<PAGE>

                          MBIA INSURANCE CORPORATION

                      FINANCIAL GUARANTY INSURANCE POLICY

                                 July 19, 2001





                                                             Policy No. 35738(1)



Re:                  Spiegel Credit Card Master Note Trust $600,000,000 Class A
                     Series 2001-A Floating Rate Asset Backed Notes (the
                     "Notes")
                      -----

Insured Obligation:  Obligation of the Spiegel Credit Card Master Note Trust
                     (the "Issuer") to pay principal on the Series 2001-A Final
                           ------
                     Maturity Date, interest and the servicing fee on the Notes

Beneficiary:         The Bank of New York, as indenture trustee under the Master
                     Indenture and the Series 2001-A Indenture Supplement, as
                     defined below (together with any successor trustee duly
                     appointed and qualified, the "Indenture Trustee")
                                                   ------------------



     MBIA INSURANCE CORPORATION (the "Insurer"), for consideration received,
                                      -------
hereby unconditionally and irrevocably guarantees to the Indenture Trustee,
subject only to the terms of this Financial Guaranty Insurance Policy (the
"Policy"), payment of the Insured Obligation.  The Insured Obligation shall not
 ------
include any Excluded Amount. The Insurer agrees to pay to the Indenture Trustee
an amount equal to the sum of: (a) in respect of each Distribution Date, the
amount equal to the sum of (i) the amount, if any, by which the Monthly Interest
to be paid on such Distribution Date exceeds the amount on deposit in the
Collection Account allocable to the Notes, and available for distribution in
payment of Monthly Interest pursuant to the Series 2001-A Indenture Supplement,
and (ii) if the Servicer is not an Affiliate of the Seller, the amount, if any,
by which the Monthly Servicing Fee allocable to the Notes for the preceding
Monthly Period exceeds the amount previously paid to the Servicer with respect
to the Monthly Servicing Fee for such Monthly Period; (b) in respect of the
Series 2001-A Final Maturity Date, an amount equal to the Note Principal Balance
after application of all amounts allocable to the Note Principal Balance
pursuant to the Series 2001-A Indenture Supplement; and (c) on the date due
hereunder, an amount equal to any Avoided Payment; provided, however, that no
                                                   -----------------
payment (other than any payment made in respect of an Avoided Payment) under
this Policy with respect to any Distribution Date or Series 2001-A Final
Maturity Date shall exceed the Policy Amount
<PAGE>

for such Distribution Date or Series 2001-A Final Maturity Date. No payment
under this Policy with respect to any Distribution Date or Series 2001-A Final
Maturity Date will be made in respect of any Excluded Amount. The Insurer's
obligations under this Policy will be discharged to the extent funds equal to
the amounts described above are received by the Indenture Trustee, whether or
not such funds are properly applied by the Indenture Trustee.

     Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to such terms in the Master Indenture dated as of December
1, 2000 (the "Master Indenture"), as supplemented by the Series 2001-A Indenture
              ----------------
Supplement dated as of July 19, 2001 (the "Series 2001-A Indenture Supplement")
                                           ----------------------------------
between the Issuer and the Indenture Trustee.

     "Excluded Amount" means (a) shortfalls, if any, in amounts available to
      ---------------
make payments on the Notes attributable to the liability of the Issuer or the
Servicer for withholding taxes or any interest and penalties in respect of such
liability of the Issuer or Servicer and (b) payment of the Note Principal
Balance prior to the Series 2001-A Final Maturity Date.

     "Insolvency Proceeding" means the commencement, after the date hereof, of
      ---------------------
any bankruptcy, insolvency, readjustment of debt, reorganization, marshalling of
assets and liabilities or similar proceedings by or against the Seller, the
Servicer or the Issuer, the commencement, after the date hereof, of any
proceedings by or against the Seller, the Servicer or the Issuer for the winding
up or liquidation of its affairs, or the consent, after the date hereof, to the
appointment of a trustee, conservator, receiver or liquidator in any bankruptcy,
insolvency, readjustment of debt, reorganization, marshalling of assets and
liabilities or similar proceedings of or relating to the Seller, the Servicer or
the Issuer.

     "Policy Amount" means (a) in the case of any Distribution Date, the sum of
      -------------
(i) the Monthly Interest payable on such Distribution Date and (ii) the Monthly
Servicing Fee allocable to the Notes payable on such Distribution Date, provided
that the Servicer is not an Affiliate of the Seller; and (b) in the case of the
Series 2001-A Final Maturity Date, the Note Principal Balance (after giving
effect to all amounts allocable to the Note Principal Balance).

     "Qualified Maturity Agreement" has the meaning assigned to such term in the
      ----------------------------
Series 2001-A Indenture Supplement, provided that (i) it shall be a term of such
agreement that the Eligible Institution will have no access to any cash or
collateral unless and until its obligations are performed in full, and (ii) no
provision in such agreement shall have the effect of reducing the period of time
between the Expected Principal Distribution Date and the Series 2001-A Final
Maturity Date.

     Payment of amounts hereunder shall be made in immediately available funds
on the following basis: (a) with respect to payments of Monthly Interest or
Monthly Servicing Fees payable on a given Distribution Date, to the Indenture
Trustee for deposit in the Spread Account on the later of (x) 12:00 noon, New
York City time, on the second Business Day preceding the Distribution Date and
(y) 12:00 noon, New York City time, on the second Business Day succeeding
presentation to State Street Bank & Trust Company, N.A., in New York, New York,
as Fiscal Agent (the "Fiscal Agent") for the Insurer  or any successor fiscal
                      ------------
agent appointed by

                                      -2-
<PAGE>

the Insurer (as hereinafter provided) of a notice for payment in the form of
Exhibit A hereto ("Notice for Payment"), appropriately completed and executed by
                   ------------------
the Indenture Trustee; and (b) with respect to payment of the Note Principal
Balance payable on the Series 2001-A Final Maturity Date, to the Indenture
Trustee for deposit in the Spread Account on the later of (x) 12:00 noon, New
York City time, on the second Business Day preceding the Series 2001-A Final
Maturity Date and (y) 12:00 noon, New York City time, on the second Business Day
next succeeding presentation to the Fiscal Agent of a Notice for Payment,
appropriately completed and executed by the Indenture Trustee. A Notice for
Payment under this Policy may be presented to the Fiscal Agent on any Business
Day following the Determination Date in respect of which the Notice for Payment
is being presented, in each case by (a) delivery of the original Notice for
Payment to the Fiscal Agent at its address set forth below, or (b) facsimile
transmission of the Notice for Payment to the Fiscal Agent at its facsimile
number set forth below. If presentation is made by facsimile transmission, the
Indenture Trustee shall (i) simultaneously confirm transmission by telephone to
the Fiscal Agent at its telephone number set forth below, and (ii) as soon as
reasonably practicable, deliver the original Notice for Payment to the Fiscal
Agent at its address set forth below. Any Notice for Payment received by the
Fiscal Agent after 1:00 p.m., New York City time, on a Business Day, or on any
day that is not a Business Day, will be deemed to be received by the Fiscal
Agent at 9:00 a.m., New York City time, on the next succeeding Business Day.

     Subject to the foregoing, if the payment of any amount with respect to the
Insured Obligation is voided (a "Preference Event") under any applicable
                                 ----------------
bankruptcy, insolvency, receivership or similar law in an Insolvency Proceeding,
and as a result of such Preference Event, any  Noteholder is required to return
such voided payment, or any portion of such voided payment, made in respect of
any Note (an "Avoided Payment"), the Insurer will pay an amount equal to such
              ---------------
Avoided Payment, irrevocably, absolutely and unconditionally and without the
assertion of any defenses to payment, including fraud in inducement or fact or
any other circumstances that would have the effect of discharging a surety in
law or in equity, upon payment by such Noteholder of such Avoided Payment and
receipt by the Fiscal Agent from the Indenture Trustee on behalf of such
Noteholder of (x) a certified copy of a final order of a court or other
Governmental Authority exercising jurisdiction in such Insolvency Proceeding to
the effect that the Noteholder is required to return any such payment or portion
thereof prior to the Termination Date of this Policy because such payment was
voided under applicable law, with respect to which order the appeal period has
expired without an appeal having been filed (the "Final Order"), (y) an
                                                  -----------
assignment, substantially in the form attached hereto as Exhibit B, properly
completed and executed by such Noteholder irrevocably assigning to the Insurer
all rights and claims of such Noteholder relating to or arising under such
Avoided Payment, and (z) a Notice for Payment in the form of Exhibit A hereto
appropriately completed and executed by the Indenture Trustee.

