has been requested hereunder and the shares of Common
Stock, if any, as to which registration has been requested pursuant to the
piggy-back registration rights granted under the FSA Registration Rights
Agreement and the Stanwich Registration Rights Agreement (to be allocated among
the persons requesting inclusion in such registration pursuant to such
agreements pro rata in accordance with the number of shares of Common Stock with
respect to which such person has the right to request such inclusion under such
agreements, regardless of the number of shares which such person has actually
requested be included in such registration) that can be sold without exceeding
the Maximum Number of Shares and (iii) third, to the extent the Maximum Number
of Shares has not been reached under the foregoing clauses (i) and (ii), the
shares of Common Stock that other shareholders desire to sell that can be sold
without exceeding the Maximum Number of Shares.

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<PAGE>

(ii) If the managing Underwriter or Underwriters for a Piggy-Back
Registration that is to be an underwritten offering of shares for the account of
persons having demand registration rights under the Stanwich Registration Rights
Agreement account advises the Company and the holders of Registrable Securities
in writing that the dollar amount or number of shares of Common Stock which such
persons desire to sell, taken together with the Registrable Securities as to
which registration has been requested hereunder, the shares of Common Stock, if
any, as to which registration has been requested pursuant to the piggy-back
registration rights under the FSA Registration Rights Agreement and the shares
of Common Stock, if any, which the Company or other shareholders of the Company
desire to sell, exceeds the Maximum Number of Shares, then the Company shall
include in such registration: (i) first, the shares of Common Stock for the
account of persons having demand registration rights under the Stanwich
Registration Rights Agreement that can be sold without exceeding the Maximum
Number of Shares, (ii) second, to the extent the Maximum Number of Shares has
not been reached under the foregoing clause (i), the Registrable Securities as
to which registration has been requested by the holders of Registrable
Securities hereunder and the shares of Common Stock, if any, as to which
registration has been requested pursuant to the piggy-back registration rights
granted under the FSA Registration Rights Agreement (to be allocated among the
persons requesting inclusion in such registration pursuant to such agreements
pro rata in accordance with the number of shares of Common Stock with respect to
which such person has the right to request such inclusion under such agreements,
regardless of the number of shares which such person has actually requested be
included in such registration) that can be sold without exceeding the Maximum
Number of Shares, (iii) third, to the extent the Maximum Number of Shares has
not been reached under the foregoing clauses (i) and (ii), the shares of Common
Stock, if any, that the Company desires to sell that can be sold without
exceeding the Maximum Number of Shares and (iv) fourth, to the extent the
Maximum Number of Shares has not been reached under the foregoing clauses (i),
(ii) and (iii), the shares of Common Stock, if any, which other shareholders
desire to sell that can be sold without exceeding the Maximum Number of Shares.

(iii) If the managing Underwriter or Underwriters for a
Piggy-Back Registration that is to be an underwritten offering of shares for
the account of persons having demand registration rights under the FSA
Registration Rights Agreement account advises the Company and the holders of
Registrable Securities in writing that the dollar amount or number of shares
of Common Stock which such persons desire to sell, taken together with the
Registrable Securities as to which registration has been requested hereunder,
the shares of Common Stock, if any, as to which registration has been
requested pursuant to the piggy-back registration rights under the Stanwich
Registration Rights Agreement and the shares of Common Stock, if any, which
the Company or other shareholders of the Company desire to sell, exceeds the
Maximum Number of Shares, then the Company shall include in such
registration: (i) first, the shares of Common Stock for the account of
persons having demand registration rights under the FSA Registration Rights
Agreement that can be sold without exceeding the Maximum Number of Shares,
(ii) second, to the extent the Maximum Number of Shares has not been reached
under the foregoing clause (i), the Registrable Securities as to which
registration has been requested by the holders of Registrable Securities
hereunder and the shares of Common Stock, if any, as to which registration
has been

7
<PAGE>

requested pursuant to the piggy-back registration rights granted under the
Stanwich Registration Rights Agreement (to be allocated among the persons
requesting inclusion in such registration pursuant to such agreements pro
rata in accordance with the number of shares of Common Stock with respect to
which such person has the right to request such inclusion under such
agreements, regardless of the number of shares which such person has actually
requested be included in such registration) that can be sold without
exceeding the Maximum Number of Shares, (iii) third, to the extent the
Maximum Number of Shares has not been reached under the foregoing clauses (i)
and (ii), the shares of Common Stock, if any, that the Company desires to
sell that can be sold without exceeding the Maximum Number of Shares and (iv)
fourth, to the extent the Maximum Number of Shares has not been reached under
the foregoing clauses (i), (ii) and (iii), the shares of Common Stock, if
any, which other shareholders desire to sell that can be sold without
exceeding the Maximum Number of Shares.

(c) WITHDRAWAL. Any holder of Registrable Securities may elect to
withdraw such holder's request for inclusion of Registrable Securities in any
Piggy-Back Registration by giving written notice to the Company of such request
to withdraw prior to the effectiveness of the registration statement. The
Company may also elect to withdraw a registration statement at any time prior to
the effectiveness of the registration statement. Notwithstanding any such
withdrawal, the Company shall pay all expenses incurred by the holders of
Registrable Securities in connection with such Piggy-Back Registration as
provided in Section 3.3.

