Release Agreement

Release Agreement

by Monaco Finance Inc -Cl A
September 9th, 1999



                                RELEASE AGREEMENT


      This RELEASE AGREEMENT,  dated as of July 28, 1999 (this "Agreement"),  is
entered into among MONACO  FINANCE,  INC.,  a Colorado  corporation  ("Monaco"),
PACIFIC USA HOLDINGS CORP., a Texas corporation  ("Pacific"),  PACIFIC SOUTHWEST
BANK, a federally chartered savings bank ("PSB"),  the parties identified on the
signature page hereof as the "Indenture Parties"  (collectively,  the "Indenture
Parties"),    ROTHSCHILD   NORTH   AMERICA,   INC.,   a   Delaware   corporation
("Rothschild"),  and DAIWA FINANCE CORPORATION, a Delaware corporation ("Daiwa")
(Pacific,  PSB,  the  Indenture  Parties,  Rothschild  and Daiwa  are  sometimes
hereinafter collectively referred to as the "Specified Parties" and individually
as a "Specified Party").

                              RECITALS

      WHEREAS,  Monaco and Norwest  Bank  Minnesota,  National  Association  (as
trustee on behalf of the other Indenture Parties, the "Indenture Trustee"), have
previously  entered  into that  certain  Indenture,  dated as of January 9, 1996
(together  with  all  outstanding  notes  issued  pursuant   thereto,   and  all
agreements,  documents and instruments entered into in connection therewith, all
as amended modified or supplemented, the "Indenture Documents");

      WHEREAS, Monaco, MF Receivables Holding Corp., a Delaware corporation (the
"Company"),  and the Indenture Trustee, with the consent of the holders of notes
issued  pursuant  to the  Indenture  Documents,  have  agreed to enter into that
certain Consent and Amendment No. 2 to Indenture and Related Documents, dated as
of even date  herewith (the  "Indenture  Amendment"),  pursuant to which,  among
other things,  the Company has agreed to assume all of the obligations of Monaco
in respect of the Indenture Documents;

      WHEREAS,  Monaco and Rothschild have previously  entered into that certain
Amended  and  Restated  Note  Purchase  Agreement,  dated as of  January 9, 1996
(together  with  all  outstanding  notes  issued  pursuant  thereto  in favor of
Rothschild,  and all  agreements,  documents  and  instruments  entered  into in
connection therewith, all as amended, modified or supplemented,  the "Rothschild
Documents");

      WHEREAS, Monaco, the Company and Rothschild have agreed to enter into that
certain Amendment to Amended and Restated Note Purchase  Agreement,  dated as of
even date herewith, (the "Rothschild Amendment"), pursuant to which, among other
things,  the  Company has agreed to assume all of the  obligations  of Monaco in
respect of the Rothschild Documents;

      WHEREAS,  the execution and delivery hereof is a condition to the
effectiveness  of each of the Indenture  Amendment  and the  Rothschild
Amendment; and







                                  10
3360.03/Release
      WHEREAS,  Daiwa  has  provided  various  financial  accommodations  to  MF
Receivables Corp. IV, a Delaware  corporation ("MF IV") (which is a wholly owned
subsidiary  of the Company and the successor by merger to MF  Receivables  Corp.
III, a Delaware corporation ("MF III") which, prior to the effectiveness of such
merger and along with MF IV, was a wholly owned subsidiary of Monaco), the terms
and conditions of which have been amended and restated  pursuant to the terms of
two separate Amended and Restated Credit  Agreements,  each dated as of July 28,
1999 (the  "Daiwa  Amendments")  (together  with all  outstanding  notes  issued
pursuant thereto and all agreements,  documents and instruments  entered into in
connection  therewith,  all as  amended,  modified or  supplemented,  the "Daiwa
Documents"),  and the execution and delivery  hereof is a condition to the Daiwa
Amendments; and
      WHEREAS,  in connection  with the Indenture  Amendment and the  Rothschild
Amendment,  the Company,  the Indenture Trustee,  Rothschild and The Bank of New
York, as collateral  agent (in such  capacity,  the  "Collateral  Agent"),  have
entered or are in the process of entering into that certain Pledge and Custodial
Agreement,  dated as of even date herewith (as amended, modified or supplemented
from time to time, the "Pledge and Custodial Agreement");