     The Insurer shall make payments due in respect of Avoided Payments prior to
12:00 noon, New York City time, on the first to occur of (a) the fourth Business
Day following the Fiscal Agent's receipt of the documents required under clauses
(x) through (z) of the preceding paragraph, or (b) on the date of the Fiscal
Agent's receipt of the documents required under clauses (x) through (z),
provided that at least four business days prior to the date of the Fiscal

                                      -3-
<PAGE>

Agent's receipt of such documents, the Fiscal Agent received written notice,
specifying the date of delivery, that such documents were to be delivered on the
date on which such documents were received by the Fiscal Agent. Any such
documents and/or written notice received by the Fiscal Agent after 1:00 p.m.,
New York City time, on any Business Day or on any day that is not a Business Day
shall be deemed to have been received by the Fiscal Agent prior to 1:00 p.m. on
the next succeeding Business Day. All payments made by the Insurer hereunder on
account of any Avoided Payment shall be made to the receiver or the trustee in
bankruptcy named in the Final Order on behalf of the Noteholder and not to the
Indenture Trustee or any Noteholder directly unless such Noteholder has returned
such Avoided Payment to such receiver or trustee in bankruptcy, in which case
such payment will be disbursed to the Indenture Trustee for the benefit of the
Noteholder entitled to such payment upon proof of such payment reasonably
satisfactory to the Insurer.

     If any Notice for Payment received by the Fiscal Agent is not in proper
form, is not properly completed, executed or delivered, or is otherwise
insufficient for the purpose of making a claim hereunder, it shall be deemed not
to have been received by the Fiscal Agent, and the Insurer or the Fiscal Agent,
as the case may be, shall promptly so advise the Indenture Trustee, and the
Indenture Trustee may submit an amended Notice for Payment.

     Payments due hereunder unless otherwise stated herein will be disbursed by
the Fiscal Agent to the Indenture Trustee on behalf of the Noteholders by wire
transfer of immediately available funds in the amount of such payment, less, in
respect of Avoided Payments, any amounts held by the Indenture Trustee for the
payment of such Avoided Payments and legally available therefor.  Upon such
disbursement by wire transfer of the payments due hereunder by the Fiscal Agent
to the Indenture Trustee on behalf of the Noteholders, the Insurer's obligations
under the Policy shall be discharged.

     The Fiscal Agent is the agent of the Insurer only, and the Fiscal Agent
shall in no event be liable to the Noteholders for any acts of the Fiscal Agent
or any failure of the Insurer to deposit or cause to be deposited sufficient
funds to make payments due under this Policy.

     The Insurer shall be subrogated to the rights of each Noteholder to receive
payments under the Series 2001-A Indenture Supplement to the extent of any
payment by the Insurer hereunder.

     The Insurer hereby waives and agrees not to assert any and all rights to
require the Indenture Trustee to make demand on or to proceed against any
person, party or security prior to the Indenture Trustee demanding payment under
this Policy.

     No defenses, set-offs and counterclaims of any kind available to the
Insurer so as to deny payment of any amount due in respect of this Policy will
be valid and the Insurer hereby waives and agrees not to assert any and all such
defenses, set-offs and counterclaims, including, without limitation, any such
rights acquired by subrogation, assignment or otherwise. Any rights of
subrogation acquired by the Insurer as a result of any payment made under this
Policy shall, in

                                      -4-
<PAGE>

all respects, be subordinate and junior in right of payment to the prior
indefeasible payment in full of all amounts due the Indenture Trustee on account
of payments due under the Notes.

     This Policy is neither transferable nor assignable, in whole or in part,
except to a successor trustee duly appointed and qualified under the Indenture.
All notices, presentations, transmissions, deliveries and communications made by
the Indenture Trustee to the Insurer with respect to this Policy shall
specifically refer to the number of this Policy and shall be made to the Insurer
at:

          MBIA Insurance Corporation
          113 King Street
          Armonk, New York 10504
          Attention: Insured Portfolio Management, Structured Finance
          Telephone:  (914) 273-4545
          Facsimile:  (914) 765-3163

or such other address, telephone number or facsimile number as the Insurer may
designate to the Indenture Trustee in writing from time to time. Each such
notice, presentation, transmission, delivery and communication shall be
effective only upon actual receipt by the Insurer.

     Any notice hereunder delivered to the Fiscal Agent may be made at the
address listed below for the Fiscal Agent or such other address as the Insurer
shall specify in writing to the Indenture Trustee.

     The notice address of the Fiscal Agent is 61 Broadway, 15/th/ Floor, New
York, New York 10006 Attention: Municipal Registrar and Paying Agency, or such
other address as the Fiscal Agent shall specify to the Indenture Trustee in
writing.

     The obligations of the Insurer under this Policy are irrevocable, primary,
absolute and unconditional (except as expressly provided herein) and neither the
failure of the Seller, the Servicer, the Indenture Trustee or any other person
to perform any covenant or obligation in favor of the Insurer (or otherwise),
nor the failure or omission to make a demand permitted hereunder, nor the
commencement of any bankruptcy, debtor or other insolvency proceeding by or
against the Indenture Trustee, the Seller, the Servicer or any other person
shall in any way affect or limit the Insurer's obligations under this Policy. If
a successful action or proceeding to enforce this Policy is brought by the
Indenture Trustee, the Indenture Trustee shall be entitled to recover from the
Insurer costs and expenses reasonably incurred, including without limitation
reasonable fees and expenses of counsel.

     There shall be no acceleration payment due under this Policy unless such
acceleration is at the sole option of the Insurer.

     This Policy and the obligations of the Insurer hereunder shall terminate on
the date (the "Termination Date") which is the earliest of the following:  (a)
               ----------------
the Series 2001-A Final Maturity Date, (b) the date of funding under any
Qualified Maturity Agreement, or (c) the date on which

                                      -5-
<PAGE>

all amounts required to be paid to the Noteholders have been paid in full,
provided that, this Policy shall not terminate prior to the date on which all
-------------
amounts payable to the Insurer under the Insurance Agreement shall have been
paid, provided further that, if any Insolvency Proceeding is existing by or
      ---------------------
against the Seller, the Servicer or the Issuer, then this Policy and the
Insurer's obligations hereunder shall terminate on the date of the conclusion or
dismissal of such Insolvency Proceeding without continuing jurisdiction by the
court in such Insolvency Proceeding, and provided further that, and
                                         ---------------------
notwithstanding anything herein to the contrary, this Policy shall not terminate
prior to the date on which the Insurer has made all payments required to be made
under the terms of this Policy in respect of Avoided Payments.

     All payments made hereunder by the Insurer shall be made with the Insurer's
own funds. The payment by the Issuer or the Insurer to the Indenture Trustee of
any amount guaranteed by the Insurer under the first paragraph of this Policy,
and the payment by the Insurer of any Avoided Payment after the occurrence of a
Preference Event shall constitute "payments" for all purposes under this Policy.
                                   --------
In no event shall any payment be made under this Policy on account of (a) the
failure of the Indenture Trustee to deliver the proceeds of any such payment to
any Noteholder or the Servicer or (b) the failure of any such Noteholder or the
Servicer to claim any such proceeds from the Indenture Trustee.

     This Policy is not covered by the property/casualty insurance fund
specified in Article Seventy-Six of the New York State insurance law.

     This Policy sets forth in full the undertaking of the Insurer, and shall
not, except with the prior written consent of the Indenture Trustee and the
Insurer or otherwise in accordance with the express terms hereof, be modified,
altered or affected by any other agreement or instrument, including any
modification or amendment thereto and may not be canceled or revoked by the
Insurer prior to the Termination Date.

     This Policy shall be returned to the Insurer by the Indenture Trustee on
the Termination Date.

     THIS POLICY SHALL BE CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATION LAW) OR THE APPLICATION OF THE
LAWS OF ANY OTHER JURISDICTION.

                           [Signature Page Follows]

                                      -6-
<PAGE>

     IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed on
the date first written above.



