Document:

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                                                                    Exhibit 4.11

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                                TRUST AGREEMENT

                           Dated as of April 3, 2000

                                    between

                               Owner Participant

                                      and

                           WILMINGTON TRUST COMPANY,
                                 Owner Trustee

              Assorted Railroad Tank Cars and Covered Hopper Cars

                           GATX Rail Trust No. 2000-1

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                               TABLE OF CONTENTS
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ARTICLE I
     DEFINITIONS...................................................................... 3
               Section 1.1   Definitions.............................................. 3
               Section 1.2   Interpretation........................................... 3

ARTICLE II
     AUTHORITY; DECLARATION OF TRUST.................................................. 3
               Section 2.1   Authority to Execute and Perform Various Documents....... 3
               Section 2.2   Declaration of Trust..................................... 4

ARTICLE III
     DISTRIBUTIONS AND PAYMENTS....................................................... 4
               Section 3.1   Payments to the Indenture Trustee........................ 4
               Section 3.2   Payments to the Owner Trustee; Other Parties............. 4
               Section 3.3   Certain Distributions to the Owner Participant........... 5
               Section 3.4   Excepted Property........................................ 5
               Section 3.5   Method of Payment........................................ 5

ARTICLE IV
     CERTAIN DUTIES OF THE OWNER TRUSTEE.............................................. 5
               Section 4.1   Notice of Certain Events................................. 5
               Section 4.2   Action Upon Instructions................................. 6
               Section 4.3   Indemnification.......................................... 6
               Section 4.4   No Duties Except as Specified............................ 6
               Section 4.5   No Action Except Under Specified
                             Agreements or Instructions............................... 7
               Section 4.6   Tax Returns; Records..................................... 7
               Section 4.7   Absence of Certain Duties................................ 7
               Section 4.8   Furnishing of Documents.................................. 8

ARTICLE V
     THE OWNER TRUSTEE................................................................ 8
               Section 5.1   Acceptance of Trusts and Duties.......................... 8
               Section 5.2   No Representations or Warranties as
                             to Equipment or Documents................................ 9
               Section 5.3   No Segregation of Moneys; No Interest.................... 9
               Section 5.4   Reliance; Advice of Counsel.............................. 9
               Section 5.5   Not Acting in Individual Capacity........................10

ARTICLE VI
     INDEMNIFICATION..................................................................10
               Section 6.1   Indemnification of Trust Company.........................10
               Section 6.2   Expenses.................................................11

ARTICLE VII
     TERMINATION OF TRUST AGREEMENT...................................................12
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               Section 7.1   Termination of Trust Agreement...........................12
               Section 7.2   Termination at Option of the Owner Participant...........12

ARTICLE VIII
     SUCCESSOR OWNER TRUSTEES, CO-OWNER TRUSTEES
     AND SEPARATE OWNER TRUSTEES......................................................13
               Section 8.1   Resignation of the Owner Trustee;
                             Appointment of Successor.................................13
               Section 8.2   Additional and Separate Trustees.........................14

ARTICLE IX
     SUPPLEMENTS AND AMENDMENTS.......................................................16
               Section 9.1   Supplements and Amendments...............................16

ARTICLE X
     MISCELLANEOUS....................................................................16
               Section 10.1  No Legal Title to Trust Estate in
                             the Owner Participant....................................16
               Section 10.2  Sale of Accepted Equipment by
                             the Owner Trustee is Binding.............................16
               Section 10.3  Notices..................................................16
               Section 10.4  Severability.............................................17
               Section 10.5  Separate Counterparts....................................17
               Section 10.6  Waivers, etc.............................................17
               Section 10.7  Successors and Assigns...................................17
               Section 10.8  Transfer of Owner Participant's Interest.................17
               Section 10.9  Actions of the Owner Participants........................17
               Section 10.10 Headings; Table of Contents..............................17
               Section 10.11 Governing Law............................................18
               Section 10.12 Benefit..................................................18
               Section 10.13 Performance by the Owner Participant.....................18
               Section 10.14 Conflict with Operative Agreements.......................18
               Section 10.15 Limitation on Owner Participant's Liability..............18
               Section 10.16 Identification of Trust..................................18
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                                TRUST AGREEMENT

     This Trust Agreement is entered into as of April 3, 2000 between
                (the "Owner Participant"), and WILMINGTON TRUST COMPANY, (in its
individual capacity, "Trust Company," and otherwise not in its individual
capacity but solely as trustee hereunder, the "Owner Trustee"). In consideration
of the mutual agreements herein contained, the agreements contained in the other
Operative Agreements and the acceptance by Trust Company of the trusts hereby
created, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

                                   ARTICLE I
                                  DEFINITIONS

     Section 1.1  Definitions. The capitalized terms used in this Trust
Agreement have the meanings given in Appendix A unless otherwise defined herein
or unless the context otherwise requires. For all purposes hereof, the following
terms shall have the following meanings:

     "Accepted Equipment" means all of the Accepted Units.

     "Accepted Unit" means each Unit that has been purchased by the Owner
Trustee pursuant to the Participation Agreement and any Replacement Unit.

     "Actual Knowledge" of Trust Company or the Owner Trustee means actual
knowledge of, including any written notices received by, a responsible officer
in the Corporate Trust Administration of Trust Company.

     Section 1.2  Interpretation. Unless otherwise indicated, references in this
Trust Agreement to Sections, subsections, paragraphs and Appendices are to
Sections, subsections, paragraphs and Appendices of this Trust Agreement. The
terms "hereof," "herein," "hereby," "hereto" and "hereunder" refer to this Trust
Agreement, taken as a whole. References to a given agreement or instrument are
references to such agreement or instrument as originally entered into, as
modified, amended, supplemented and restated through the date as of which such
reference is made.

                                  ARTICLE II
                        AUTHORITY; DECLARATION OF TRUST

     Section 2.1  Authority to Execute and Perform Various Documents. The Owner
Participant hereby authorizes and directs the Owner Trustee to, and the Owner
Trustee agrees for the benefit of the Owner Participant that it will, execute
and deliver the Participation Agreement, on the Closing Date, upon receipt of
the confirmation by the Owner Participant pursuant to Section 2.4 of the
Participation Agreement, execute and deliver the Operative Agreements
contemplated by the Participation Agreement to be executed and delivered by the
Owner Trustee on the Closing Date, in the respective forms thereof in which
delivered by the Owner Participant to the Owner Trustee for execution and
delivery, and to take the other actions contemplated to be taken by the Owner
Trustee on the Closing Date in Section 2 of the Participation Agreement, execute
and deliver any other agreement, instrument or certificate contemplated by the
Operative Agreements as the Owner Participant from time to time may direct in
writing, subject to the terms of this Trust Agreement, exercise the rights (upon
written instructions received from the Owner Participant) and perform the duties
of the Owner Trustee under each of the documents,
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agreements, instruments and certificates referred to in this Section 2.1 as set
forth in such documents, agreements, instruments and certificates, and subject
to the terms of this Trust Agreement, take such other action in connection with
the foregoing as the Owner Participant may from time to time direct in writing.

     Section 2.2  Declaration of Trust. The Trust Company hereby declares that
it will hold as Owner Trustee all estate, right, title and interest of the Owner
Trustee in and to the Accepted Equipment and the Owner Trustee Agreements, and
any other property contributed by the Owner Participant pursuant to the terms of
any of the Operative Agreements, including without limitation all amounts of
Rent, insurance proceeds and requisition, indemnity or other payments of any
kind, but specifically excluding Excepted Property (collectively, the "Trust
Estate"), upon the trusts set forth herein and for the use and benefit of the
Owner Participant as sole beneficiary, subject, however, to the provisions of
and the Lien created by the Indenture.