      NOW, THEREFORE,  in consideration of the mutual promises contained herein,
and for other good and valuable  consideration,  the receipt and  sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:

                              AGREEMENT

Section 1. Mutual Releases.

      Each of the Specified Parties does hereby release and discharge each other
Specified Party,  and each of such Specified  Party's  shareholders,  directors,
partners, members, officers,  employees,  attorneys,  accountants,  consultants,
agents,  representatives,  successors and assigns (each, a "Released Party"), of
and from all manner of actions,  choses and causes of action,  claims,  demands,
damages, expenses,  liabilities,  losses, judgments and executions, in each case
of whatever  kind or nature,  whether in law or in equity,  and whether known or
unknown,  at any time  arising out of or relating in any manner to any action or
inaction by such Released Party prior to the effective date hereof in connection
with or relating to Monaco, the Company, MF IV, MF III, the Indenture Documents,
the Rothschild Documents and/or the Daiwa Documents.

Section 2. Covenants of Pacific USA, PSB, Monaco and Daiwa.

      (a)  Neither  Pacific  USA nor PSB shall:  (i) take any action  that would
cause or permit the Company or MF IV to breach any of its  covenants  in respect
of any of their  respective  contracts or  agreements  (including  the Indenture
Documents, the Rothschild Documents and the Daiwa Documents);  (ii) prior to the
date that is ninety-one  days after the Effective  Date (as that term is defined
in the Pledge Agreement),  file any involuntary  petition or otherwise institute
any bankruptcy,  reorganization,  insolvency or liquidation  proceeding or other
proceeding  under any federal or state  bankruptcy or similar law against Monaco
or cause Monaco to  institute  any such  proceeding;  or (iii) prior to the date
that  is one  year  and  one  day  after  the  final  repayment  in  full of all
obligations  owed under any  agreement  or contract of the Company  and/or MF IV
(including  the  Indenture  Documents,  the  Rothschild  Documents and the Daiwa
Documents), file any involuntary petition or otherwise institute any bankruptcy,
reorganization,  insolvency or liquidation  proceeding or other proceeding under
any federal or state  bankruptcy or similar law against the Company and/or MF IV
or cause the Company  and/or MF IV to institute any such  proceeding or take any
action in furtherance of the foregoing.






      (b) Monaco  shall not:  (i) take any action that would cause or permit the
Company  or MF IV to  breach  any  of its  covenants  in  respect  of any of its
contracts or agreements  (including  the  Indenture  Documents,  the  Rothschild
Documents and the Daiwa  Documents);  or (ii) prior to the date that is one year
and one day after the final repayment in full of all obligations  owed under any
agreement  or contract  of the Company  and/or MF IV  (including  the  Indenture
Documents,  the  Rothschild  Documents  and  the  Daiwa  Documents),   file  any
involuntary  petition or otherwise  institute  any  bankruptcy,  reorganization,
insolvency or liquidation  proceeding or other  proceeding  under any federal or
state  bankruptcy  or similar law  against the Company  and/or MF IV or cause or
permit the Company  and/or MF IV to institute  any such  proceeding  or take any
action in furtherance of the foregoing.