2.3 REGISTRATIONS ON FORM S-3. The holders of Registrable Securities may
at any time request in writing that the Company register the resale of any or
all of such Registrable Securities on Form S-3 (or any similar short-form
registration which may be available at such time). Upon receipt of such written
request, the Company will promptly give written notice of the proposed
registration to all other holders of Registrable Securities, and, as soon as
practicable thereafter, effect the registration of all or such portion of such
holder's or holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
holder or holders joining in such request as are specified in a written request
given within 15 days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration pursuant to this Section 2.3 if (i) Form S-3 is not available for
such offering; (ii) the holders propose to effect an underwritten offering,
(iii) the holders propose to sell Registrable Securities at an anticipated
aggregate price to the public (net of any underwriters' discounts or
commissions) of less than $500,000, (iv) the Company shall furnish to the
holders a certificate signed by the Chief Executive Officer of the Company
stating that in the good faith judgment of the Board, it would be materially
detrimental to the Company and its shareholders for such Form S-3 registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement for a period of not more
than 60 days after receipt of the request of the holder or holders under this
Section 2.3, provided, however, that in the event the Company elects to exercise
such right with respect to any registration, it shall not have the right to
exercise such right again prior to the date which is ten months after the date
on which the registration statement relating to such deferred registration is
declared effective, (v) the Company has effected eight registrations pursuant to
this Section 2.3 or (vi) the Company

8
<PAGE>

has effected two registrations pursuant to this Section 2.3 during the 12 month
period prior to the date on which the registration statement relating to such
registration is anticipated to be declared effective. The Company shall use its
best efforts to maintain each registration statement under this Section 2.3
effective for 60 days or until the Registrable Securities covered thereby have
been sold, whichever shall first occur. Registrations effected pursuant to this
Section 2.3 shall not be counted as Demand Registrations effected pursuant to
Section 2.1.

2.4 PURCHASE (AND EXERCISE) OF THE WARRANT BY THE UNDERWRITERS.
Notwithstanding any other provision of this Agreement to the contrary, in
connection with any Demand Registration or Piggy-Back Registration which is to
be an underwritten offering, to the extent all or any portion of the Registrable
Securities to be included in such registration consist of shares of Common Stock
issuable upon exercise of the Warrant or any portion thereof, the holders of
such Registrable Securities may require that the Underwriter or Underwriters
purchase (and exercise) the Warrant or any portion thereof rather than require
the holders of the Registrable Securities to exercise the Warrant or portion
thereof in connection with such registration unless the Underwriters inform such
holders that such a purchase and exercise of the Warrant will materially and
adversely affect the proposed offering. The Company shall take all such action
and provide all such assistance as may be reasonably requested by the holders of
Registrable Securities to facilitate any such purchase (and exercise) of the
Warrant agreed to by the Underwriter or Underwriters, including, without
limitation, issuing the Common Stock issuable upon the exercise of the Warrant
or any portion thereof to be issued within such time period as will permit the
Underwriters to make and complete the distribution contemplated by the
underwriting.

3. REGISTRATION PROCEDURES.

3.1 FILINGS; INFORMATION. If and whenever the Company is required to
effect the registration of any Registrable Securities under the 1933 Act
pursuant to SECTION 2, the Company shall use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof as expeditiously as practicable, and in
connection with any such request:

(a) FILING REGISTRATION STATEMENT. The Company shall, as
expeditiously as possible, prepare and file, within 60 days after receipt of a
request for a Demand Registration pursuant to SECTION 2.1, with the Commission a
registration statement on any form for which the Company then qualifies or which
counsel for the Company shall deem appropriate and which form shall be available
for the sale of the Registrable Securities to be registered thereunder in
accordance with the intended method of distribution thereof, and shall use its
best efforts to cause such registration statement to become and remain effective
for the period required by Section 3.1(c); provided, however, that the Company
shall have the right to defer such registration for up to 60 days if the Company
shall furnish to the holders a certificate signed by the Chief Executive Officer
of the Company stating that, in the good faith judgment of the Board, it would
be materially detrimental to the Company and its shareholders for such
registration statement to be effected at such time;

9
<PAGE>

provided further, that in the event the Company elects to exercise such right
with respect to any registration, it shall not have the right to exercise such
right again prior to the date which is 12 months after the date on which the
registration statement relating to such deferred registration is declared
effective.

(b) COPIES. The Company shall, prior to filing a registration
statement or prospectus or any amendment or supplement thereto, furnish without
charge to the holders of Registrable Securities included in such registration,
and such holders' legal counsel, copies of such registration statement as
proposed to be filed, each amendment and supplement to such registration
statement (in each case including all exhibits thereto and documents
incorporated by reference therein), the prospectus included in such registration
statement (including each preliminary prospectus), and such other documents as
the holders of Registrable Securities included in such registration or legal
counsel for any such holder may request in order to facilitate the disposition
of the Registrable Securities owned by such holders.

(c) AMENDMENTS AND SUPPLEMENTS. The Company shall prepare and file
with the Commission such amendments, including post-effective amendments, and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
in compliance with the provisions of the 1933 Act until all Registrable
Securities and other securities covered by such registration statement have been
disposed of in accordance with the intended methods of disposition set forth in
such registration statement (which period shall not exceed the sum of 120 days
plus any period during which any such disposition is interfered with by any stop
order, injunction or other order or requirement of the Commission or any
governmental agency or court) or such securities have been withdrawn.

(d) NOTIFICATION. After the filing of the registration statement,
the Company shall promptly, and in no event more than two Business Days, notify
the holders of Registrable Securities included in such registration statement,
and confirm such advice in writing, (i) when such registration statement becomes
effective, (ii) when any post-effective amendment to such registration statement
becomes effective, (iii) of any stop order issued or threatened by the
Commission (and the Company shall take all actions required to prevent the entry
of such stop order or to remove it if entered) and (iv) of any request by the
Commission for any amendment or supplement to such registration statement or any
prospectus relating thereto or for additional information or of the occurrence
of an event requiring the preparation of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of the securities
covered by such registration statement, such prospectus will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
and promptly make available to the holders of Registrable Securities included in
such registration statement any such supplement or amendment; except that before
filing with the Commission a registration statement or prospectus or any
amendment or supplement thereto, including documents incorporated by reference,
the Company shall furnish to the holders of Registrable Securities included in
such registration statement and to the legal counsel for any such holders,
copies of all such documents proposed to be filed sufficiently in advance of
filing to provide such holders and

10
<PAGE>

legal counsel with a reasonable opportunity to review such documents and comment
thereon, and the Company shall not file any registration statement or prospectus
or amendment or supplement thereto, including documents incorporated by
reference to which such holders or legal counsel, shall object on a timely basis
in light of the requirements of the 1933 Act or any other applicable laws and
regulations.