                                         MBIA INSURANCE CORPORATION



                                         By: /s/ Gary C. Stanton
                                             -------------------
                                             President




                                         By: /s/ Amy R. Gonch
                                             ----------------
                                             Assistant Secretary

                                      -7-
<PAGE>

Exhibit A to Financial Guaranty Insurance Policy, Number 35738(1)
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention:  Insured Portfolio Management, Structured Finance

                              NOTICE FOR PAYMENT
           UNDER FINANCIAL GUARANTY INSURANCE POLICY NUMBER 35738(1)

     The Bank of New York, as Indenture Trustee (the "Indenture Trustee"),
                                                      -----------------
hereby certifies as follows to MBIA Insurance Corporation (the "Insurer") with
                                                                -------
reference to that certain Financial Guaranty Insurance Policy, Number 35738(1),
dated July 19, 2001 (the "Policy"), issued by the Insurer in favor of the
                          ------
Indenture Trustee under the Master Indenture, dated as of December 1, 2000 (the
"Master Indenture") between Spiegel Credit Card Master Note Trust (the "Issuer")
 ----------------                                                       ------
and the Indenture Trustee, as supplemented by the Series 2001-A Indenture
Supplement, dated as of July 19, 2001 (the "Series 2001-A Indenture Supplement",
                                            ----------------------------------
and together with the Master Indenture, the "Indenture"), among the Issuer and
                                             ---------
the Indenture Trustee:

     1.   The Indenture Trustee is the Indenture Trustee under the Indenture and
the Beneficiary under the Policy.

     2.   The Indenture Trustee is entitled to make a demand under the Policy
[pursuant to Section 4.16 of the Series 2001-A Indenture Supplement] [as a
result of the occurrence of a Preference Event as defined in the Policy].

     [For a Notice for Payment in respect of a Distribution Date use the
following paragraphs 3, 4 and 5]

     3.   This notice relates to the [insert date] Distribution Date. The Policy
Amount, as specified to the Indenture Trustee by the Servicer, for such
Distribution Date is $______. The amount demanded by this notice does not exceed
such Policy Amount.

     4.   The Indenture Trustee demands payment of $___________ which is an
amount equal to the amount by which the sum of (i) Monthly Interest allocable to
the Notes for such Distribution Date (as defined in the Policy) and (ii) the
Monthly Servicing Fee allocable to the Notes (provided that the Servicer is not
an Affiliate of the Seller) for such Distribution Date exceeds Available Finance
Charge Collections, Reallocated Principal Collections and Available Spread
Account Amounts that are available to cover such amounts for such Distribution
Date.

     5.   The amount demanded is to be paid in immediately available funds to
the Collection Account at _______________; account number ________________.

     [For a Notice for Payment in respect of the Series 2001-A Final Maturity
Date use the following paragraphs 6, 7 and 8]

                                      -8-
<PAGE>

     6.   This notice relates to the Series 2001-A Final Maturity Date.  The
Policy Amount, as specified to the Indenture Trustee by the Servicer, for such
Series 2001-A Final Maturity Date is $______. The amount demanded by this notice
does not exceed such Policy Amount.

     7.   The Indenture Trustee demands payment of $___________ which is an
amount equal to the amount of the Note Principal Balance after application of
all amounts to the Note Principal Balance.

     8.   The amount demanded is to be paid in immediately available funds to
the Collection Account at _______________; account number ________________.

     [For a Notice for Payment relating to both a Distribution Date and the
Series 2001-A Final Maturity Date, use the following paragraphs 9, 10, 11, 12,
,13.]

     9.   This notice relates to the [insert date] Distribution Date. The Policy
Amount, as specified to the Indenture Trustee by the Servicer, for such
Distribution Date is $______. The amount demanded by this notice does not exceed
such Policy Amount.

     10.  The Indenture Trustee demands payment of $___________ which is an
amount equal to the amount by which the sum of (i) Monthly Interest allocable to
the Notes for such Distribution Date (as defined in the Policy) and (ii) the
Monthly Servicing Fee allocable to the Notes (provided that the Servicer is not
an Affiliate of the Seller) for such Distribution Date exceeds Available Finance
Charge Collections, Reallocated Principal Collections and Available Spread
Account Amounts that are available to cover such amounts for such Distribution
Date.

     11.  This notice relates to the Series 2001-A Final Maturity Date. The
Policy Amount, as specified to the Indenture Trustee by the Servicer, for such
Series 2001-A Final Maturity Date is $______. The amount demanded by this notice
does not exceed such Policy Amount.

     12.  The Indenture Trustee demands payment of $___________ which is an
amount equal to the amount of the Note Principal Balance after application of
all amounts to the Note Principal Balance.

     13.  The amount demanded is to be paid in immediately available funds to
the Collection Account at _______________; account number ________________.

     [For a Notice for Payment in respect of an Avoided Payment use the
following paragraphs 14 and 15.]

     14.  The Indenture Trustee hereby represents and warrants, based upon
information available to it, that (i) the amount entitled to be drawn under the
Policy on the date hereof in respect of Avoided Payments is [$________ ] (the
"Avoided Payment Amount"), (ii) or each Noteholder with respect to which the
-----------------------
drawing is being made under the Policy, as the case may be, has paid or
simultaneously with such draw on the Policy will pay its pro rata share of such
Avoided Payment, and (iii) the documents required by the Policy to be delivered
in connection

                                      -9-
<PAGE>

with such Avoided Payment and Avoided Payment Amount have previously been
presented to the Insurer or are attached hereto.

     15.  The amount demanded is to be paid in immediately available funds by
wire transfer to [__________].

     [For a Notice for Payment relating to both an Avoided Payment and a
Distribution Date, use the following paragraphs 16, 17, 18 and 19.]

     16.  This notice relates to the [insert date] Distribution Date. The Policy
Amount, as specified to the Indenture Trustee by the Servicer, for such
Distribution Date is $______. The amount demanded by this notice does not exceed
such Policy Amount.

     17.  The Indenture Trustee demands payment of $___________ which is an
amount equal to the amount by which the sum of (i) Monthly Interest allocable to
the Notes for such Distribution Date (as defined in the Policy) and (ii) the
Monthly Servicing Fee allocable to the Notes (provided that the Servicer is not
an Affiliate of the Seller) for such Distribution Date exceeds Available Finance
Charge Collections, Reallocated Principal Collections and Available Spread
Account Amounts that are available to cover such amounts for such Distribution
Date.

     18.  The Indenture Trustee hereby represents and warrants, based upon
information available to it, that (i) the amount entitled to be drawn under the
Policy on the date hereof in respect of Avoided Payments is [$________ ] (the
"Avoided Payment Amount"), (ii) each Noteholder with respect to which the
 ----------------------
drawing is being made under the Policy, as the case may be, has paid or
simultaneously with such draw on the Policy will pay its pro rata share of such
Avoided Payment, and (iii) the documents required by the Policy to be delivered
in connection with such Avoided Payment and Avoided Payment Amount have
previously been presented to the Insurer or are attached hereto.

     19.  The amount demanded is to be paid in immediately available funds by
wire transfer to [_______________].

     [For a Notice for Payment relating to both an Avoided Payment and the
Series 2001-A Final Maturity Date, use the following paragraphs 20, 21, 22 and
23.]

     20.  This notice relates to the Series 2001-A Final Maturity Date. The
Policy Amount, as specified to the Indenture Trustee by the Servicer, for such
Series 2001-A Final Maturity Date is $______. The amount demanded by this notice
does not exceed such Policy Amount.

     21.  The Indenture Trustee demands payment of $___________ which is an
amount equal to the amount of the Note Principal Balance after application of
all amounts to the Note Principal Balance.

     22.  The Indenture Trustee hereby represents and warrants, based upon
information available to it, that (i) the amount entitled to be drawn under the
Policy on the date hereof in respect of Avoided Payments is [$________ ] (the
"Avoided Payment Amount"), (ii) each
 ----------------------

                                      -10-
<PAGE>

Noteholder with respect to which the drawing is being made under the Policy, as
the case may be, has paid or simultaneously with such draw on the Policy will
pay its pro rata share of such Avoided Payment, and (iii) the documents required
by the Policy to be delivered in connection with such Avoided Payment and
Avoided Payment Amount have previously been presented to the Insurer or are
attached hereto.

     23.  The amount demanded is to be paid in immediately available funds by
wire transfer to [_______________].

     [For a Notice for Payment relating to an Avoided Payment, the Series 2001-A
Final Maturity Date and a Distribution Date, use the following paragraphs 24,
25, 26, 27, 28 and 29.]

     24.  This notice relates to the [insert date] Distribution Date. The Policy
Amount, as specified to the Indenture Trustee by the Servicer, for such
Distribution Date is $______. The amount demanded by this notice does not exceed
such Policy Amount.