                                  ARTICLE III
                          DISTRIBUTIONS AND PAYMENTS

     Section 3.1  Payments to the Indenture Trustee. Until the Lien of the
Indenture shall have been discharged pursuant to the terms thereof, all Basic
Rent, Supplemental Rent, insurance proceeds and requisition or other payments of
any kind (other than payments constituting Excepted Property and other than
payments received from the Indenture Trustee) for or with respect to any
Accepted Unit payable to the Owner Trustee shall be payable directly to the
Indenture Trustee for distribution in accordance with the provisions of the
Indenture, and if any such amount or payment is received by the Owner Trustee,
such amount or payment upon receipt thereof shall be paid over to the Indenture
Trustee without deduction, set-off or adjustment of any kind for distribution in
accordance with the provisions of the Indenture.

     Section 3.2  Payments to the Owner Trustee; Other Parties. Any payment of
the type referred to in Section 3.1 (other than payments constituting Excepted
Property) received by the Owner Trustee after the Indenture shall have been
discharged pursuant to the terms thereof, any payment received from the
Indenture Trustee other than as specified in Section 3.4 and any other amount
received as part of the Trust Estate and for the application or distribution of
which no provision is made herein shall be distributed forthwith upon receipt by
the Owner Trustee in the following order of priority: first, so much of such
payment as shall be required to reimburse the Owner Trustee for any expenses not
otherwise reimbursed as to which the Owner Trustee is entitled to be so
reimbursed pursuant to the provisions hereof shall be retained by the Owner
Trustee; second, so much of the remainder for which provision as to the
application thereof is contained in the Lease, any of the other Operative
Agreements or any of the other Owner Trustee Agreements shall be applied and
distributed in accordance with the terms of the Lease, such other Operative
Agreement or such other Owner Trustee Agreement, as the case may be; and third,
the balance, if any, shall be paid to the Owner Participant.

     Section 3.3  Certain Distributions to the Owner Participant. All amounts
from time to time distributable by the Indenture Trustee to the Owner
Participant pursuant to the terms of the Indenture shall, if paid to the Owner
Trustee, be distributed by the Owner Trustee to the Owner Participant.

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     Section 3.4  Excepted Property. Anything in this Trust Agreement to the
contrary notwithstanding, any amounts or payments constituting Excepted Property
received by the Owner Trustee shall be paid promptly by the Owner Trustee to the
Person to whom such amounts or payments are payable pursuant to the terms of the
Operative Agreements.

     Section 3.5  Method of Payment.

          (a)  All amounts payable to the Owner Participant or to the Indenture
Trustee pursuant to this Trust Agreement shall be paid by the Owner Trustee, if
to the Owner Participant, by transferring such amount in immediately available
funds to the account of the Owner Participant specified in Schedule 2 to the
Participation Agreement or, if to the Indenture Trustee, in the manner specified
in the Indenture. The Owner Trustee shall pay such amounts on the day received,
or on the next succeeding Business Day if the funds to be so paid shall not have
been received by the Owner Trustee by 1:00 p.m. New York time, provided that the
Owner Trustee shall use reasonable efforts to invest overnight in Specified
Investments at the direction and for the benefit of the Owner Participant all
funds received by it at or later than 1:00 p.m. New York time.

          (b)  Notwithstanding the foregoing, the Owner Trustee will pay, if so
requested by the Owner Participant in writing, any or all amounts in immediately
available funds payable by the Owner Trustee hereunder to the Owner Participant
either by crediting such amount or amounts to an account or accounts maintained
by the Owner Participant with Trust Company, by payment to such account at such
financial institution as the Owner Participant may from time to time direct in
writing or by mailing an official bank check or checks in such amount or amounts
payable to the Owner Participant at such address as the Owner Participant may
from time to time designate in writing.

                                  ARTICLE IV
                      CERTAIN DUTIES OF THE OWNER TRUSTEE

     Section 4.1  Notice of Certain Events. In the event that the Owner Trustee
shall have Actual Knowledge of any Lease Default, Lease Event of Default,
Indenture Default, Indenture Event of Default or Event of Loss, the Owner
Trustee shall give prompt telephonic notice thereof (promptly confirmed in
writing) to the Owner Participant, the Lessee and the Indenture Trustee unless
such Lease Default, Lease Event of Default, Indenture Default, Indenture Event
of Default or Event of Loss, as the case may be, has been remedied before the
giving of such notice and the Owner Trustee has Actual Knowledge that such Lease
Default, Lease Event of Default, Indenture Default, Indenture Event of Default
or Event of Loss has been so remedied. Subject to the terms of Section 4.3, the
Owner Trustee shall take or refrain from taking such action with respect
thereto, not inconsistent with the provisions of the Operative Agreements, as
the Owner Trustee shall be instructed in writing by the Owner Participant.

     Section 4.2  Action Upon Instructions. Subject to the terms of Sections 4.1
and 4.3, upon the written instructions at any time and from time to time of the
Owner Participant, the Owner Trustee will take such of the following actions as
may be specified in such instructions: give such notice or direction or exercise
such right, remedy or power under the Owner Trustee Agreements with respect
thereto or to any Accepted Equipment, including, without limitation,

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the right to transfer, assign or convey the Owner Trustee's interest in the
Owner Trustee Agreements or any Accepted Unit, or take such other action with
respect to the Owner Trustee Agreements or any Accepted Unit as shall be
specified in such instructions; and after the expiration or earlier termination
of the Lease with respect to any Accepted Unit, convey all of the Owner
Trustee's right, title and interest in and to such Accepted Unit to the Owner
Participant or for such amount, on such terms and to such purchaser or
purchasers as shall be designated in such instructions, or net lease such
Accepted Unit as designated in such instructions; provided, however, that if
such instructions have not been delivered to the Owner Trustee prior to the
expiration of one year following such expiration or earlier termination of the
Lease, the Owner Trustee shall transfer title to such right, title and interest
to the Owner Participant.

     Section 4.3  Indemnification. The Owner Trustee shall not be required to
take or refrain from taking any action under Section 4.1 or 4.2 (other than the
actions specified in the first sentence of Sections 3.1 and 4.1 and the last
sentence of Section 4.4) unless the Owner Trustee shall have been indemnified,
in manner and form reasonably satisfactory to the Owner Trustee, against any
liability, fee, cost or expense (including, without limitation, reasonable
attorneys' fees and expenses) which may be incurred or charged in connection
therewith, other than any such liability, fee, cost or expense arising as a
result of any action or circumstance for which the Owner Trustee is answerable
or accountable pursuant to the third sentence of Section 5.1. The Owner Trustee
shall not be required to take any action under any Operative Agreement or any
Owner Trustee Agreement (other than the actions specified in the first sentence
of Section 4.1 or in the second sentence of Section 4.4) if the Owner Trustee
reasonably shall determine, or shall have been advised by counsel, that such
action is likely to result in unindemnified personal liability to the Owner
Trustee or is contrary to the terms hereof or of any documents contemplated
hereby to which the Owner Trustee is a party, or otherwise contrary to law, and
the Owner Trustee in such case shall deliver promptly to the Owner Participant
written notice of the basis of its refusal to act.