(e) STATE SECURITIES LAWS COMPLIANCE. The Company shall use its best
efforts to (i) register or qualify the Registrable Securities covered by the
registration statement under such securities or blue sky laws of such
jurisdictions in the United States as the holders of Registrable Securities
included in such registration statement (in light of their intended plan of
distribution) may request and (ii) cause such Registrable Securities covered by
the registration statement to be registered with or approved by such other
governmental agencies or authorities in the United States as may be necessary by
virtue of the business and operations of the Company and do any and all other
acts and things that may be necessary or advisable to enable the holders of
Registrable Securities included in such registration statement to consummate the
disposition of such Registrable Securities in such jurisdictions; provided,
however, that the Company shall not be required to qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this paragraph (e), or subject itself to taxation in any such
jurisdiction.

(f) AGREEMENTS FOR DISPOSITION. The Company shall enter into
customary agreements (including, if applicable, an underwriting agreement in
customary form) and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of such Registrable Securities. The
representations, warranties and covenants of the Company in any underwriting
agreement which are made to or for the benefit of any Underwriters shall also be
made to and for the benefit of the holders of Registrable Securities included in
such registration statement. No holder of Registrable Securities included in
such registration statement shall be required to make any representations or
warranties in the underwriting agreement except, if applicable, with respect to
such holder's organization, good standing, authority, title to Registrable
Securities, lack of conflict of such sale with such holder's material agreements
and organizational documents, and with respect to written information relating
to such holder that such holder has furnished in writing expressly for inclusion
in such registration statement.

(g) COOPERATION. The Chief Executive Officer, the President of the
Company, the Chief Financial Officer of the Company, any Senior Vice President
of the Company and any other members of the management of the Company shall
cooperate fully in any offering of Registrable Securities hereunder, which
cooperation shall include, without limitation, the preparation of the
registration statement with respect to such offering and all other offering
materials and related documents, and participation in meetings with
Underwriters, attorneys, accountants and potential investors.

(h) RECORDS. The Company shall make available for inspection by the
holders of Registrable Securities included in such registration statement, any
Underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other

11
<PAGE>

professional retained by any holder of Registrable Securities included in such
registration statement or any Underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, as shall be
necessary to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all information
requested by any of them in connection with such registration statement.

(i) OPINIONS AND COMFORT LETTERS. The Company shall furnish to each
holder of Registrable Securities included in any registration statement a signed
counterpart, addressed to such holder, of (i) any opinion of counsel to the
Company delivered to any Underwriter and (ii) any comfort letter from the
Company's independent public accountants delivered to any Underwriter. In the
event no legal opinion is delivered to any Underwriter, the Company shall
furnish to each holder of Registrable Securities included in such registration
statement, at any time that such holder elects to use a prospectus, an opinion
of counsel to the Company to the effect that the registration statement
containing such prospectus has been declared effective and that no stop order is
in effect.

(j) EARNINGS STATEMENT. The Company shall comply with all applicable
rules and regulations of the Commission and the 1933 Act, and make available to
its shareholders, as soon as practicable, an earnings statement covering a
period of 12 months, beginning within three months after the effective date of
the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder.

(k) LISTING. The Company shall use its best efforts to cause all
Registrable Securities included in any registration to be listed on such
exchanges or otherwise designated for trading in the same manner as similar
securities issued by the Company are then listed or designated or, if no such
similar securities are then listed or designated, in a manner satisfactory to
the holders of a majority of the Registrable Securities included in such
registration.

3.2 OBLIGATION TO SUSPEND DISTRIBUTION. Upon receipt of any notice from
the Company of the happening of any event of the kind described in
SECTION 3.1(d)(iv), each holder of Registrable Securities included in any
registration shall immediately discontinue disposition of such Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such holder receives the supplemented or amended prospectus
contemplated by SECTION 3.1(d)(iv), and, if so directed by the Company, each
such holder will deliver to the Company all copies, other than permanent file
copies then in such holder's possession, of the most recent prospectus covering
such Registrable Securities at the time of receipt of such notice.

3.3 REGISTRATION EXPENSES. The Company shall pay all expenses incurred in
connection with any Demand Registration pursuant to SECTION 2.1 and any
Piggy-Back Registration pursuant to SECTION 2.2, and all expenses incurred in
performing or complying with the Company's obligations under this SECTION 3,
whether or not the registration statement becomes effective, in each case
including, but not limited to: (i) all registration and filing fees; (ii) fees
and expenses of compliance with securities or blue sky laws (including fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities); (iii) printing expenses; (iv) the

12
<PAGE>

Company's internal expenses (including, without limitation, all salaries and
expenses of its officers and employees); (v) the fees and expenses incurred in
connection with the listing of the Registrable Securities as required by
SECTION 3.1(k); (vi) National Association of Securities Dealers, Inc. fees;
(vii) fees and disbursements of counsel for the Company and fees and expenses
for independent certified public accountants retained by the Company (including
the expenses or costs associated with the delivery of any opinions or comfort
letters requested pursuant to SECTION 3.1(i); (viii) the fees and expenses of
any special experts retained by the Company in connection with such
registration; (ix) one-half of the cost for selling stockholder errors and
omissions insurance for the benefit of the holders of Registrable Securities
included in such registration which the holders of a majority of such
Registrable Securities may elect to purchase (with the other one-half of such
cost to be paid by the holders of Registrable Securities included in such
registration, pro rata in accordance with the number of shares included in such
registration), and (x) all fees and expenses incurred by the holders of
Registrable Securities included in such registration statement in connection
with its participation in such registration, including, without limitation, the
fees and expenses of such holders' legal counsel, accountants and other experts.
The Company shall have no obligation to pay any underwriting fees, discounts or
selling commissions attributable to the Registrable Securities being sold by
holders of Registrable Securities, which expenses shall be borne by such
holders.

3.4 INFORMATION. The holders of Registrable Securities shall provide such
information as reasonably requested by the Company in connection with the
preparation of any registration statement, including amendments and supplements
thereto, in order to effect the registration of any Registrable Securities under
the 1933 Act pursuant to SECTIONS 2.