     25.  The Indenture Trustee demands payment of $___________ which is an
amount equal to the amount by which the sum of (i) Monthly Interest allocable to
the Notes for such Distribution Date (as defined in the Policy) and (ii) the
Monthly Servicing Fee allocable to the Notes (provided that the Servicer is not
an Affiliate of the Seller) for such Distribution Date exceeds Available Finance
Charge Collections, Reallocated Principal Collections and Available Spread
Account Amounts that are available to cover such amounts for such Distribution
Date.

     26.  This notice relates to the Series 2001-A Final Maturity Date. The
Policy Amount, as specified to the Indenture Trustee by the Servicer, for such
Series 2001-A Final Maturity Date is $______. The amount demanded by this notice
does not exceed such Policy Amount.

     27.  The Indenture Trustee demands payment of $___________ which is an
amount equal to the amount of the Note Principal Balance after application of
all amounts to the Note Principal Balance.

     28.  The Indenture Trustee hereby represents and warrants, based upon
information available to it, that (i) the amount entitled to be drawn under the
Policy on the date hereof in respect of Avoided Payments is [$________ ] (the
"Avoided Payment Amount"), (ii) each Noteholder with respect to which the
 ----------------------
drawing is being made under the Policy, as the case may be, has paid or
simultaneously with such draw on the Policy will pay its pro rata share of such
Avoided Payment, and (iii) the documents required by the Policy to be delivered
in connection with such Avoided Payment and Avoided Payment Amount have
previously been presented to the Insurer or are attached hereto.

     29.  The amount demanded is to be paid in immediately available funds by
wire transfer to [_______________].

                                      -11-
<PAGE>

     Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to them in the Master Indenture or the Series 2001-A
Indenture Supplement, as the context may require.





     IN WITNESS WHEREOF, this notice has been executed this ___ day of__________




                                             THE BANK OF NEW YORK, as
                                             Indenture Trustee

                                             By: ______________________________
                                                       Authorized Officer


                                      -12-
<PAGE>

Exhibit B to Financial Guaranty Insurance Policy, Number 35738(1)

                              Form of Assignment

Reference is made to the Financial Guaranty Insurance Policy No. 35738(1), dated
July 19, 2001 (the "Policy"), issued by MBIA Insurance Corporation (the
                    ------
"Insurer") relating to the $600,000,000 Spiegel Credit Card Master Note Trust
 -------
Class A Series 2001-A Floating Rate Asset Backed Notes.  Unless otherwise
defined herein, capitalized terms used in this Assignment shall have the
meanings assigned thereto in the Policy or incorporated by reference therein. In
connection with the Avoided Payment of [$______________] paid by the undersigned
(the "Holder") on [_______] and the payment by the Insurer in respect of such
      ------
Avoided Payment pursuant to the Policy, the Holder hereby irrevocably and
unconditionally, without recourse, representation or warranty (except as
provided below), sells, assigns, transfers, conveys and delivers all of such
Holder's right, title and interest in and to any rights or claims, whether
accrued, contingent or otherwise, that the Holder now has or may hereafter
acquire, against any person relating to, arising out of or in connection with
such Avoided Payment. The Holder represents and warrants that such claims and
rights are free and clear of any lien or encumbrance created or incurred by such
Holder./1/


                                           _________________________
                                           Holder of Certificate








     _____________________________________

     /1/ In the event that the terms of this form of assignment are reasonably
determined to be insufficient solely as a result of a change of law or
applicable rules after the date of the Policy to fully vest all of the Holder's
right, title and interest in such rights and claims, the Holder and MBIA shall
agree on such other form as is reasonably necessary to effect such assignment,
which assignment shall be without recourse, representation or warranty except as
provided above.
<PAGE>

                                   EXHIBIT F

                        INSURANCE AGREEMENT DEFINITIONS

     General Definitions.  The terms defined in this Article 1 shall have the
meanings provided herein for all purposes of this Insurance Agreement, unless
the context clearly requires otherwise, in both singular and plural form, as
appropriate.  Capitalized terms used herein and not otherwise defined shall have
the meanings assigned to them in the Master Indenture as supplemented by the
Series 2001-A Indenture Supplement.

     "Available Spread Account Amount" means for any Distribution Date, an
amount equal to the lesser of (a) the amount on deposit in the Spread Account
(exclusive of Investment Earnings, unless and until the occurrence of an Event
of Default with respect to Series 2001-A and acceleration of the maturity of the
Series 2001-A Notes pursuant to Section 5.3 of the Indenture) on such date
(before giving effect to any deposit to, or withdrawal from, the Spread Account
made or to be made with respect to such date), and (b) the Required Spread
Account Amount for such Distribution Date.

     "Average Excess Spread Percentage" means, for any Distribution Date, the
percentage determined as follows:

          For the August 15, 2001 Distribution Date, the Modified Excess Spread
     Percentage;

          For the September 17, 2001 Distribution Date, the sum of the Modified
     Excess Spread Percentage and the Excess Spread Percentage for the calendar
     month of August 2001, divided by two (2);

          For the October 15, 2001 Distribution Date, the sum of the Modified
     Excess Spread Percentage, the Excess Spread Percentage with respect to the
     calendar month of August 2001 and the Excess Spread Percentage with respect
     to the calendar month of September 2001, divided by three (3); and

     For each following Distribution Date, the sum of the Excess Spread
Percentages for the three (3) prior calendar months, divided by three (3).

     "Bank" means, on any day, the Eligible Institution holding the Spread
Account pursuant to Section 2.05 of the Insurance Agreement.

     "Base Rate" means with respect to any calendar month, the annualized
percentage equivalent of a fraction the numerator of which is the sum of (a) the
Monthly Interest due on the Notes, (b) the Monthly Servicing Fee for the Notes,
(c) any Net Swap Payment due from the Issuer, and (d) the Premium, each as of
the following Distribution Date; and the denominator of which is the Collateral
Amount as of the first day of that calendar month.

     "Condition Precedent Documents" means the Insurance Agreement, the Transfer
and Servicing Agreement, the Master Indenture, the Series 2001-A Indenture
Supplement, the Receivables Purchase Agreement dated September 20, 1994 among
the Seller, FCNB and Spiegel Acceptance, the Trust Agreement, the Administration
Agreement, the Pooling and Servicing Agreement, the Collateral Series Supplement
and Exhibit B thereto, the form of Trust Receivables Purchase Agreement, the
Underwriting Agreement, the Indemnification Agreement, the Premium and Fee
Letter, the Swap, and the Spread Account Letter.
<PAGE>

     "Credit Agreements" means (i) the 364-Day Revolving Credit Agreement, dated
as of June 30, 2000 (as amended, supplemented, restated or otherwise modified),
among Spiegel, as Borrower, the various financial institutions as are or may
become parties thereto, as Lenders (the "Lenders"), Deutsche Bank Securities Inc
and J.P. Morgan Securities Inc., as Joint Lead Arrangers and Book Runners, J.P.
Morgan Securities Inc., as Syndication Agent and Deutsche Bank AG New York
Branch, as Administrative Agent; and (ii) the Second Amended and Restated
Revolving Credit Agreement, dated as of June 30, 2000 (as amended, supplemented,
amended and restated or otherwise modified) among Spiegel, as Borrower, the
various financial institutions as are or may become parties thereto, as Lenders,
Deutsche Bank Securities Inc and J.P. Morgan Securities Inc., as Joint Lead
Arrangers and Book Runners, J.P. Morgan Securities Inc., as Syndication Agent,
Deutsche Bank AG New York Branch, as Administrative Agent, and The HongKong and
Shanghai Banking Corporation Limited, as Letter of Credit Issuer.

     "Credit Agreements Trigger Event" means the occurrence of a breach of the
financial covenants of Spiegel granted in Section 7.2.6 of each of the Credit
Agreements, provided that such breach has not been waived by the Lenders.  A
Credit Agreements Trigger Event shall be deemed to be continuing until the
Insurer has received a compliance certificate from Spiegel which establishes
that Spiegel has not been in breach of the financial covenants provided in
Section 7.2.6 of each of the Credit Agreements for a period of six months or two
consecutive quarters.

     "Default Amount Rate" means with respect to any calendar month the
annualized percentage equivalent of a fraction, the numerator of which is the
sum of the Investor Default Amount plus the Investor Uncovered Dilution Amount
for that calendar month; and the denominator of which is the Collateral Amount
as of the first day of that calendar month.