     Section 4.4  No Duties Except as Specified. The Owner Trustee shall not
have any duty or obligation to manage, control, use, make any payment in respect
of, register, record, insure, inspect, sell, dispose of or otherwise deal with
any Accepted Unit or any other part of the Trust Estate, or to otherwise take or
refrain from taking any action under, or in connection with, any Owner Trustee
Agreement or any of the other Operative Agreements, except as expressly provided
by the terms of this Trust Agreement, the Indenture or the Owner Trustee
Agreements or in written instructions from the Owner Participant received
pursuant to Section 4.1 or 4.2; and no implied duties or obligations shall be
read into this Trust Agreement against the Owner Trustee. Notwithstanding and
without limiting the foregoing, Trust Company agrees that it will promptly
(without any right to indemnification hereunder) take all action necessary to
discharge any Lessor's Lien attributable to Trust Company on any part of the
Trust Estate or Indenture Estate. Trust Company agrees to indemnify, protect,
save and keep harmless the Owner Participant from and against any loss, cost or
expense (including reasonable legal fees and expenses) incurred by the Owner
Participant as a result of the imposition or enforcement of any such Lessor's
Lien against the Accepted Units, any interest herein or on the Trust Estate or
the Indenture Estate resulting from the Lessor's Liens attributable to Trust
Company.

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     Section 4.5  No Action Except Under Specified Agreements or Instructions.
The Owner Trustee shall have no right, power or authority to, and the Owner
Trustee agrees that it will not, manage, control, use, sell, dispose of or
otherwise deal with any Accepted Unit or any other part of the Trust Estate
except as expressly provided by the terms of this Trust Agreement, expressly
required by the terms of any Owner Trustee Agreement or expressly directed or
authorized in written instructions from the Owner Participant pursuant to
Section 4.1 or 4.2.

     Section 4.6  Tax Returns; Records. The Owner Trustee shall be responsible
for the keeping of all appropriate books and records relating to the receipt and
disbursement of all money which it may receive or be entitled to hereunder or
under any agreement contemplated hereby. The Owner Trustee agrees at the expense
of the Lessee to file an application with the Internal Revenue Service for a
taxpayer identification number with respect to the trust created by this Trust
Agreement. The Owner Participant shall be responsible for causing to be prepared
all income tax returns required to be filed by the Owner Participant. The Owner
Trustee shall be responsible for causing to be prepared, at the request of the
Owner Participant and the expense of the Lessee, all income tax returns required
to be filed with respect to the trusts created hereby and shall execute and file
such returns. The Owner Trustee and the Owner Participant, upon request, will
furnish each other with all such information as may be reasonably required in
connection with the preparation of such tax returns; provided that the Owner
Trustee shall send a completed copy of such return to the Owner Participant not
more than 60 nor less than 30 days prior to the due date of the return (provided
that the Owner Trustee shall have timely received all necessary information to
complete and deliver to the Owner Participant such return). The Owner Trustee
shall keep copies of all returns delivered to or filed by it.

     Section 4.7  Absence of Certain Duties. Except in accordance with written
instructions furnished pursuant to Sections 4.1 and 4.2, and except as expressly
provided in any Owner Trustee Agreement, and without limiting the generality of
Section 4.4, the Owner Trustee shall not have any duty to file, record or
deposit any Operative Agreement or Owner Trustee Agreement, including without
limitation this Trust Agreement, or any other document, or to maintain any such
filing, recording or deposit, or to refile, re-record or redeposit any such
document, except that the Owner Trustee shall, upon written request by the
Lessee or the Owner Participant, sign and file such documents as Lessee or the
Owner Participant prepares as necessary to maintain the filing and recordation
for the Lease, any Lease Supplement, the Indenture and any Indenture Supplement
in the name of the Owner Trustee with the STB pursuant to 49 U.S.C. (S)11301 of
the Interstate Commerce Act or Registrar General of Canada pursuant to Section
90 of the Railway Act of Canada, or as otherwise required under applicable law,
and to the extent that such documents for that purpose are supplied by the
Lessee pursuant to any of the Operative Agreements, timely submit any and all
such documents and reports with respect to the Accepted Units which may from
time to time be required by the STB, the AAR, or any other authority having
jurisdiction, obtain insurance with respect to any Accepted Unit or to effect or
maintain any such insurance, other than to receive and promptly forward to the
Owner Participant any notices, policies, certificates or binders furnished to
the Owner Trustee by the Lessee or its insurance brokers, maintain or mark any
Accepted Unit, pay or discharge any tax, assessment or other governmental
charge, or any Lien or encumbrance of any kind, owing with respect to or
assessed or levied against any part of the Trust Estate, except as provided in
Sections 4.4 or 5.1 hereof, and Section 6.3 of the Participation Agreement
confirm, verify, investigate or inquire into the failure to receive any reports
or financial statements of the Lessee,

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inspect the Accepted Equipment at any time, or ascertain or inquire as to the
performance or observance of any of the covenants of the Lessee or any other
Person under any Operative Agreement or Owner Trustee Agreement with respect to
any Accepted Unit or any other part of the Trust Estate or manage, control, use,
sell, dispose of or otherwise deal with any Accepted Unit or any other part of
the Trust Estate, or any part thereof, except as provided in Sections 3.5(a) or
4.5 hereof.

     Section 4.8  Furnishing of Documents. The Owner Trustee will furnish to the
Owner Participant, promptly upon receipt thereof, duplicates or copies of all
reports, notices, requests, demands, opinions, certificates, financial
statements and any other instruments furnished to the Owner Trustee under any
Operative Agreement or any Owner Trustee Agreement, unless the Owner Trustee
shall have determined that the same already has been furnished to the Owner
Participant.

                                   ARTICLE V
                               THE OWNER TRUSTEE

     Section 5.1  Acceptance of Trusts and Duties. Trust Company accepts the
trusts hereby created and agrees to perform the same on the terms of this Trust
Agreement. Trust Company also agrees to disburse all moneys actually received by
it constituting part of the Trust Estate pursuant to the terms of this Trust
Agreement. Trust Company shall not be answerable or accountable under any
circumstances except for its own willful misconduct or gross negligence
(including, without limitation, in connection with any activities of the Owner
Trustee in violation of Section 4.5), in the case of the breach or inaccuracy of
any of its representations or warranties contained in any Operative Agreement
given expressly in its individual capacity and not in its capacity as a trustee
hereunder, as arising from its failure to perform obligations expressly
undertaken by it in the penultimate and last sentence of Section 4.4 hereof or
expressly undertaken by it in its individual capacity under the Participation
Agreement, for any Taxes based on or measured by any fees, commissions or
compensation received by it for acting as Owner Trustee in connection with any
of the transactions contemplated by the Operative Agreements or for its failure
to disburse or invest funds actually received by it in accordance with the terms
hereof or the Lease or for any negligence or willful misconduct of the Owner
Trustee arising out of its obligations under Sections 4.1 or 4.4.

     Section 5.2  No Representations or Warranties as to Equipment or Documents.

          (a)  NEITHER TRUST COMPANY NOR THE OWNER TRUSTEE MAKES ANY
REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE DESIGN,
OPERATION OR CONDITION OF ANY UNIT OR ANY PART THEREOF, THE MERCHANTABILITY
THEREOF OR THE FITNESS THEREOF FOR ANY PARTICULAR PURPOSE, TITLE TO ANY UNIT OR
ANY PART THEREOF, THE QUALITY OF THE MATERIALS OR WORKMANSHIP THEREOF OR
CONFORMITY THEREOF TO SPECIFICATIONS, OR THE PRESENCE OR ABSENCE OF ANY LATENT
OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, except that Trust Company hereby
represents and warrants that on the Closing Date for such Accepted Unit, the
Owner Trustee shall have received whatever title thereto was conveyed to it by
the Lessee and (ii) while a part of the Trust Estate, such Accepted Unit shall
be free and clear of Lessor's Liens attributable to it.