4. INDEMNIFICATION AND CONTRIBUTION.

4.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless (i) LLCP (including its general and limited partners), each holder
of Registrable Securities and Levine Leichtman Capital Partners, Inc., and (ii)
the respective officers, employees, affiliates, directors, partners, members and
agents, and each person, if any, who controls LLCP, any holder of Registrable
Securities or Levine Leichtman Capital Partners, Inc. within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act (each, an "LLCP
Indemnified Party"), from and against any loss, claim, damage or liability and
any action in respect thereof to which any LLCP Indemnified Party may become
subject under the 1933 Act or the 1934 Act or any other statute or common law,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (a) any untrue statement or alleged untrue statement of a material
fact made in connection with the sale of Registrable Securities or shares of
Common Stock, whether or not such statement is contained or incorporated by
reference in any registration statement or prospectus relating to the
Registrable Securities (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
(b) any omission or alleged omission to state a material fact required to be
stated in any registration statement or prospectus or necessary to make the
statements therein not misleading, or (c) any violation by the Company of any
Federal, state or common law, rule or regulation applicable to the Company and
relating to action

13
<PAGE>

required of or inaction by the Company in connection with such registration.
The Company also shall promptly, but in no event more than ten Business Days
after request for payment, pay directly or reimburse each LLCP Indemnified Party
for any legal and other expenses incurred by such LLCP Indemnified Party in
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action. The Company also shall indemnify any Underwriter
of the Registrable Securities, their officers, affiliates, directors, partners,
members and agents and each person who controls such Underwriters on
substantially the same basis as that of the indemnification provided above in
this SECTION 4.1.

The indemnity agreement contained in this SECTION 4.1 shall not apply to
amounts paid in settlement of any such loss, claim, damage or liability or any
action in respect thereof if such settlement is effected without the consent of
the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable to any holder of Registrable Securities included in any
registration for any loss, claim, damage, liability or any action in respect
thereof to the extent that it arises solely from or is based solely upon and is
in conformity with information related to such holder furnished in writing by
such holder expressly for use in connection with such registration, nor shall
the Company be liable to any holder of Registrable Securities included in any
registration for any loss, claim, damage or liability or any action in respect
thereof to the extent it arises solely from or is based solely upon (i) any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus relating to the Registrable Securities
delivered in writing by such holder after the Company had provided written
notice to such holder that such registration statement or prospectus contained
such untrue statement or alleged untrue statement of a material fact, or
(ii) any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
after the Company had provided written notice to such holder that such
registration statement or prospectus contained such omission or alleged
omission.

4.2 INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. Each holder of
Registrable Securities shall indemnify and hold harmless the Company, its
officers, directors, partners, members and agents and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act to the same extent as the foregoing indemnity from
the Company to such holder, but solely with reference to information related to
such holder furnished in writing by such holder expressly for use in any
registration statement or prospectus relating to Registrable Securities of such
holder included in any registration, or any amendment or supplement thereto, or
any preliminary prospectus. Each holder of Registrable Securities included in
any registration hereunder shall also indemnify and hold harmless any
Underwriter of such holder's Registrable Securities, their officers, directors,
partners, members and agents and each person who controls such Underwriters on
substantially the same basis as that of the indemnification of the Company
provided in this SECTION 4.2; PROVIDED, HOWEVER, that in no event shall any
indemnity obligation under this SECTION 4.2 exceed the dollar amount of the net
proceeds (after payment of any underwriting fees, discounts or commissions)
actually received by such holder from the sale of Registrable Securities which
gave rise to such indemnification obligation under such registration statement
or prospectus.

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<PAGE>

4.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after receipt by any
person of any notice of any loss, claim, damage or liability or any action in
respect of which indemnity may be sought pursuant to SECTION 4.1 or 4.2, such
person (the "INDEMNIFIED PARTY") shall, if a claim in respect thereof is to be
made against any other person for indemnification hereunder, notify such other
person (the "INDEMNIFYING PARTY") in writing of the loss, claim damage,
liability or action; PROVIDED, HOWEVER, that the failure by the Indemnified
Party to notify the Indemnifying Party shall not relieve the Indemnifying Party
from any liability which the Indemnifying Party may have to such Indemnified
Party hereunder, except to the extent the Indemnifying Party is actually
prejudiced by such failure. If the Indemnified Party is seeking indemnification
with respect to any claim or action brought against the Indemnified Party, then
the Indemnifying Party shall be entitled to participate in such claim or action,
and, to the extent that it wishes, jointly with all other Indemnifying Parties,
to assume the defense thereof with counsel satisfactory to the Indemnified
Party. After notice from the Indemnifying Party to the Indemnified Party of its
election to assume the defense of such claim or action, the Indemnifying Party
shall not be liable to the Indemnified Party for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation; PROVIDED, HOWEVER, that in
any action in which both the Indemnified Party and the Indemnifying Party are
named as defendants, the Indemnified Party shall have the right to employ
separate counsel (but no more than one such separate counsel) to represent the
Indemnified Party and its controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by the
Indemnified Party against the Indemnifying Party, with the fees and expenses of
such counsel to be paid by such Indemnifying Party if, based upon the written
opinion of counsel of such Indemnified Party, representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, consent to entry of judgment or effect any
settlement of any claim or pending or threatened proceeding in respect of which
the Indemnified Party is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Party, unless such judgment or
settlement includes an unconditional release of such Indemnified Party from all
liability arising out of such claim or proceeding.

4.4 CONTRIBUTION. If the indemnification provided for in the foregoing
SECTIONS 4.1, 4.2 and 4.3 is unavailable to any Indemnified Party in respect of
any loss, claim, damage, liability or action referred to herein, then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such loss, claim, damage, liability or action in such proportion as is
appropriate to reflect the relative fault of the Indemnified Parties and the
Indemnifying Parties in connection with the actions or omissions which resulted
in such loss, claim, damage, liability or action, as well as any other relevant
equitable considerations. The relative fault of any Indemnified Party and any
Indemnifying Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such Indemnified Party or such Indemnifying Party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.