     "Dilution" means non-cash adjustments and non-charge off adjustments to the
Receivables made from time to time by the Servicer as a consequence of (but not
limited to) merchandise returns, late charge waivers, and billing adjustments.

     "Dilution Rate" means on any Distribution Date the percentage equivalent of
a fraction (a) the numerator of which is equal to the Dilution for the 3
calendar months preceding such Distribution Date, and (b) the denominator of
which is the sum of the Aggregate Principal Receivables as of the end of each of
those three calendar months.

     "Dilution Trigger Event": a Dilution Trigger Event has occurred if on any
Distribution Date the Dilution Rate exceeds 3.5%. A Dilution Trigger Event shall
be deemed to be continuing until three consecutive subsequent Distribution Dates
have occurred on which the Dilution Rate is less than 3.5%.

     "Excess Spread Percentage" means, for any calendar month, the result of (a)
the Portfolio Yield for that calendar month minus (b) the Base Rate for that
calendar month, minus (c) the Default Amount Rate for that calendar month.

     "Indemnification Agreement" means the Indemnification Agreement, dated as
of July 19, 2001 among the Insurer, the Seller, Spiegel and J.P. Morgan
Securities Inc., as representative (the "Representative") of Banc of America
Securities LLC, Deutsche Bank Alex. Brown Inc. and Dresdner Kleinwort
Wasserstein Securities LLC., as underwriters (together with the Representative,
the "Underwriters").
<PAGE>

     "Investment Earnings" means, for any Distribution Date, all interest and
earnings on Permitted Investments included in the Spread Account (net of losses
and investment expenses) during the period commencing on and including the
Distribution Date immediately proceeding such distribution Date and ending on
but excluding such Distribution Date.

     "Maximum Commitment Amount" means $600,000,000.

     "Modified Excess Spread Percentage" means 6.58%.

     "Otto Interests" means (a) Werner Otto of Hamburg, Germany, his spouse and
any of his lineal descendants and their respective spouses (collectively, the
"Otto Family"), any Subsidiary of any members of the Otto Family, and any
personal representative, trustee or other fiduciary acting in respect of the
estate of any member of the Otto Family, and (b) any trust which is solely for
the benefit of one or more members of the Otto Family (whether or not any member
of the Otto Family is a trustee of such trust) or principally for the benefit of
one or more members of the Otto Family (provided that a member of the Otto
Family is a trustee of such trust); and "Subsidiary" of a Person shall for the
purposes of this definition mean (i) any corporation of which more than 50% of
the outstanding securities having ordinary voting power  shall at the time be
owned or controlled, directly or indirectly, by such Person or by one or more of
its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii)
any partnership, association, joint venture, limited liability company or
similar business organization of which more than 50% of the ownership interests
having ordinary voting power shall at the time be so owned or controlled.

     "Person" means an individual, a partnership, a corporation, a business
trust, a joint stock company, a trust, an unincorporated association, a joint
venture, a Governmental Authority or another entity of whatever nature.

     "Portfolio Yield" means, with respect to any calendar month, the annualized
percentage equivalent of a fraction:  (a) the numerator of which is equal to the
amount of (i) Investor Finance Charge Collections with respect to such calendar
month plus (ii) any Net Swap Receipt for the following Distribution Date, plus
(iii) the Principal Accumulation Investment Proceeds deposited into the
Collection Account on the Distribution Date following such calendar month, plus
(iv) the amount of the Reserve Draw Amount (up to the Available Reserve Account
Amount) plus any amounts of interest and earnings described in Section 4.10 of
the Series 2001-A Indenture Supplement, each deposited into the Collection
Account on the Distribution Date following such calendar month, plus (v) if the
Rating Agency Condition is satisfied, any Excess Finance Charge Collections that
are allocated to Series 2001-A with respect to such calendar month, such sum to
be calculated on a cash basis, and (b) the denominator of which is the
Collateral Amount as of the first day of such calendar month.

     "Premium" means the premiums, and fees for the Policy due and payable to
the Insurer on each Distribution Date in accordance with the terms and
conditions of the Premium and Fee Letter.

     "Premium and Fee Letter " means the letter dated the Closing Date from the
Insurer to the Seller setting forth the payment arrangement for the premium on
the Policy and certain fees and expenses related to payment arrangements.

     "Rating Agency Condition" means with respect to any action or series of
related actions or proposed transaction or series of related proposed
transactions affecting Series 2001-A,  that
<PAGE>

each Rating Agency shall have notified Seller and the Indenture Trustee in
writing that such action or series of related actions or the consummation of
such proposed transactions or series of related transactions will not result in
a reduction or withdrawal of (i) the rating of the Series 2001-A Notes or (ii)
the Shadow Rating.

     "Reimbursement Amount" has the meaning given to such term in Section
2.04(a) of the Insurance Agreement.

     "Required Amount" means, for any Distribution Date, an amount equal to the
sum of the amounts described in subsections 4.4(a)(i) and 4.4(a)(ii) of the
Series 2001-A Indenture Supplement; provided, that if the Rapid Amortization
Period is extended past the Series 2001-A Final Maturity Date as a result of
there being amounts owed to the Insurer under this Agreement or the Series 2001-
A Indenture Supplement or the Counterparty under the Swap, then for any
Distribution Date falling on or after the Series 2001-A Final Maturity Date, the
Required Amount shall mean any such amounts owed to the Insurer and/or the
Counterparty that remain outstanding, and such amounts shall also be included in
the Required Amount on the Series 2001-A Final Maturity Date to the extent that
Reallocated Principal Collections remain available to cover such amounts after
all other components of the Required Amount have been paid in full or Available
Spread Account Amount remains for that purpose after the other components of the
Required Amount and the Note Principal Balance have been paid in full.

     "Required Excess Collateral Amount" means on any Distribution Date 12.5% of
the Collateral Amount (excluding any Supplemental Enhancement); provided that,
(A) except as provided in (C) below, the Required Excess Collateral Amount will
never be less than 3% of the Initial Collateral Amount (excluding any
Supplemental Enhancement); (B) except as provided in (C) below, the Required
Excess Collateral Amount will not decrease during a Rapid Amortization Period,
and (C) the Required Excess Collateral Amount will never be greater than the
Note Principal Balance minus the Principal Accumulation Account Balance; and
provided further that, upon delivery by the Insurer of a Spread Account Partial
Collateral Substitution Notice to the other parties to the Insurance Agreement,
the percentage "12.5%" in the preceding clause (i) shall be deemed to be changed
to "14.0%" with effect from the date of such delivery.

     "Required Spread Account Amount" means (a) on the Closing Date, the Spread
Account Deposit, (b) on each Distribution Date prior to a Pay Out Event, an
amount equal to the lesser of (x) the product of (i) the Spread Account
Percentage for that Distribution Date and (ii) the Maximum Commitment Amount,
and (y) the Note Principal Balance on such Distribution Date, minus the
Principal Accumulation Account Balance on the relevant determination date; and
(c) on each Distribution Date after a Pay Out Event or on which a Pay Out Event
has occurred, the Note Principal Balance on such Distribution Date; provided
that (i) at any time that a Dilution Trigger Event has occurred and is
continuing, the amount calculated pursuant to clause (b)(x) shall be increased
by an amount equal to the product of (A) the amount by which the Dilution Rate
exceeds 3.5% multiplied by (B) the Note Principal Balance, and (ii) at any time
that a Credit Agreements Trigger Event has occurred and is continuing, the
amount calculated pursuant to clause (b)(x) shall be increased by an amount
equal to 3% of the Maximum Commitment Amount.

     "Series 2000-A Average Excess Spread Percentage" means the Average Excess
Spread Percentage as defined in the Series 2000-A Insurance Agreement.
<PAGE>

     "Series 2000-A Insurance Agreement" means the Insurance and Reimbursement
Agreement, dated as of December 19, 2000, among the Insurer, the Seller, the
Servicer, Spiegel, Spiegel Acceptance, the Issuer and the Indenture Trustee.

     "Shadow Rating" means rating of the Notes at investment grade by the Rating
Agencies, without giving effect to the Policy.

     "Spread Account" means the segregated trust account required to be
established pursuant to Section 2.05 of the Insurance Agreement.