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          (b)  Neither Trust Company nor the Owner Trustee makes any
representation or warranty as to the validity or enforceability of any Operative
Agreement, or as to the correctness of any statement therein, except to the
extent that any such representation, warranty or statement is expressly made
therein or in any written certificate delivered pursuant thereto by the Owner
Trustee or Trust Company and except that Trust Company hereby represents and
warrants that this Trust Agreement has been duly executed and delivered by Trust
Company and each of the Owner Trustee Agreements has been or will be executed
and delivered by officers of the Owner Trustee who are or will be duly
authorized to execute and deliver documents on its behalf, and that each of this
Agreement and each of the other Owner Trustee Agreements constitutes (assuming
the due authorization, execution, and delivery of this Agreement and each such
other agreement by the other parties thereto) the legal, valid and binding
obligation of the Trust Company (or the Owner Trustee if expressly stated
therein) enforceable against it in accordance with its terms except as limited
by bankruptcy, insolvency, reorganization or other similar laws or equitable
principles of general application to or affecting the enforcement of creditors
rights generally from time to time in effect.

     Section 5.3  No Segregation of Moneys; No Interest. Except as required by
Section 2.4 of the Participation Agreement, moneys received by the Owner Trustee
hereunder need not be segregated in any manner except to the extent required by
law, and such moneys may be deposited under such general conditions as may be
prescribed by law, and the Owner Trustee shall not be liable for any interest
thereon.

     Section 5.4  Reliance; Advice of Counsel. The Owner Trustee shall not incur
any liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, bond or other
document or paper reasonably believed by it in good faith to be genuine and
reasonably believed by it in good faith to be signed by the proper party or
parties. Any request, direction, order or demand of the Owner Participant or the
Lessee mentioned herein or in any other Operative Agreement to which the Owner
Trustee is a party shall be sufficiently evidenced by an Officer's Certificate
of the Owner Participant or the Lessee, as the case may be. The Owner Trustee
may accept in good faith a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the manner of ascertainment of
which is not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on an Officer's Certificate of the relevant party as to
such fact or matter, and such Officer's Certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon. In the administration of the trusts
hereunder, the Owner Trustee may execute any of the trusts or powers hereof and
perform its powers and duties hereunder directly or through agents or attorneys,
and may consult with counsel, accountants and other skilled persons to be
selected and employed by it (other than persons regularly employed by it), and
the Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written advice or opinion within the
scope of the competence of any such counsel, accountants or other skilled
persons and not contrary to this Trust Agreement, except for the use of due care
in the appointment of counsel, accountants or other skilled persons.

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     Section 5.5  Not Acting in Individual Capacity. Trust Company is entering
into this Agreement and accepting the trust created hereby in its individual
capacity. Otherwise, except as provided in this Trust Agreement and in the other
Operative Agreements, Trust Company agrees to act solely as trustee hereunder
and not in its individual capacity; and all Persons having any claim against the
Owner Trustee by reason of the transactions contemplated by the Operative
Agreements or the Owner Trustee Agreements shall look only to the Trust Estate
(or a part thereof, as the case may be) for payment or satisfaction thereof,
except as specifically provided in this Trust Agreement and except to the extent
the Owner Trustee otherwise shall agree in any Owner Trustee Agreement.

                                  ARTICLE VI
                                INDEMNIFICATION

     Section 6.1  Indemnification of Trust Company. The Owner Participant agrees
to assume liability for, and to indemnify and hold harmless Trust Company
against and from any and all liabilities, obligations, losses, damages, taxes
(excluding any taxes, fees or other charges payable by Trust Company or measured
by any compensation received by Trust Company for its services hereunder),
penalties, claims, actions, suits, proceedings, costs, expenses and
disbursements of any kind and nature whatsoever, including, without limitation,
the reasonable fees and expenses of counsel (collectively, "Trust Expenses")
which may be imposed on, incurred by or asserted against Trust Company whether
or not also indemnified by any other Person (provided, however, that to the
extent Trust Company shall have actually received any payment in the nature of
an indemnity payment from any such other Person relating to a claim hereunder,
Trust Company shall not be entitled to the amount of any such payment pursuant
to this Section 6.1) in any way relating to or arising out of the administration
of the Trust Estate or the action or inaction of Trust Company hereunder or
under the other Operative Agreements, any Accepted Equipment or any part
thereof, the Operative Agreements or any of them, or the enforcement by Trust
Company of any of its rights under the Operative Agreements, or the design,
manufacture, financing, refinancing, installation, acceptance, rejection,
ownership, delivery, nondelivery, lease, sublease, possession, control, use,
operation, condition, modification, servicing, maintenance, repair, improvement,
replacement, sale, return or other disposition of the Accepted Equipment, any
Accepted Unit or any part thereof including, without limitation, (A) any
inadequacy or deficiency or defect therein, including latent defects, whether or
not discoverable or any claim based on negligence or arising from any violation
of law or for strict liability in tort or any claim for patent, trademark or
copyright tort or any claim for patent, trademark or copyright infringement, and
(B) any loss or damage to property or the environment or injury or death to any
Person; except only that the Owner Participant shall not be required to
indemnify Trust Company for Trust Expenses arising or resulting from any of the
matters described in the last sentence of Section 5.1; provided that the Owner
Participant shall be liable under this Section 6.1 only to the extent that the
Owner Trustee is indemnified by the Lessee pursuant to Section 7 of the
Participation Agreement (with the exception of the limitations to Lessee's
indemnification obligations set forth in Sections 7.1(c)(ii), 7.1(c)(iv) (to the
extent relating to any such transfer by the Owner Participant or transfer by the
Owner Trustee at the direction of the Owner Participant), 7.2(d)(i), 7.2(d)(iv)
(to the extent relating to any such transfer by the Owner Participant or
transfer by the Owner Trustee at the direction of the Owner Participant) and
7.2(d)(vi) (when the Owner Trustee is acting on instructions from the Owner
Participant) of the Participation Agreement); provided, further, that before
asserting its right to

                                       8
<PAGE>

indemnification pursuant to this Section 6.1, the Owner Trustee shall first
demand its corresponding right to indemnification, if any, pursuant to Section 7
of the Participation Agreement (but need not exhaust any or all remedies
available thereunder), and the Owner Participant shall have the right to pursue
any such remedies against the Lessee which are not pursued by the Owner Trustee.
The indemnities contained in this Section 6.1 shall survive the termination of
this Trust Agreement. To secure the foregoing indemnities, the Owner Trustee
shall be entitled to apply any amount otherwise distributable to the Owner
Participant pursuant to Section 3.2 against any such indemnity which has not
been paid when due. The indemnities contained in this Section 6.1 extend to
Trust Company only and shall not be construed as indemnities of the Trust
Estate. The payor of any indemnity under this Section 6.1 shall be subrogated to
any right of the Person indemnified in respect of the matter as to which such
indemnity was paid.