      (c) So long as any of the  obligations  of the  Company  owing  under  the
Rothschild  Documents and/or the Indenture Documents remain  outstanding,  Daiwa
shall not amend,  supplement  or otherwise  modify any of the  provisions of the
Daiwa  Documents  as in effect on the date hereof  relating to: (i) the interest
rate applicable to any of the obligations  owing under the Daiwa Documents;  and
(ii) the  order or  amount  of any  distributions  to be made  under  the  Daiwa
Documents  in respect  of the  Designated  Auto  Loans (as  defined in the Daiwa
Documents)  as set forth in  Sections  4 and 6 of the  Security  Agreements  (as
defined in the Daiwa Documents).

Section 3. Representations of the Parties.

      Each party hereto by its execution  hereof  represents and warrants to and
for the  benefit of each other  party  hereto  that the  person  executing  this
Agreement  on behalf of such party is duly  authorized  to do so, such party has
full  right and  authority  to enter  into this  Agreement,  and this  Agreement
constitutes  the valid  and  legally  binding  obligation  of such  party and is
enforceable against such party in accordance with its terms.

Section 4. Execution in Counterparts.

      This Agreement may be executed in any number of  counterparts,  or by each
of the parties hereto in separate  counterparts,  each of which when so executed
and delivered shall be deemed to be an original, but all of which together shall
constitute one and the same instrument. Delivery of an executed counterpart of a
signature page to this Agreement by telecopier shall be as effective as delivery
of a manually executed counterpart of this Agreement.

Section 5. Entire Agreement.

      This Agreement  constitutes the entire agreement and  understanding of the
parties hereto with respect to the matters and transactions  contemplated hereby
and supersedes all prior written and prior and  contemporaneous  oral agreements
and understandings relating to such matters and transactions.

Section 6. Amendment.

      Neither  this  Agreement  nor any  term  hereof  may be  changed,  waived,
discharged or terminated  orally, but only by an instrument in writing signed by
the party  against  which  enforcement  of the  changes,  waiver,  discharge  or
termination is sought.

Section 7. Headings.

      The headings in this  Agreement  are for  purposes of  reference  only and
shall not limit or otherwise affect the meaning hereof.






Section 8. Severability.

      Any  covenant,  provision,  agreement or term of this  Agreement  which is
prohibited or is held to be void 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,  enforceability  or legality of such  provision in any
other jurisdiction.

Section 9.      Governing Law.

      This Agreement  shall be governed by and construed in accordance  with the
internal laws of the State of New York.

Section 10.     Effectiveness.

      Upon  execution  by  the  parties  hereto,  this  Agreement  shall  become
effective  as of the  Effective  Date (as that term is defined in the Pledge and
Custodial Agreement).







      IN WITNESS  WHEREOF,  each of the parties hereto has caused this Agreement
to be executed as of the date first written above.






ROTHSCHILD NORTH AMERICA, INC.

By:   _________________________
Name: _________________________
Title:     _________________________

DAIWA FINANCE CORPORATION

By:   _________________________
Name: _________________________
Title:     _________________________





MONACO FINANCE, INC.

By:   _________________________
Name: _________________________
Title:     _________________________

PACIFIC USA HOLDINGS CORP.

By:   _________________________
Name: _________________________
Title:     _________________________






PACIFIC SOUTHWEST BANK

By:   _________________________
Name: _________________________
Title:     _________________________







INDENTURE PARTIES:









NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Indenture Trustee

By:   _________________________
Name: _________________________
Title:     _________________________


BDC PARTNERS, I, L.P.

By:   BLACK DIAMOND CAPITAL MANAGEMENT, L.L.C.
Title:     General Partner

      By:  ______________________
      Name:______________________
      Title:    ______________________





BLACK DIAMOND ADVISORS, INC.

By:   _________________________
Name: _________________________
Title:     _________________________


HELLER FINANCIAL, INC.

By:   _________________________
Name: _________________________
Title:     _________________________






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GUARANTEE TITLE & TRUST CO.

By:   _________________________
Name: _________________________
Title:     _________________________


- -------------------------------
LISA W. ZENNI

- -------------------------------
STEVEN DECKOFF

- -------------------------------
JAMES WALKER