15
<PAGE>

The parties hereto agree that it would not be just and equitable if
contribution pursuant to this SECTION 4.4 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an Indemnified Party as a result of any loss,
claim, damage, liability or action referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this SECTION 4.4, no holder of Registrable
Securities shall be required to contribute any amount in excess of the dollar
amount of the net proceeds (after payment of any underwriting fees, discounts or
commissions) actually received by such holder from the sale of Registrable
Securities which gave rise to such contribution obligation. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.

5. UNDERWRITING AND DISTRIBUTION.

5.1 RULE 144. The Company covenants that it shall file any reports
required to be filed by it under the 1933 Act and the 1934 Act and shall take
such further action as the holders of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holders to
sell Registrable Securities without registration under the 1933 Act within the
limitation of the exemptions provided by Rule 144 or Rule 144A under the 1933
Act, as such Rules may be amended from time to time, or any similar Rule or
regulation hereafter adopted by the Commission.

5.2 RESTRICTIONS ON SALE BY THE COMPANY AND OTHERS. The Company agrees
(i) not to effect any sale or distribution of any securities similar to those
being registered in accordance with SECTION 2.1, or any securities convertible
into or exchangeable or exercisable for such securities, during the 90 days
prior to, and during the 120-day period beginning on, the effective date of any
Demand Registration (except as part of such Demand Registration to the extent
permitted by Section 2.1(d)); and (ii) that any agreement entered into after the
date hereof pursuant to which the Company issues or agrees to issue any
privately placed securities shall contain a provision under which holders of
such securities agree not to effect any sale or distribution of any such
securities during the periods described in (i) above, in each case including a
sale pursuant to Rule 144 or 144A under the 1933 Act (except as part of any such
registration, if permitted); PROVIDED, HOWEVER, that the provisions of this
SECTION 5.2 shall not prevent the conversion or exchange of any securities
pursuant to their terms into or for other securities and shall not prevent the
issuance of securities by the Company under any employee benefit, stock option
or stock subscription plans.

16
<PAGE>

6. MISCELLANEOUS.

6.1 OTHER REGISTRATION RIGHTS. The Company represents and warrants that,
except as provided in the Stanwich Registration Rights Agreement, no person has
any right to require the Company to register any shares of the Company's capital
stock for sale or to include shares of the Company's capital stock in any
registration filed by the Company for the sale of shares of capital stock for
its own account or for the account of any other person. From and after the date
of this Agreement, the Company shall not, without the prior written consent of
LLCP, (i) enter into any agreement granting any demand registration right (i.e.,
the right to require the Company to register the sale of any shares of the
Company's capital stock) other than demand registration rights under the FSA
Registration Rights Agreement, (ii) enter into any agreement granting any
piggy-back registration right (i.e., the right to require the Company to
register the sale of any shares of the Company's capital stock in any
registration filed by the Company for the sale of shares of capital stock for
its own account or for the account of any other person) which is inconsistent
with, equal to (except pursuant to the FSA Registration Rights Agreement) or
superior to any registration rights granted hereunder, or (iii) amend the
Stanwich Registration Rights Agreement (or enter into or amend the FSA
Registration Rights Agreement at any time) so as to cause the registration
rights granted therein to be inconsistent with, equal to or superior to the
rights granted to the holders of Registrable Securities hereunder or to
otherwise adversely affect the registration rights granted to the holders of
Registrable Securities hereunder.

6.2 SUCCESSORS AND ASSIGNS. The rights and obligations of LLCP under this
Agreement shall be freely assignable in whole or in part. Each such assignee,
by accepting such assignment of the rights of the assignor hereunder shall be
deemed to have agreed to and be bound by the obligations of the assignor
hereunder. The rights and obligations of the Company hereunder may not be
assigned.

6.3 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given if transmitted by telecopier with
receipt acknowledged, or upon delivery, if delivered personally or by recognized
commercial courier with receipt acknowledged, or upon the expiration of 72 hours
after mailing, if mailed by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:

If to LLCP:

c/o Levine Leichtman Capital Partners, Inc.
335 North Maple Drive, Suite 240
Beverly Hills, CA 90210
Attention: Arthur E. Levine, President
Telephone: (310) 275-5335
Facsimile: (310) 275-1441

17
<PAGE>

If to any assignee of LLCP:

At such assignee's address as shown on the books of the Company.

18
<PAGE>

If to the Company:

Consumer Portfolio Services, Inc.
16355 Laguna Canyon Road
Irvine, CA 92618
Attention: Charles E. Bradley, Jr., President
and Chief Executive Officer
Telephone: (949) 753-6800
Facsimile: (949) 753-6805

or at such other address or addresses as LLCP, such assignee or the Company, as
the case may be, may specify by written notice given in accordance with this
Section.

6.4 SEVERABILITY. In case any provision of this Agreement 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.

6.5 COUNTERPART. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

6.6 DESCRIPTIVE HEADINGS, CONSTRUCTION AND INTERPRETATION. The
descriptive headings of the several paragraphs of this Agreement are for
convenience of reference only and do not constitute a part of this Agreement and
are not to be considered in construing or interpreting this Agreement. All
section, preamble, recital and party references are to this Agreement unless
otherwise stated. No party, nor its counsel, shall be deemed the drafter of
this Agreement for purposes of construing the provisions of this Agreement, and
all provisions of this Agreement shall be construed in accordance with their
fair meaning, and not strictly for or against any party.

6.7 WAIVERS AND AMENDMENTS. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally or by course of
dealing, except by a statement in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought.

6.8 REMEDIES. In the event that the Company fails to observe or perform
any covenant or agreement to be observed or performed under this Agreement, LLCP
or any other holder of Registrable Securities may proceed to protect and enforce
its rights by suit in equity or action at law, whether for specific performance
of any term contained in this Agreement or for an injunction against the breach
of any such term or in aid of the exercise of any power granted in this
Agreement or to enforce any other legal or equitable right, or to take any one
or more of such actions. The Company agrees to pay all fees, costs, and
expenses, including without limitation, fees and expenses of attorneys,
accountants and other experts, and all fees, costs and expenses of appeals,
incurred by LLCP or any other holder of Registrable Securities in connection
with the enforcement of this Agreement or the collection or any sums due
hereunder, whether or not suit is commenced. None

19
<PAGE>

of the rights, powers or remedies conferred under this Agreement shall be
mutually exclusive, and each such right, power or remedy shall be cumulative and
in addition to any other right, power or remedy whether conferred by this
Agreement or now or hereafter available at law, in equity, by statute or
otherwise.