     Section 6.2  Expenses. The Owner Participant shall pay, or reimburse the
Owner Trustee for, all reasonable expenses of the Owner Trustee, including,
without limitation, the reasonable expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and duties under the
Operative Agreements, unless and to the extent that the Owner Trustee otherwise
receives payment or reimbursement pursuant to any Operative Agreement, whether
or not the transactions contemplated hereby are consummated; provided that the
Owner Participant shall have no obligation hereunder to the extent Lessee is not
obligated to pay such amounts pursuant to Section 2.5 of the Participation
Agreement. The Owner Trustee agrees to look first to the Lessee for such payment
pursuant to Section 2.5 of the Participation Agreement. Except as provided
herein, the Owner Trustee and Trust Company shall have no right to compensation
with respect to the transactions contemplated by the Operative Agreements.

                                  ARTICLE VII
                        TERMINATION OF TRUST AGREEMENT

     Section 7.1  Termination of Trust Agreement.

          (a)  Subject to the terms of the Participation Agreement, the
Indenture and Section 7.2, this Trust Agreement and the trusts created hereby
shall terminate and the Trust Estate shall be distributed to the Owner
Participant, and this Trust Agreement shall be of no further force or effect,
upon the earlier of the sale or other final disposition by the Owner Trustee of
all property constituting part of the Trust Estate and the final distribution by
the Owner Trustee of all moneys or other property or proceeds constituting part
of the Trust Estate in accordance with the terms of Article III and one hundred
ten (110) years after the earlier execution of this Trust Agreement by either
party hereto, but if any rights, privileges or options hereunder shall be or
become valid under applicable law for a period subsequent to one hundred ten
(110) years after the earlier execution of this Trust Agreement by either party
hereto (or, without limiting the generality of the foregoing, if legislation
shall become effective providing for the validity or permitting the effective
grant of such rights, privileges and options for a period in gross exceeding the
period for which such rights, privileges and options are hereinabove stated to
extend and be valid), then such rights, privileges or options shall not
terminate as aforesaid but shall extend to and continue in effect, but only if
such nontermination and extension shall then be

                                       9
<PAGE>

valid under applicable law, until such time as the same shall cease to be valid
under applicable law.

          (b)  Except as expressly provided in Section 7.2, the Owner
Participant shall not be entitled to revoke or terminate this Trust Agreement or
the trust created hereby. Except as otherwise provided herein, the Owner
Participant may not withdraw any of the Trust Estate until the Lien of the
Indenture on the Trust Estate shall have been discharged pursuant to the terms
thereof.

     Section 7.2  Termination at Option of the Owner Participant. The provisions
of Section 7.1 notwithstanding, this Trust Agreement and the trusts created
hereby shall terminate and the Trust Estate shall be distributed to the Owner
Participant, and this Trust Agreement shall be of no further force and effect,
upon the election of the Owner Participant by notice to the Owner Trustee to
revoke the trusts created hereby; provided that, in addition to the giving of
such notice, the Owner Participant, with the cooperation of the Owner Trustee,
shall execute and deliver such written agreements and instruments and take such
actions as shall be necessary in order to cause the succession of the Owner
Participant to all the rights, title, interests, duties and liabilities of the
Owner Trustee under the Operative Agreements (other than obligations
attributable to any gross negligence or willful misconduct of Trust Company or
any breach by the Owner Trustee of its obligations under the Operative
Agreements); provided, however, that until the Lien of the Indenture on the
Trust Estate shall have been discharged pursuant to the terms thereof the Owner
Participant may not revoke such trusts without the consent of the Indenture
Trustee. The written agreements and instruments referred to in the preceding
sentence shall be reasonably satisfactory in form and substance to the Owner
Trustee and shall release the Owner Trustee from all further obligations of the
Owner Trustee hereunder and under the agreements and other instruments mentioned
in the preceding sentence.

                                  ARTICLE VII
                  SUCCESSOR OWNER TRUSTEES, CO-OWNER TRUSTEES
                          AND SEPARATE OWNER TRUSTEES

     Section 8.1  Resignation of the Owner Trustee; Appointment of Successor.

          (a)  The Owner Trustee may resign as the Owner Trustee at any time
without cause by giving at least thirty (30) days' prior written notice to the
Owner Participant, the Indenture Trustee and the Lessee, such resignation to be
effective on the acceptance of appointment by a successor to the Owner Trustee
under paragraph (b) of this Section 8.1. In addition, the Owner Participant at
any time may remove the Owner Trustee without cause by an instrument in writing
delivered to the Owner Trustee, the Indenture Trustee and the Lessee, such
removal to be effective upon the acceptance of appointment by a successor to the
Owner Trustee under paragraph (b) of this Section 8.1. In case of the
resignation or removal of the Owner Trustee, the Owner Participant may appoint a
successor to the Owner Trustee by an instrument in writing, signed by the Owner
Participant. If a successor to the Owner Trustee shall not have been appointed
within thirty (30) days after the giving of written notice of such resignation
or the delivery of the written instrument with respect to such removal, the
Owner Trustee or the Owner Participant may apply to any court of competent
jurisdiction to appoint a successor to the Owner Trustee to act until such time,
if any, as a successor shall have been appointed as above provided

                                       10
<PAGE>

in this Section 8.1. Any successor to the Owner Trustee so appointed by such
court shall immediately and without further act be superseded by any successor
to the Owner Trustee appointed as above provided in this Section 8.1.

          (b)  Any successor Owner Trustee, however appointed, shall execute and
deliver to the predecessor Owner Trustee an instrument accepting such
appointment and shall give the Owner Participant, the Indenture Trustee and
Lessee written notice of such acceptance. Upon the execution and delivery of
such instrument, such successor Owner Trustee, without further act, shall become
vested with all the estates, properties, rights, powers, duties and trusts of
the predecessor Owner Trustee in the trusts hereunder with like effect as if
originally named a trustee herein; provided, however, that upon the written
request of such successor Owner Trustee, such predecessor Owner Trustee shall
execute and deliver an instrument transferring to such successor Owner Trustee,
upon the trusts herein expressed, all the estates, properties, rights, powers,
duties and trusts of such predecessor trustee as the Owner Trustee hereunder,
and such predecessor trustee shall duly assign, transfer, deliver and pay over
to such successor Owner Trustee all moneys or other property then held by such
predecessor trustee as the Owner Trustee upon the trusts herein expressed. Upon
the appointment of any successor Owner Trustee hereunder, the predecessor Owner
Trustee, pursuant to written instructions of the Owner Participant, will execute
all documents and take all reasonable action within its control in order to
cause title to the Trust Estate to be transferred to the successor Owner
Trustee.

          (c)  Any successor Owner Trustee, however appointed, shall be a bank
or trust company incorporated and doing business within the United States of
America and having a combined capital and surplus of at least $100,000,000, if
there be such an institution willing, able and legally qualified to perform the
duties of the Owner Trustee hereunder upon reasonable or customary terms.

          (d)  Any corporation into which the Owner Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Owner Trustee shall be
a party, or any corporation to which substantially all the corporate trust
business of the Owner Trustee may be transferred, shall be, subject to
compliance with the terms of paragraph (c) of this Section 8.1, the Owner
Trustee under this Trust Agreement without further act; provided, that such
corporation shall in no event be the Indenture Trustee.