     "Spread Account Deposit" means 3.5% of the Note Initial Principal Balance;
provided, that upon delivery to the other parties hereto of the Spread Account
Partial Decrease Notice or the Spread Account Partial Collateral Substitution
Notice by the Insurer, the term "Spread Account Deposit" shall have the meaning
assigned to it in the definition of "Spread Account Deposit" set forth in Annex
A to the Insurance Agreement/1/, which definition shall thereafter for all
purposes supersede this definition as fully as if set forth in this place.

     "Spread Account Deficiency" means the excess, if any, of the Required
Spread Account Amount over the Available Spread Account Amount.

     "Spread Account Letter" means the letter from the Bank addressed to the
Insurer, dated the Closing Date, substantially in the form of Exhibit C to the
Insurance Agreement.

     "Spread Account Partial Collateral Substitution Notice" means the notice,
substantially in the form of Exhibit E to the Insurance Agreement, from the
Insurer to the other parties hereto.

     "Spread Account Partial Decrease Notice" means the notice, substantially in
the form of Exhibit D hereto, from the Insurer to the other parties to the
Insurance Agreement.

     "Spread Account Percentage" means on each Distribution Date:

 .  if the Average Excess Spread Percentage for such Distribution Date is greater
   than 5.5%, 3.5% ("level 1");

 .  if the Average Excess Spread Percentage for such Distribution Date is less
   than or equal to 5.5%, but is greater than 5.0%, 6.0% ("level 2");

 .  if the Average Excess Spread Percentage for such Distribution Date is less
   than or equal to 5.0%, but is greater than 4.5%, 7.0% ("level 3");

 .  if the Average Excess Spread Percentage for such Distribution Date is less
   than or equal to 4.5%, but is greater than 3.5%, 8.5% ("level 4"); and

 .  if the Average Excess Spread Percentage for such Distribution Date is less
   than or equal to 3.5%, 11.5% ("level 5");

   provided, however, that, if the Spread Account Percentage is greater than
   3.5%, the Spread Account Percentage will remain constant until (a) it is
   required to be increased pursuant to (ii) through (v) above, or (b) the
   Average Excess Spread Percentage has

________________________


     /1/ Annex A to the Insurance Agreement is attached to this Exhibit F.
<PAGE>

     exceeded the percentage specified as the upper bound of the range of
     Average Excess Spread Percentages specified for such Spread Account
     Percentage for three consecutive Distribution Dates, in which case the
     Spread Account Percentage will be decreased on the third consecutive
     Distribution Date as required in (i) through (v) above, provided that the
     Spread Account Percentage on any Distribution Date may in no event be
     reduced by more than one level below the Spread Account Percentage on the
     immediately preceding Distribution Date;

     provided further, however, that upon receipt by the other parties hereto
     from the Insurer of a Spread Account Partial Decrease Notice or a Spread
     Account Partial Collateral Substitution Notice, the term "Spread Account
     Percentage" shall have the meaning assigned to it in the definition of
     "Spread Account Percentage" set forth in Annex A to the Insurance
     Agreement/2/, which definition shall thereafter for all purposes supersede
     this definition as fully as if set forth in this place.


     "Supplemental Enhancement" means on any Distribution Date the product of
the Supplemental Enhancement Percentage and the Collateral Amount (disregarding
for the purposes of calculating the Collateral Amount any reference to
Supplemental Enhancement).

     "Supplemental Enhancement Percentage" means on any Distribution Date a
percentage equivalent of a fraction the numerator of which is the aggregate
amount of Receivables aged over 180 days on a contractual delinquency basis as
of the last day of the calendar month preceding such Distribution Date, and the
denominator of which is the aggregate Receivables as of the last day of the
calendar month preceding such Distribution Date.

     "Trust Receivables Purchase Agreement" means the Receivables Purchase
Agreement to be entered into between the Seller, as buyer, and FCNB and Spiegel
Acceptance, as Seller, in the form attached as Exhibit B to the Collateral
Series Supplement.




_________________
     /2/ Annex A to the Insurance Agreement is attached to this Exhibit F.
<PAGE>

                                    ANNEX A
                                    -------

"Spread Account Deposit" means 2.0% of the Note Initial Principal Balance

"Spread Account Percentage" means on each Distribution Date:

     (i)  if the Average Excess Spread Percentage for such Distribution Date is
greater than 5.5%, 2.0% ("level 1");

     (ii)  if the Average Excess Spread Percentage for such Distribution Date is
less than or equal to 5.5%, but is greater than 5.0%, 4.5% ("level 2");

     (iii)  if the Average Excess Spread Percentage for such Distribution Date
is less than or equal to 5.0%, but is greater than 4.5%, 5.5% ("level 3");

     (iv)  if the Average Excess Spread Percentage for such Distribution Date is
less than or equal to 4.5%, but is greater than 3.5%, 7.0% ("level 4"); and

     (v)  if the Average Excess Spread Percentage for such Distribution Date is
less than or equal to 3.5%, 10.0% ("level 5");

     provided, however, that, if the Spread Account Percentage is greater than
     2.0%, the Spread Account Percentage will remain constant until (a) it is
     required to be increased pursuant to (ii) through (v) above, or (b) the
     Average Excess Spread Percentage has exceeded the percentage specified as
     the upper bound of the range of Average Excess Spread Percentages specified
     for such Spread Account Percentage for three consecutive Distribution
     Dates, in which case the Spread Account Percentage will be decreased on the
     third consecutive Distribution Date as required in (i) through (v) above,
     provided that the Spread Account Percentage on any Distribution Date may in
     no event be reduced by more than one level below the Spread Account
     Percentage on the immediately preceding Distribution Date.
<PAGE>

                                   EXHIBIT G

             SECTION 2.05 OF INSURANCE AGREEMENT (SPREAD ACCOUNT)

     The Spread Account.

          (b)  On or prior to the Closing Date, the Servicer shall cause to be
established in the name of the Noteholders and the Insurer an account (the
"Spread Account") at an Eligible Institution. Unless the Insurer otherwise
agrees, the Spread Account shall be a fully segregated trust account at the
corporate trust department of the Eligible Institution. The Insurer hereby gives
its consent to permit the Spread Account to be maintained as a trust account at
the Indenture Trustee. The Spread Account will be in the name of the Insurer and
under the control of the Insurer. The Spread Account will be entitled "MBIA
Insurance Corporation pursuant to the Insurance and Reimbursement Agreement
among MBIA Insurance Corporation, Spiegel Credit Corporation III, First
Consumers National Bank, Spiegel, Inc., Spiegel Acceptance Corporation, Spiegel
Credit Card Master Note Trust and The Bank of New York, as Indenture Trustee,
dated as of July 19, 2001". The Issuer hereby irrevocably instructs the Bank to
pay amounts on deposit in the Spread Account as provided in Sections 2.05(d),
(e), (f) and (j) hereof.

          (c)  The Insurer hereby revocably appoints the Servicer, which
appointment the Servicer hereby accepts, to act on behalf of the Insurer for
investing all cash at any time on deposit in the Spread Account. The Insurer
hereby directs the Indenture Trustee, at the direction of the Servicer, to
invest all cash at any time on deposit in the Spread Account in Permitted
Investments that mature not later than the Business Day preceding the next
Distribution Date. Each such instruction shall designate specific investments
and shall certify that the investments so specified constitute Permitted
Investments, mature at the time required and are otherwise permitted hereby. All
such investments shall be made in the name of the Bank as agent for the Insurer
and the Series 2001-A Noteholders, and held by the Bank, or its nominee, for the
benefit of the Insurer and the Series 2001-A Noteholders. The Bank shall not be
liable for any loss incurred in connection with any investment in the Spread
Account, except for losses with respect to investments in any investment issued
or guaranteed by the Bank. In the event the Bank ceases to be an Eligible
Institution, the Insurer shall direct the Servicer to establish a new Spread
Account (and transfer any balance and investments then in the Spread Account to
such new Spread Account) within three days of such direction at an Eligible
Institution specified by the Insurer.

          (d)  On each Distribution Date (but subject to subsections 2.05(d) and
2.05(e)), the Investment Earnings, if any, accrued since the preceding
Distribution Date on funds on deposit in the Spread Account shall be paid to the
holders of the Seller Interest by the Indenture Trustee upon written direction
of the Servicer. For purposes of determining the availability of funds or the
balance in the Spread Account for any reason under this Insurance Agreement or
the Series 2001-A Indenture Supplement (subject to subsections 2.05(d) and
2.05(e)), all Investment Earnings shall be deemed not to be available or on
deposit; provided that after the maturity of the Series 2001-A Notes has been
accelerated as a result of an Event of Default, all Investment Earnings shall be
added to the balance on deposit in the Spread Account and treated like the rest
of the Available Spread Account Amount. Spiegel Acceptance will report for
federal, state and local income tax purposes the income, if any, represented by
the Spread Account and may not assign, transfer or otherwise convey its rights
under this Insurance Agreement to receive any

<PAGE>

amounts from the Spread Account, except that Investment Earnings and excess
funds will be paid to Spiegel Acceptance as set forth in subsections 2.05(c),
2.05(f) and 2.05(j).