6.9 GOVERNING LAW. In all respects, including all matters of
construction, validity and performance, this Agreement and the rights and
obligations arising hereunder shall be governed by, and construed and enforced
in accordance with, the laws of the State of California applicable to contracts
made and performed in such state, without regard to principles thereof regarding
conflicts of laws.

7. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX
COMMERCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, AND UNDERSTANDING THEY ARE WAIVING A CONSTITUTIONAL RIGHT, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR
OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS
AGREEMENT, THE PURCHASE AGREEMENT AND/OR ANY RELATED AGREEMENT OR THE
TRANSACTIONS COMPLETED HEREBY OR THEREBY.

[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

20
<PAGE>

IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be executed and delivered by their duly authorized representatives
as of the date first above written.

THE COMPANY: LLCP:

CONSUMER PORTFOLIO SERVICES, LEVINE LEICHTMAN CAPITAL
INC., a California corporation PARTNERS, INC., a California corporation

<TABLE>
<CAPTION>
<S> <C>
By:/s/ Charles E. Bradley, Jr. on behalf of LEVINE LEICHTMAN
--------------------------------------- CAPITAL PARTNERS II, L.P.,
Charles E. Bradley, Jr., a California limited partnership
President and Chief Executive Officer

By:/s/ Jeffrey P. Fritz By:/s/ Lauren B. Leichtman
--------------------------------------- ---------------------------------------
Jeffrey P. Fritz, Lauren B. Leichtman,
Senior Vice President and Chief Chief Executive Officer
Financial Officer
</TABLE>

<PAGE>

SECURITIES OPTION AGREEMENT

This Securities Option Agreement is entered into as of November 17, 1998
(this "Agreement"), by and among Levine Leichtman Capital Partners II, L.P., a
California limited partnership ("LLCP"), Stanwich Financial Services Corp., a
Rhode Island corporation ("SFSC"), and Consumer Portfolio Services, Inc., a
California corporation ("CPS").

RECITALS

A. On the terms and subject to the conditions set forth in that certain
Securities Purchase Agreement of even date herewith (the "Purchase Agreement")
between LLCP and CPS, on the date hereof, CPS is issuing, selling and delivering
to LLCP, and LLCP is purchasing from CPS, a Senior Subordinated Primary Note in
the aggregate principal amount of $25,000,000 (the "LLCP Senior Subordinated
Note") and a Primary Warrant to Purchase 3,450,000 Shares of Common Stock (the
"Primary Warrant"). Capitalized terms used and not otherwise defined herein
have the meanings set forth in the Purchase Agreement.

B. LLCP may purchase a New Senior Facility Note (the "LLCP Senior Note")
in connection with the establishment of the New Senior Credit Facility by the
Company and the payment of the outstanding principal amount of and all accrued
interest on the LLCP Senior Subordinated Note.

C. SFSC wishes to acquire from LLCP, and LLCP is willing to grant to
SFSC, on the terms and subject to the conditions set forth herein, an option to
purchase from LLCP (i) a participation interest in (A) the LLCP Senior
Subordinated Note, to the extent the LLCP Senior Subordinated Note is
outstanding or (B) the LLCP Senior Note, to the extent LLCP acquires a New
Senior Facility Note equal, in either case to $2,500,000 of the principal amount
of the LLCP Senior Subordinated Note or the LLCP Senior Note, as the case may
be, together with the right to receive all accrued and unpaid interest on such
principal amount on the date of purchase and all interest on such principal
amount that accrues on or after the date of purchase (such participation
interest being referred to as the "SFSC Note Participation") and (ii) a portion
of the Primary Warrant (the "SFSC Warrant") representing the right to purchase
250,000 of the 3,450,000 Warrant Shares purchasable under the Primary Warrant
(such number of Warrant Shares which may be purchased by SFSC being referred to
herein as the "SFSC Warrant Shares").

D. In addition, CPS wishes to acknowledge and consent to the issuance by
LLCP to SFSC of such option and to provide for the purchase of the SFSC Note
Participation and the SFSC Warrant pursuant to the terms and conditions set
forth in this Agreement.

<PAGE>

AGREEMENT

Now, therefore, in consideration of the mutual covenants and agreements set
forth herein, and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

1. OPTION.

1.1 GRANT OF OPTION. On the terms and subject to the conditions set forth
in this Agreement, LLCP hereby grants to SFSC the right and option (the
"Option") to purchase from LLCP, in whole and not in part, the SFSC Note
Participation and the SFSC Warrant (collectively, the "SFSC Securities"),
without recourse to, or representation or warranty by LLCP, whether express or
implied, other than as to the organization and authority of LLCP, title to the
LLCP Note and the Primary Warrant (which shall be good and marketable title,
free and clear of all Liens) and the absence of conflict with material
agreements of LLCP. The exercise price (the "Exercise Price") for the SFSC
Securities shall be equal to the sum of (a) $2,500,000, PLUS (b) all accrued and
unpaid interest on the SFSC Note Participation through the date of purchase.
The Option granted under this SECTION 1.1 is not transferable to any Person and
may be exercised only by SFSC; PROVIDED, HOWEVER, that the Option may be
transferred to, and exercised by, Charles E. Bradley, Sr. or a member of the
Immediate Family of Charles E. Bradley Sr., or Charles E. Bradley, Jr., or a
member of the Immediate Family of Charles E. Bradley, Jr., and to no other
Person.