     Section 8.2  Additional and Separate Trustees.
                  --------------------------------

          (a)  If the Owner Trustee or the Owner Participant shall conclude that
it is necessary or prudent in order to conform to the law of any jurisdiction in
which all or any part of the Trust Estate shall be situated, or to make or
defend any claim or bring or defend any suit with respect to the Trust Estate or
any Operative Agreement, or pursuant to advice of counsel satisfactory to it, or
if the Owner Trustee shall have been instructed to do so by the Owner
Participant, the Owner Trustee shall appoint another Person to act as additional
or separate trustee for all or any part of the Trust Estate with such property,
title, right, power or duty of the Owner Trustee as the Owner Trustee and the
Owner Participant may determine. In case any such additional trustee or separate
trustee shall resign or be removed, all the assets, property, rights, powers or
duties of such additional trustee or separate trustee, as the case may be, so
far as

                                       11
<PAGE>

permitted by any applicable law, shall vest in and be exercised by a new
successor to such additional trustee, appointed in the manner otherwise provided
in this Trust Agreement.

          (b)  In the event that either the Owner Participant or the Owner
Trustee shall determine to appoint another Person as additional or separate
trustee, the Owner Trustee and the Owner Participant shall execute and deliver
an agreement supplemental hereto, and all other instruments and agreements
necessary or proper to constitute another bank or trust company, or one or more
Persons approved by the Owner Trustee and the Owner Participant, either to act
as an additional trustee or trustees of all or any part of the Trust Estate,
jointly with the Owner Trustee, or to act as separate trustee or trustees of all
or any part of the Trust Estate, in any such case with such powers of the Owner
Trustee as may be provided in such agreement supplemental hereto, and to vest in
such bank, trust company or Person as such additional trustee or separate
trustee, as the case may be, any property, title, right or power of the Owner
Trustee deemed necessary or proper by the Owner Trustee or the Owner
Participant, subject to the remaining provisions of this Section 8.2. The Owner
Trustee may execute, deliver and perform any deed, conveyance, assignment or
other instrument in writing as may be required by an additional trustee or
separate trustee for more fully and certainly vesting in and confirming to such
person any property, title, right or power which, by the terms of such agreement
supplemental hereto, are expressed to be conveyed or conferred to or upon such
additional trustee or separate trustee, and the Owner Participant shall, upon
the Owner Trustee's request, join therein and execute, acknowledge and deliver
the same.

          (c)  Every additional trustee and separate trustee hereunder shall, to
the extent permitted by law, be appointed to act and the Owner Trustee shall
act, subject to the following provisions and conditions:

               (i)  all powers, duties, obligations and rights conferred or
          imposed upon the Owner Trustee in respect of the receipt, custody,
          investment and payment of moneys, shall be exercised solely by the
          Owner Trustee;

               (ii)  all other rights, powers, duties, and obligations conferred
          or imposed upon the Owner Trustee shall be conferred or imposed upon
          and exercised or performed by the Owner Trustee and such additional
          trustee or trustees and separate trustee or trustees jointly, except
          to the extent that under any law of the jurisdiction in which any
          particular act or acts are to be performed by the Owner Trustee shall
          be incompetent or unqualified to perform such act or acts, in which
          event such rights, powers, duties and obligations (including the
          holding of title to the Trust Estate in any such jurisdiction) shall
          be exercised and performed by such additional trustee or trustees or
          separate trustee or trustees;

               (iii)  no power hereby given to, or which may be exercised by,
          any such additional trustee or separate trustee shall be exercised
          hereunder by such additional trustee or separate trustee except
          jointly with, or with the consent of, the Owner Trustee; and

                                       12
<PAGE>

               (iv)  no trustee hereunder shall be personally liable by reason
          of any act or omission of any other trustee hereunder.

          (d)  If at any time the Owner Trustee and the Owner Participant shall
deem it no longer necessary or prudent in order to conform to any applicable law
or shall be advised by its counsel that it is no longer necessary or prudent in
the interest of the Owner Trustee and the Owner Participant to maintain the
appointment of such additional or separate trustee as provided herein, the Owner
Trustee and the Owner Participant shall execute and deliver any agreement
supplemental hereto and all other instruments and agreements necessary or proper
to remove any such additional or separate trustee. The Owner Participant, at any
time, by an instrument in writing may remove any separate trustee or additional
trustee.

          (e)  Any additional trustee or separate trustee may at any time by an
instrument in writing constitute the Owner Trustee its agent or attorney-in-fact
with full power and authority, to the extent which may be authorized by
applicable law, to do all acts and things and exercise all discretion which it
is authorized or permitted to do or exercise, for and in its behalf and in its
name. In case any such additional trustee or separate trustee shall die, become
incapable of acting, resign or be removed, all the assets, property, rights,
powers, trusts, duties and obligations of such additional trustee or separate
trustee, as the case may be, so far as permitted by law, shall vest in and be
exercised by the Owner Trustee without necessity of any act by any party and
without the appointment of a new successor to such additional or separate
trustee, unless and until a successor is appointed in the manner provided in
this Section 8.2.

                                  ARTICLE IX
                          SUPPLEMENTS AND AMENDMENTS

     Section 9.1  Supplements and Amendments. Subject to Section 9.05 of the
Indenture, at the written request of the Owner Participant (and subject to the
provisions of Sections 6.5 and 6.6 of the Participation Agreement), this Trust
Agreement and each other Owner Trustee Agreement shall be amended by a written
instrument signed by Trust Company and the Owner Participant; provided, however,
if in the reasonable opinion of Trust Company any instrument required to be so
executed adversely affects any right, duty or liability of, or immunity or
indemnity in favor of, Trust Company under this Trust Agreement or any of the
documents contemplated hereby to which it is a party, or would cause or result
in any conflict with or breach of any term, condition or provision of, or
default under, its charter documents or by-laws, Trust Company in its reasonable
discretion may decline to execute such instrument, unless the Trust Company is
indemnified therefor under Section 4.3, as determined by the Trust Company in
its reasonable discretion.

                                   ARTICLE X
                                 MISCELLANEOUS

     Section 10.1  No Legal Title to Trust Estate in the Owner Participant. The
Owner Participant shall not have legal title to any part of the Trust Estate. No
transfer, by operation of law or otherwise, of any right, title and interest of
the Owner Participant in and to the Trust Estate or hereunder, or insolvency,
dissolution or other termination of the Owner Participant, shall operate to
terminate this Trust Agreement or the trusts created hereby or entitle any

                                       13
<PAGE>

successor or transferee to an accounting or to the transfer to it of legal title
to any part of the Trust Estate.

     Section 10.2  Sale of Accepted Equipment by the Owner Trustee is Binding.
Any sale, transfer or other conveyance of any Accepted Unit or part thereof by
the Owner Trustee made pursuant to the terms of this Trust Agreement or the
Lease shall bind the Owner Participant and shall be effective to transfer or
convey all right, title and interest of the Owner Trustee and the Owner
Participant in and to such Accepted Unit or part thereof, as the case may be. No
purchaser or other grantee shall be required to inquire as to the authorization,
necessity, expediency or regularity of such sale or conveyance or as to the
application of any sale or other proceeds with respect thereto by the Owner
Trustee.

     Section 10.3  Notices. Unless otherwise expressly specified or permitted by
the terms hereof, all notices hereunder shall be given as provided in Section
10.4 of the Participation Agreement.

     Section 10.4  Severability. If any term or provision of this Trust
Agreement is invalid or unenforceable in any jurisdiction, such term or
provision shall be ineffective to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable any remaining
terms and provisions hereof, and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

     Section 10.5  Separate Counterparts. This Trust Agreement may be executed
by the parties hereto in any number of counterparts and by the parties hereto on
separate counterparts, each of which when so executed and delivered shall be an
original, and all of which shall together constitute but one and the same
instrument.