          (e)  If, on any Distribution Date, the sum of the Available Finance
Charge Collections and the Reallocated Principal Collections is less than the
Required Amount, the Indenture Trustee, at the written direction of the
Servicer, shall withdraw from the Spread Account the amount of such deficiency
up to the Available Spread Account Amount and, if the Available Spread Account
Amount is less than such deficiency, Investment Earnings credited to the Spread
Account, and deposit such amount in the Collection Account for application to
the unpaid components of the Required Amount in the priority in which such items
are listed in Section 4.4(a) of the Series 2001-A Indenture Supplement.

          (f)  On the Series 2001-A Final Maturity Date, the Indenture Trustee
at the written direction of the Servicer shall withdraw from the Spread Account
an amount equal to the lesser of (i) the Note Principal Balance (after any
payments to be made pursuant to subsection 4.4(c) of the Series 2001-A Indenture
Supplement) and (ii) the Available Spread Account Amount and, if the Available
Spread Account Amount is not sufficient to reduce the Note Principal Balance to
zero, Investment Earnings credited to the Spread Account up to the amount
required to reduce the Note Principal Balance to zero, and the Indenture Trustee
upon the written direction of the Servicer or the Servicer shall deposit such
amounts into the Collection Account for distribution to the Series 2001-A
Noteholders in accordance with subsection 5.2(e) of the Series 2001-A Indenture
Supplement.

          (g)  If on any Distribution Date, after giving effect to all
withdrawals from the Spread Account, the Available Spread Account Amount is less
than the Required Spread Account Amount then in effect, the Indenture Trustee
shall deposit Available Finance Charge Collections into the Spread Account up to
the amount of the Spread Account Deficiency in accordance with subsection
4.4(a)(vii) of the Series 2001-A Indenture Supplement. Subject to Section
2.05(k), if on any Distribution Date, after giving effect to all withdrawals
from the Spread Account, the Available Spread Account Amount exceeds the
Required Spread Account Amount, the Servicer shall withdraw the amount of such
excess and distribute such amount to the holders of the Seller Interest.

          (h)  Upon delivery of a Notice for Payment under the Policy, the
Indenture Trustee or the Servicer on its behalf shall immediately deliver
written notice, in the form of Exhibit A to the Policy, to the Bank, and the
Bank shall, immediately upon receipt thereof and upon receipt of the required
funds from the Insurer, cause payments required to be made by the Insurer under
such Notice for Payment to be satisfied by depositing the amount into the Spread
Account in accordance with the Policy and by debiting the Spread Account and
crediting the accounts specified in such notice, to the extent of any funds then
on deposit in the Spread Account. Such payment will be made by the Bank without
any further direction or notice from the Insurer. The Indenture Trustee shall
deliver to the Insurer a statement with respect to such payment in the form of
Exhibit B hereto in addition to a Notice for Payment. The Insurer shall deliver
to the Bank such documentation as such institution may reasonably deem necessary
to effectuate the terms of this Section 2.05(g).

          (i)  In the event that, notwithstanding the terms and conditions
hereof and the intention of the parties to the contrary, the Issuer, the
Indenture Trustee, the Seller, the Servicer or Spiegel Acceptance is deemed to
have any rights or interest in or to any funds on deposit in

<PAGE>

the Spread Account, other than the right of Spiegel Acceptance to receive
Investment Earnings and payments of amounts in excess of the applicable Required
Spread Account Amount and amounts pursuant to subsection 2.05(j) hereof, then,
and in any such event, each of the Issuer, the Indenture Trustee, the Seller,
the Servicer and Spiegel Acceptance hereby agrees that this Insurance Agreement
constitutes a grant to the Insurer, as of the date hereof, of a security
interest in the Spread Account, all funds on deposit therein, all investments
made from time to time with the funds so deposited therein, and all proceeds of
such investments to secure any and all rights to payment and reimbursement that
now exist or may hereafter arise in favor of the Insurer under this Insurance
Agreement, the Policy and/or the Indemnification Agreement, and each such Person
hereby pledges, assigns, sets over, and otherwise transfers to the Insurer any
and all of its respective right, title and interest in and to the Spread
Account, any amounts on deposit from time to time therein, all investments made
from time to time with the funds so deposited therein, and all proceeds of such
investments; and each such Person hereby agrees to such pledge and assignment,
and all necessary action on the part of each such Person has been taken as may
be required to perfect the security interest of the Insurer in the Spread
Account, all amounts from time to time on deposit therein as of the date hereof,
all investments made from time to time with the funds so deposited therein, and
all proceeds of such investments. Each of the Issuer, the Indenture Trustee, the
Seller, the Servicer and Spiegel Acceptance agrees to promptly, from time to
time, at the sole expense of the Seller, execute and deliver all instruments and
documents, and at the request of the Insurer, take all action, that may be
reasonably necessary or desirable, in order to perfect and protect the security
interest granted to the Insurer pursuant to this Section 2.05(h) or to enable
the Insurer to exercise and enforce its rights and remedies with respect to the
assets of the Spread Account. The Insurer is hereby authorized to file one or
more financing or continuation statements, and amendments thereto, relating to
all or any part of the assets of the Spread Account.

          (j)  The Indenture Trustee shall hold such of the Permitted
Investments as consist of instruments, deposit accounts, negotiable documents,
money, goods, letters of credit, and advices of credit in the State of New York.
The Indenture Trustee shall hold such of the Permitted Investments as
constitutes investment property through a securities intermediary, which
securities intermediary shall agree with the Indenture Trustee that (a) such
investment property shall at all times be credited to a securities account of
the Indenture Trustee, (b) such securities intermediary shall treat the
Indenture Trustee as entitled to exercise the rights that comprise each
financial asset credited to such securities account, (c) all property credited
to such securities account shall be treated as a financial asset, (d) such
securities intermediary shall comply with entitlement orders originated by the
Indenture Trustee without the further consent of any other person or entity, (e)
such securities intermediary will not agree with any person or entity other than
the Indenture Trustee to comply with entitlement orders originated by such other
person or entity, (f) such securities accounts and the property credited thereto
shall not be subject to any lien, security interest, or right of set-off in
favor of such securities intermediary or anyone claiming through it (other than
the Indenture Trustee), and (g) such agreement shall be governed by the laws of
the State of New York. Terms used in the preceding sentence that are defined in
the New York UCC and not otherwise defined herein shall have the meaning set
forth in the New York UCC.

          (k)  Subject to Section 2.05(k), ninety days after (A) the payment in
full to the Noteholders of all amounts payable with respect to the Notes, or (B)
the date of funding under any Qualified Maturity Agreement, and the payment in
full of the Reimbursement Amount and