1.2 CONDITIONS TO EXERCISE. The obligation of LLCP to sell and assign to
SFSC the SFSC Securities pursuant to the Option shall be subject to the
following conditions precedent:

(a) No later than May 31, 1999, the shareholders of CPS shall have
approved the issuance by CPS of the Excess Warrant Shares (as defined in SECTION
2.5 of the Primary Warrant);

(b) Stanwich shall have made an investment in the Company of at least
$15,000,000 (whether through the purchase of debt or equity securities)
generating net cash proceeds (after the payment of all fees and expenses) to the
Company of at least $14,400,000 on terms and conditions approved by a majority
of the disinterested members of the Board of Directors of CPS (and, if such
investment is made through the purchase of debt securities, the indebtedness
evidenced thereby shall be expressly made subordinate (A) to the LLCP Senior
Subordinated Note, if the LLCP Senior Subordinated Note is then outstanding, to
the same extent as Stanwich Indebtedness other than Stanwich Senior Subordinated
Debt is subordinated to the LLCP Senior Subordinated Note as of the date hereof
or (B) to the LLCP Senior Note, if the LLCP Senior Note is then outstanding, to
the same extent as Senior Subordinated Indebtedness is subordinated to Senior
Indebtedness as of the date hereof), which investment shall have been made
either (i) within the one hundred twenty (120) day period immediately following
the date hereof or (ii) within the two hundred seventy (270) day period
immediately following the date hereof if, within the one hundred twenty (120)
day period immediately following the date hereof, a third party makes an
investment in the Company of at least $15,000,000 (whether through the purchase
of debt or equity securities) generating net cash proceeds

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<PAGE>

(after the payment of all fees and expenses) to the Company of at least
$14,400,000 on terms and conditions approved by a majority of the disinterested
members of the Board of Directors of CPS (and if such investment is in the form
of Senior Indebtedness or Senior Subordinated Indebtedness, such terms and
conditions shall also be approved by LLCP, which approval shall not be
unreasonably withheld); and

1.3 EXERCISE PERIOD. The Option shall be exercisable only after SFSC has
satisfied the conditions precedent set forth in SECTION 1.2 and only during the
period (the "Exercise Period") commencing on the later to occur of (a) the date
upon which SFSC satisfies the conditions precedent set forth in SECTION 1.2 in
accordance with the terms thereof and (b) May 17, 1999, and ending on the
earlier of (y) the date that is six (6) months after the date upon which the
Exercise Period commences and (z) June 30, 2000 (the "Expiration Date").

1.4 NO REPRESENTATIONS OR WARRANTIES. LLCP shall not be responsible for,
and makes no representation or warranty as to, any representation or warranty
made by CPS in connection with the Purchase Agreement or any other Related
Agreement, and shall not be responsible for, and makes no representation or
warranty as to, the correctness as to form, due execution, legality, validity,
enforceability, genuineness or sufficiency of the Purchase Agreement or the LLCP
Senior Subordinated Note or the LLCP Senior Note or the collectability of the
Indebtedness evidenced thereby or other amounts owing thereunder, or for any
failure by CPS to perform its obligations thereunder.

2. EXERCISE.

2.1 METHOD OF EXERCISE.

(a) SFSC may exercise the Option granted hereunder by (a) delivering
to LLCP a written Exercise Notice, in substantially the form of EXHIBIT A (the
"Exercise Notice"), with a copy simultaneously delivered by SFSC to CPS, and (b)
paying to LLCP an amount equal to the Exercise Price no later than 12:00 p.m.
(noon) (Los Angeles time) on the date of exercise by wire transfer of
immediately available funds to Bank of America, Century City, Private Banking,
2049 Century Park East, Los Angeles, California 90067; ABA No. 121000358;
Account No. 11546-03239; Attention: Cheryl Stewart (or such other place of
payment that LLCP may designate in writing to SFSC).

(b) Upon the exercise by SFSC of the Option in accordance with the
terms and conditions of this Agreement, LLCP will be deemed to have sold and
conveyed the SFSC Securities to SFSC and, in connection therewith, will promptly
deliver to CPS the LLCP Senior Subordinated Note or the LLCP Senior Note, as the
case may be, and the LLCP Warrant. Within three (3) Business Days following its
receipt thereof, CPS shall deliver to SFSC a promissory note of like tenor to
the LLCP Senior Subordinated Note or the LLCP Senior Note, as the case may be,
representing the SFSC Note Participation and a warrant representing the SFSC
Warrant, and (b)

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<PAGE>

deliver to LLCP a replacement note in the principal amount of $22,500,000 and a
replacement warrant to purchase 3,200,000 shares of Common Stock.

2.2 INVESTOR STATUS. SFSC represents and warrants to LLCP and CPS on the
date hereof, and shall represent and warrant at the time it exercises the Option
pursuant to the terms hereof, that (a) SFSC is acquiring the SFSC Securities for
its own account, for investment purposes, and not with a view to or for sale in
connection with any distribution thereof, (b) SFSC understands that the SFSC
Securities have not been registered under the Securities Act or registered or
qualified under any state securities law in reliance upon specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of SFSC's investment intent as expressed herein, (c) SFSC is an
"accredited investor" (as such term is defined in Rule 501 of Regulation D under
the Securities Act), (d) by reason of its business and financial experience,
SFSC has such knowledge, sophistication and experience in business and financial
matters as to be capable of evaluating the merits and risks of the investment in
the SFSC Securities and has the capacity to protect its own interests and is
able to bear the economic risk of such investment, (e) SFSC has had an
opportunity to review the books and records of CPS and to ask questions of
representatives of LLCP and CPS concerning the terms and conditions of the
transactions contemplated by this Agreement and (f) the Option will be exercised
in compliance with all applicable federal and state securities laws.

2.3 FURTHER ASSURANCES. SFSC hereby agrees to execute and deliver such
agreements, instruments and other documents, in form and substance satisfactory
to LLCP, and to take such actions as may be requested by LLCP, to implement and
effect the intent and purpose of this Agreement.