     Section 10.6  Waivers, etc. No term or provision hereof may be changed,
waived, discharged or terminated orally, but may be changed, waived, discharged
or terminated by an instrument in writing, and any waiver of the terms hereof
shall be effective only in the specific instance and for the specific purpose
given.

     Section 10.7  Successors and Assigns. This Trust Agreement, including the
terms and provisions hereof, shall be binding upon the Owner Participant and
Trust Company or the Owner Trustee, whichever is applicable pursuant to the
terms hereof, and their respective successors and assigns, and inure to the
benefit of the Owner Participant and Trust Company or the Owner Trustee,
whichever is applicable pursuant to the terms hereof, and their respective
successors and permitted assigns, all as herein provided. Any request, notice,
direction, consent, waiver or other instrument or action by the Owner
Participant shall bind the successors and assigns of the Owner Participant.

     Section 10.8  Transfer of Owner Participant's Interest. All provisions of
Section 6.1 of the Participation Agreement shall (with the same force and effect
as if set forth in full, mutatis mutandis, in this Section 10.8) be applicable
to any assignment, conveyance or other transfer by the Owner Participant of any
of its right, title or interest in and to the Trust Estate or this Trust
Agreement or any other Operative Agreement.

                                       14
<PAGE>

     Section 10.9  Actions of the Owner Participants. If at any time prior to
the termination of this Trust Agreement there is more than one Owner
Participant, then during such time, if any action is required to be taken by the
Owner Participant, such action shall be taken by or on behalf of all Owner
Participants and whenever any direction, authorization, approval, consent,
instruction or other action is permitted to be given or taken by the Owner
Participant it shall be given or taken only upon such percentage agreement of
the Owner Participants as all Owner Participants may instruct the Owner Trustee.

     Section 10.10  Headings; Table of Contents. The division of this Trust
Agreement into sections, the provision of a table of contents and the insertion
of headings are for convenience of reference only and shall not affect the
construction or interpretation hereof.

     Section 10.11  Governing Law. The terms of this Trust Agreement and the
rights and obligations of the parties hereto shall be governed by, and construed
in accordance with, the laws of the State of Delaware applicable to contracts
made and to be performed entirely within such state.

     Section 10.12  Benefit. Nothing herein, whether express or implied, shall
be construed to give any Person other than the Owner Trustee, the Indenture
Trustee and the Owner Participant any legal or equitable right, remedy or claim
under or in respect of this Trust Agreement.

     Section 10.13  Performance by the Owner Participant. Any obligation of
Trust Company or the Owner Trustee hereunder or under any other Operative
Agreement or other document contemplated hereby, may be performed by the Owner
Participant and any such performance shall not be construed as a revocation of
the trusts created hereby.

     Section 10.14  Conflict with Operative Agreements. If this Trust Agreement
(or any instructions given by the Owner Participant pursuant hereto) shall
require that any action be taken with respect to any matter or any other
Operative Agreement (or any instruction duly given in accordance with the terms
thereof) shall require that a different action be taken with respect to such
matter, and such actions shall be mutually exclusive, the provisions of this
Trust Agreement, in respect thereof, shall control.

     Section 10.15  Limitation on Owner Participant's Liability. The Owner
Participant shall not have any liability for the performance of this Trust
Agreement, except as expressly set forth herein.

     Section 10.16  Identification of Trust. The trust created hereunder may be
referred to for convenience as GATX Rail Trust No. 2000-1.

                               *       *       *

                                       15
<PAGE>

     In Witness Whereof, the parties hereto have each caused this Trust
Agreement to be duly executed and delivered as of the day and year first above
written.

                              By:
                                 ----------------------------------
                              Name:
                                   --------------------------------
                              Title:
                                    -------------------------------

                              WILMINGTON TRUST COMPANY

                              By:
                                 ----------------------------------
                              Name:
                                   --------------------------------
                              Title:
                                    -------------------------------

                                       16
<PAGE>

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

                                TRUST AGREEMENT
                         (GATX Rail Trust No. 2000-2)

                           Dated as of April 3, 2000

                                    between

                               Owner Participant

                                      and

                           WILMINGTON TRUST COMPANY,
                                 Owner Trustee

              Assorted Railroad Tank Cars and Covered Hopper Cars

                           GATX Rail Trust No. 2000-2

                 ---------------------------------------------
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                            Page
<S>                                                                                         <C>
ARTICLE I
         DEFINITIONS.......................................................................  3
         Section 1.1  Definitions..........................................................  3
         Section 1.2  Interpretation.......................................................  3

ARTICLE II
         AUTHORITY; DECLARATION OF TRUST...................................................  3
         Section 2.1  Authority to Execute and Perform Various Documents...................  3
         Section 2.2  Declaration of Trust.................................................  4

ARTICLE III
         DISTRIBUTIONS AND PAYMENTS........................................................  4
         Section 3.1  Payments to the Indenture Trustee....................................  4
         Section 3.2  Payments to the Owner Trustee; Other Parties.........................  4
         Section 3.3  Certain Distributions to the Owner Participant.......................  5
         Section 3.4  Excepted Property....................................................  5
         Section 3.5  Method of Payment....................................................  5

ARTICLE IV
         CERTAIN DUTIES OF THE OWNER TRUSTEE...............................................  5
         Section 4.1  Notice of Certain Events.............................................  5
         Section 4.2  Action Upon Instructions.............................................  6
         Section 4.3  Indemnification......................................................  6
         Section 4.4  No Duties Except as Specified........................................  6
         Section 4.5  No Action Except Under Specified Agreements or Instructions..........  7

         Section 4.6  Tax Returns; Records.................................................  7
         Section 4.7  Absence of Certain Duties............................................  7
         Section 4.8  Furnishing of Documents..............................................  8

ARTICLE V
         THE OWNER TRUSTEE.................................................................  8
         Section 5.1      Acceptance of Trusts and Duties..................................  8
         Section 5.2      No Representations or Warranties as
                          to Equipment or Documents........................................  9
         Section 5.3      No Segregation of Moneys; No Interest............................  9
         Section 5.4      Reliance; Advice of Counsel......................................  9
         Section 5.5      Not Acting in Individual Capacity................................ 10

ARTICLE VI
         INDEMNIFICATION................................................................... 10
         Section 6.1      Indemnification of Trust Company................................. 10
         Section 6.2      Expenses......................................................... 11

ARTICLE VII
         TERMINATION OF TRUST AGREEMENT.................................................... 12
</TABLE>

                                      -i-
<PAGE>

<TABLE>
<S>                                                                                           <C>
         Section 7.1  Termination of Trust Agreement........................................  12
         Section 7.2  Termination at Option of the Owner Participant........................  12

ARTICLE VIII
         SUCCESSOR OWNER TRUSTEES, CO-OWNER TRUSTEES AND SEPARATE OWNER
         TRUSTEES...........................................................................  13
         Section 8.1   Resignation of the Owner Trustee; Appointment of  Successor..........  13

         Section 8.2   Additional and Separate Trustees.....................................  14

ARTICLE IX
         SUPPLEMENTS AND AMENDMENTS.........................................................  16
         Section 9.1   Supplements and Amendments...........................................  16