<PAGE>

all other amounts payable to the Insurer or the Counterparty, the Insurer shall
direct that any amounts remaining in the Spread Account shall be released to
Spiegel Acceptance; provided, however, that, if any Insolvency Event occurs with
respect to any of the Issuer, the Seller, FCNB or any material Subsidiary of
Spiegel (collectively, the "Potential Preference Parties") during the period
described above, then all funds shall remain on deposit in the Spread Account
until the date that all applicable limitation periods with respect to all
applicable preferential transfer or other payment avoidance statutes relating to
any of the Potential Preference Parties have expired and if no proceeding at law
or in equity is commenced during any such period based upon any such statute,
all such amounts remaining on deposit in the Spread Account shall be released at
the end of all such periods to the Seller; provided, further, however, that if
any such proceeding is commenced during any applicable limitation period, all
funds on deposit in the Spread Account shall remain on deposit therein until the
date on which there is a final determination by a court of competent
jurisdiction as to whether any payment or payments made pursuant to the Transfer
and Servicing Agreement, the Series 2001-A Indenture Supplement, the
Indemnification Agreement or this Insurance Agreement is recoverable from either
the Insurer or the Noteholders. If such a court determines that a payment is so
recoverable, all funds on deposit in the Spread Account shall remain on deposit
in the Spread Account and shall be applied to the payment of any and all such
claims that the Insurer may be required to pay. If such a court determines that
such payment is not recoverable, all funds on deposit in the Spread Account
shall be released to Spiegel Acceptance. The foregoing notwithstanding, if (i)
amounts payable with respect to the Notes have been fully paid to the
Noteholders and (ii) the Reimbursement Amount and all other amounts payable to
the Insurer under this Insurance Agreement and all amounts payable to the
Counterparty have been paid in full, (iii) no Insolvency Event has occurred with
respect to the Potential Preference Parties, and (iv) (A) FCNB is rated at least
BBB and Baa2 by S&P and Moody's, respectively, (B) the Insurer shall have
received a favorable opinion or opinions, satisfactory in form and substance to
the Insurer, from counsel to the Seller, the Servicer and FCNB, to the effect
that in the event that an Insolvency Event were to occur with respect to the
Potential Preference Parties, no payment pursuant to the Transfer and Servicing
Agreement, the Series 2001-A Indenture Supplement, the Indemnification Agreement
or this Insurance Agreement would be recoverable from either the Insurer, or the
Noteholders, and such other matters as the Insurer may reasonably request; or
(C) the Insurer, in its sole discretion, elects to pay the contents of the
Spread Account to Spiegel Acceptance, then, and in any such event, the Insurer
shall pay or cause to be paid all remaining amounts in the Spread Account to
Spiegel Acceptance.

          (l)  If on the earlier of (i) the Expected Principal Distribution Date
and (ii) the date upon which all amounts payable with respect to the Notes are
paid in full , a Series 2000-A Spread Account Support Event occurs or has
occurred and is continuing, the Indenture Trustee shall not release any funds on
deposit in the Spread Account that would otherwise be distributable to the
holders of the Seller Interest and shall instead retain such funds in the Spread
Account until such time as (A) the Series 2000-A Average Excess Spread
Percentage shall have been equal to or greater than 5.5% for three consecutive
months and no Series 2000-A Insurance Agreement Pay Out Event shall have
occurred and be continuing (the "Spread Account Cure Event"), whereupon any
amounts remaining in the Spread Account in excess of the Required Spread Account
Amount shall be released from escrow and distributed by the Indenture Trustee to
the holders of the Seller Interest, or (B) if no Spread Account Cure Event has
occurred, the Series 2000-A Final Maturity Date, whereupon any amounts remaining
in the Spread Account

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after payment of all amounts owed to the Series 2001-A Noteholders shall be
released from escrow and distributed in accordance with the provisions of
Section 2.05 of the Series 2000-A Insurance Agreement. The agreements in this
Section shall survive the termination of the Policy.
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                                   EXHIBIT H

                      SECTION 5.01 OF INSURANCE AGREEMENT

                     (INSURANCE AGREEMENT PAY OUT EVENTS)

     Insurance Agreement Pay Out Events. The occurrence of any one of the
following shall constitute an Insurance Agreement Pay Out Event:

          (a)  the occurrence of a Pay Out Event as defined in Section 6.1 of
the Series 2001-A Indenture Supplement or Section 5.1 of the Indenture;

          (b)  the occurrence of any of the following events:

               (i)  failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer set forth in the Transfer and Servicing Agreement which has a material
adverse effect on the Noteholders, which continues unremedied for a period of 45
days after the date on which written notice of such failure requiring the same
to be remedied shall have been given to the Servicer by the Indenture Trustee
and/or the SMT Trustee, or to the Servicer and the Indenture Trustee by the
Noteholders holding not less than 10% of the outstanding principal amount of any
Series adversely affected thereby, or prior to the SMT Termination Date, the
Servicer and the SMT Trustee by Investor Certificateholders of 50% or more of
the then-outstanding principal amount of the Investor Certificates of any
adversely affected Series and continues to materially adversely affect such
Noteholders or such Investor Certificateholders for such period; or the
Servicer's delegation of its duties under this Agreement except as permitted by
Section 5.7 of the Transfer and Servicing Agreement;

          any representation, warranty or certification made by the Servicer in
the Transfer and Servicing Agreement or in any certificate delivered pursuant to
the Transfer and Servicing Agreement shall prove to have been incorrect when
made, which has a material adverse effect on the Noteholders and which continues
to be incorrect in any material respect for a period of 45 days after the date
on which written notice of such failure requiring the same to be remedied shall
have been given to the Servicer by the Indenture Trustee and/or the SMT Trustee,
or to the Servicer and the Indenture Trustee by Noteholders holding not less
than 10% of the outstanding principal amount of any Series adversely affected
thereby, or prior to the SMT Termination Date, the Servicer and the SMT Trustee
by Investor Certificateholders of 50% or more of the then-outstanding principal
amount of the Investor Certificates of any adversely affected Series and
continues to materially adversely affect such Noteholders for such period, or if
such failure cannot be cured within such 45 days period owing to causes beyond
the control of the Servicer, if the Servicer shall failure to proceed promptly
to cure the same and prosecute the curing of such failure with diligence and
continuity;

          the Servicer shall (i) become insolvent, (ii) fail to pay its debts
generally as they become due, (iii) voluntarily seek, consent to, or acquiesce
in the benefit or benefits of any Debtor Relief Law, or (iv) become a party to
(or be made the subject of ) any proceeding provided for by any Debtor Relief
Law, other than as a

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creditor or claimant, and, in the event such proceeding is involuntary, the
petition instituting same is not dismissed within 45 days after its filing; or

          the Servicer fails to maintain a sub-servicing agreement with First
Data Resources Inc. in the form of the Service Agreement dated September 9, 1998
between First Data Resources Inc. and Servicer or another sub-servicer
acceptable to the Insurer;

          (c)  the insolvency of a material Subsidiary of Spiegel;

          (d)  failure of the Otto Interests to own, directly or indirectly,
free and clear of all liens at least 67% of the ownership interest in Spiegel;

          (e)  failure on the part of Seller, Servicer or Spiegel to observe or
perform in any material respect any of the covenants or agreements of Seller,
Servicer or Spiegel set forth in the Insurance Agreement or breach of any
representation, warranty or certification made by Seller, Servicer or Spiegel in
the Insurance Agreement which continues unremedied for 45 days or such shorter
period specified herein after the date on which written notice of such failure
or breach requiring the same to be remedied shall have been given to the
Servicer , the Seller or Spiegel (and if to the Seller or Spiegel, also to the
Servicer) by the Insurer, provided that:

               (i)  failure by the Seller or Servicer to pay any amount due to
the Insurer hereunder within five (5) days after such amount was due to be paid
or deposited in accordance with the Insurance Agreement; and

               (ii)  failure by the Seller or Servicer to comply with Sections
4.01(h)(i),(ii), (vi), (xv), or (xvi) and 4.02(g)(i) within ten (10) days of the
Seller or Servicer receiving notice from the Insurer requiring such compliance;

          (f)  the Dilution Rate exceeds 8.5%;

          (g)  (i) the Servicer fails to maintain a risk-based capital ratio of
10%, provided that Servicer does not cure such default within thirty (30) days
following the date on which any officer of the Servicer has knowledge of such
failure; (ii) the Servicer fails to remain "Well Capitalized", as defined by 12
U.S.C. 1831 and the regulations of the Federal Deposit Insurance Corporation
adopted thereunder, provided that Servicer does not cure such default within
thirty (30) days following the date the Servicer receives notice of a final
determination from any Governmental Authority of its failure to remain "Well
Capitalized", unless the Servicer demonstrates to the Insurer, at the Insurer's
sole discretion, that the Servicer can and will increase within sixty (60) days
its capital to the level sufficient so that it would have been considered "Well
Capitalized" by such Governmental Authority; or (iii) the Servicer receives
notice, or any officer of the Servicer has actual knowledge, of a final
determination that any Governmental Authority, including the Federal Deposit
Insurance Corporation or any other Governmental Authority with regulatory powers
over the Servicer, has taken or will take any mandatory or discretionary
supervisory action against the Servicer, including, without limitation, by cease
and desist order, memorandum of understanding, capital directive or directive to
take prompt corrective action, which action in the reasonable opinion of MBIA
could have a material adverse effect on (A) the business, operations, property,
financial conditions or prospects of the Servicer or (B) the ability of the
Servicer to perform its obligations under any Condition Precedent Documents to
which it is a party;

<PAGE>

          the occurrence of an Insurance Agreement Event of Default.