3. MISCELLANEOUS

3.1 MODIFICATION AND WAIVER. This Agreement and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement is sought.

3.2 NOTICES. All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given if transmitted by telecopier with receipt
acknowledged, or upon delivery, if delivered personally or by recognized
commercial courier with receipt acknowledged, or upon the expiration of
seventy-two (72) hours after mailing, if mailed by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:

(a) If to LLCP, at: c/o Levine Leichtman Capital Partners, Inc.
335 North Maple Drive, Suite 240
Beverly Hills, CA 90210
Attention: Arthur E. Levine, President

-4-
<PAGE>

Telephone: (310) 275-5335
Facsimile: (310) 275-1441

-5-
<PAGE>

(b) If to SFSC, at: Stanwich Financial Services Corp.
c/o Stanwich Partners, Inc.
One Stamford Landing
62 Southfield Avenue
Stamford, CT 06902
Attention: President
Telephone: (203) 325-0551
Facsimile: (203) 967-3923

(c) If to CPS, at: Consumer Portfolio Services, Inc.
16355 Laguna Canyon Road
Irvine, CA 92618
Attention: Charles E. Bradley, Jr., President
Telephone: (949) 753-6800
Facsimile: (949) 450-3951

or at such other address or addresses as LLCP, SFSC or CPS, as the case may be,
may specify by written notice given in accordance with this SECTION 3.2.

3.3 NO SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties; PROVIDED, HOWEVER, that with respect to
CPS, any Person succeeding to CPS by way of merger, consolidation, combination
or acquisition of all or substantially all of CPS's assets shall assume all of
the obligations of CPS hereunder, which obligations shall survive such merger,
consolidation, combination or acquisition. Except as provided in SECTION 1.1,
SFSC may not assign its rights or delegate its obligations hereunder without the
prior written consent of LLCP.

3.4 DESCRIPTIVE HEADINGS. The descriptive headings of the paragraphs of
this Agreement are for convenience of reference only and do not constitute a
part of this Agreement and are not to be considered in construing or
interpreting this Agreement. All section, preamble, recital, exhibit, schedule,
clause and party references are to this Agreement unless otherwise stated. No
party, nor its counsel, shall be deemed the drafter of this Agreement for
purposes of construing the provisions of this Agreement, and all provisions of
this Agreement shall be construed in accordance with their fair meaning, and not
strictly for or against any party.

3.5 TERMINATION OF THIS AGREEMENT. This Agreement shall terminate upon the
earlier of (a) the date upon which the Option shall have been exercised pursuant
to the terms hereof and CPS shall have fulfilled its obligations under SECTION
2.1(b) and (b) the Expiration Date; PROVIDED, HOWEVER, that the representations
and warranties of SFSC shall survive the termination of this Agreement.

3.6 GOVERNING LAW. In all respects, including all matters of construction,
validity and performance, this Agreement and the rights and obligations arising
hereunder shall be governed by, and construed and enforced in accordance with,
the laws of the State of California applicable to

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<PAGE>

contracts made and performed in California, without regard to choice of law or
conflicts of law principles.

3.7 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
agreement and understanding among the parties and supersedes all prior oral and
written, and all contemporaneous oral, agreements and understandings related to
the subject matter hereof.

3.8 SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.

3.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts or by facsimile, each of which shall be deemed an original, but all
of which together shall constitute one instrument.

3.10 REMEDIES. If any party fails to perform, comply with or observe any
covenant or agreement to be performed, complied with or observed by it under
this Agreement, any other party may proceed to protect and enforce its rights by
suit in equity or action at law, whether for specific performance of any term
contained in this Agreement or for an injunction against the breach of any such
term or in aid of the exercise of any power granted in this Agreement or to
enforce any other legal or equitable right, or to take any one or more of such
actions. The party that fails to perform shall pay all fees, costs, and
expenses, including, without limitation, fees and expenses of attorneys,
accountants and other experts retained by such other party, and all fees, costs
and expenses of appeals, incurred or expended by such other party in connection
with the enforcement of this Agreement or the collection of any sums due
hereunder, whether or not suit is commenced. None of the rights, powers or
remedies conferred under this Agreement shall be mutually exclusive, and each
right, power or remedy shall be cumulative and in addition to any other right,
power or remedy whether conferred by this Agreement or now or hereafter
available at law, in equity, by statute or otherwise.

3.11 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, AND UNDERSTANDING THEY ARE WAIVING A CONSTITUTIONAL RIGHT, THE
PARTIES WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING
BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR OTHERWISE, ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL

-7-
<PAGE>

TO, THIS AGREEMENT AND/OR ANY RELATED AGREEMENT OR THE TRANSACTIONS COMPLETED
HEREBY OR THEREBY.

IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
issued by its duly authorized representatives on the date first above written.

LEVINE LEICHTMAN CAPITAL PARTNERS, INC.,
a California corporation

On behalf of LEVINE LEICHTMAN CAPITAL
PARTNERS II, L.P.,
a California limited partnership

By: /s/ LAUREN B. LEICHTMAN
----------------------------------------
Lauren B. Leichtman
Chief Executive Officer

STANWICH FINANCIAL SERVICES CORP.,
a Rhode Island corporation

By: /s/ CHARLES E. BRADLEY, SR.
----------------------------------------------
Name: Charles E. Bradley, Sr.
Title:President

CONSUMER PORTFOLIO SERVICES, INC.,
a California corporation

By: /s/ CHARLES E. BRADLEY, JR.
----------------------------------------------
Charles E. Bradley, Jr.,
President and Chief Executive Officer

By: /s/ JEFFREY P. FRITZ
-----------------------------------------------
Jeffrey P. Fritz
Senior Vice President and
Chief Financial Officer

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<PAGE>

EXHIBIT A

FORM OF EXERCISE NOTICE

(To be signed only upon exercise of the Option)

The undersigned hereby irrevocably elects to exercise the Option to
purchase the SFSC Note Participation and the SFSC Warrant.

The undersigned represents that it is acquiring the SFSC Note Participation
and the SFSC Warrant for its own account for investment purposes only and not
with a view to or for sale in connection with any distribution thereof.

Dated: STANWICH FINANCIAL SERVICES CORP.
--------------

By:

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

[TO BE NOTARIZED]