ARTICLE X
         MISCELLANEOUS......................................................................  16
         Section 10.1  No Legal Title to Trust Estate in
                       the Owner Participant................................................  16
         Section 10.2  Sale of Accepted Equipment by
                       the Owner Trustee is Binding.........................................  16
         Section 10.3  Notices..............................................................  16
         Section 10.4  Severability.........................................................  17
         Section 10.5  Separate Counterparts................................................  17
         Section 10.6  Waivers, etc.........................................................  17
         Section 10.7  Successors and Assigns...............................................  17
         Section 10.8  Transfer of Owner Participant's Interest.............................  17
         Section 10.9  Actions of the Owner Participants....................................  17
         Section 10.10 Headings; Table of Contents..........................................  17
         Section 10.11 Governing Law........................................................  18
         Section 10.12 Benefit..............................................................  18
         Section 10.13 Performance by the Owner Participant.................................  18
         Section 10.14 Conflict with Operative Agreements...................................  18
         Section 10.15 Limitation on Owner Participant's Liability..........................  18
         Section 10.16 Identification of Trust..............................................  18
</TABLE>

                                     -ii-
<PAGE>

                                TRUST AGREEMENT
                         (GATX Rail Trust No. 2000-2)

     This Trust Agreement (GATX Rail Trust No. 2000-2) is entered into as of
April 3, 2000 between                                        (the "Owner
Participant"), and WILMINGTON TRUST COMPANY, (in its individual capacity, "Trust
Company," and otherwise not in its individual capacity but solely as trustee
hereunder, the "Owner Trustee").  In consideration of the mutual agreements
herein contained, the agreements contained in the other Operative Agreements and
the acceptance by Trust Company of the trusts hereby created, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

                                   ARTICLE I
                                  DEFINITIONS

     Section 1.1    Definitions.  The capitalized terms used in this Trust
                    -----------
Agreement have the meanings given in Appendix A unless otherwise defined herein
                                     ----------
or unless the context otherwise requires.  For all purposes hereof, the
following terms shall have the following meanings:

     "Accepted Equipment" means all of the Accepted Units.

     "Accepted Unit" means each Unit that has been purchased by the Owner
Trustee pursuant to the Participation Agreement and any Replacement Unit.

     "Actual Knowledge" of Trust Company or the Owner Trustee means actual
knowledge of, including any written notices received by, a responsible officer
in the Corporate Trust Administration of Trust Company.

     Section 1.2    Interpretation.  Unless otherwise indicated, references in
                    --------------
this Trust Agreement to Sections, subsections, paragraphs and Appendices are to
Sections, subsections, paragraphs and Appendices of this Trust Agreement.  The
terms "hereof," "herein," "hereby," "hereto" and "hereunder" refer to this Trust
Agreement, taken as a whole.  References to a given agreement or instrument are
references to such agreement or instrument as originally entered into, as
modified, amended, supplemented and restated through the date as of which such
reference is made.

                                  ARTICLE II
                        AUTHORITY; DECLARATION OF TRUST

     Section 2.1    Authority to Execute and Perform Various Documents.  The
                    --------------------------------------------------
Owner Participant hereby authorizes and directs the Owner Trustee to, and the
Owner Trustee agrees for the benefit of the Owner Participant that it will,
execute and deliver the Participation Agreement, on the Closing Date, upon
receipt of the confirmation by the Owner Participant pursuant to Section 2.4 of
the Participation Agreement, execute and deliver the Operative Agreements
contemplated by the Participation Agreement to be executed and delivered by the
Owner Trustee on the Closing Date, in the respective forms thereof in which
delivered by the Owner Participant to the Owner Trustee for execution and
delivery, and to take the other actions contemplated to be taken by the Owner
Trustee on the Closing Date in Section 2 of the Participation Agreement, execute
and deliver any other agreement, instrument or certificate contemplated by the
Operative Agreements as the Owner Participant from time to time may direct in
writing,  subject to the
<PAGE>

terms of this Trust Agreement, exercise the rights (upon written instructions
received from the Owner Participant) and perform the duties of the Owner Trustee
under each of the documents, agreements, instruments and certificates referred
to in this Section 2.1 as set forth in such documents, agreements, instruments
and certificates, and subject to the terms of this Trust Agreement, take such
other action in connection with the foregoing as the Owner Participant may from
time to time direct in writing.

     Section 2.2    Declaration of Trust.  The Trust Company hereby declares
                    --------------------
that it will hold as Owner Trustee all estate, right, title and interest of the
Owner Trustee in and to the Accepted Equipment and the Owner Trustee Agreements,
and any other property contributed by the Owner Participant pursuant to the
terms of any of the Operative Agreements, including without limitation all
amounts of Rent, insurance proceeds and requisition, indemnity or other payments
of any kind, but specifically excluding Excepted Property (collectively, the
"Trust Estate"), upon the trusts set forth herein and for the use and benefit of
the Owner Participant as sole beneficiary, subject, however, to the provisions
of and the Lien created by the Indenture.

                                  ARTICLE III
                          DISTRIBUTIONS AND PAYMENTS

     Section 3.1    Payments to the Indenture Trustee.  Until the Lien of the
                    ---------------------------------
Indenture shall have been discharged pursuant to the terms thereof, all Basic
Rent, Supplemental Rent, insurance proceeds and requisition or other payments of
any kind (other than payments constituting Excepted Property and other than
payments received from the Indenture Trustee) for or with respect to any
Accepted Unit payable to the Owner Trustee shall be payable directly to the
Indenture Trustee for distribution in accordance with the provisions of the
Indenture, and if any such amount or payment is received by the Owner Trustee,
such amount or payment upon receipt thereof shall be paid over to the Indenture
Trustee without deduction, set-off or adjustment of any kind for distribution in
accordance with the provisions of the Indenture.

     Section 3.2    Payments to the Owner Trustee; Other Parties.  Any payment
                    --------------------------------------------
of the type referred to in Section 3.1 (other than payments constituting
Excepted Property) received by the Owner Trustee after the Indenture shall have
been discharged pursuant to the terms thereof, any payment received from the
Indenture Trustee other than as specified in Section 3.4 and any other amount
received as part of the Trust Estate and for the application or distribution of
which no provision is made herein shall be distributed forthwith upon receipt by
the Owner Trustee in the following order of priority: first, so much of such
                                                      -----
payment as shall be required to reimburse the Owner Trustee for any expenses not
otherwise reimbursed as to which the Owner Trustee is entitled to be so
reimbursed pursuant to the provisions hereof shall be retained by the Owner
Trustee; second, so much of the remainder for which provision as to the
         ------
application thereof is contained in the Lease, any of the other Operative
Agreements or any of the other Owner Trustee Agreements shall be applied and
distributed in accordance with the terms of the Lease, such other Operative
Agreement or such other Owner Trustee Agreement, as the case may be; and third,
                                                                         -----
the balance, if any, shall be paid to the Owner Participant.

                                       2
<PAGE>

     Section 3.3    Certain Distributions to the Owner Participant.  All amounts
                    ----------------------------------------------
from time to time distributable by the Indenture Trustee to the Owner
Participant pursuant to the terms of the Indenture shall, if paid to the Owner
Trustee, be distributed by the Owner Trustee to the Owner Participant.

     Section 3.4    Excepted Property.  Anything in this Trust Agreement to the
                    -----------------
contrary notwithstanding, any amounts or payments constituting Excepted Property
received by the Owner Trustee shall be paid promptly by the Owner Trustee to the
Person to whom such amounts or payments are payable pursuant to the terms of the
Operative Agreements.

     Section 3.5    Method of Payment.
                    -----------------

          (a) All amounts payable to the Owner Participant or to the Indenture
Trustee pursuant to this Trust Agreement shall be paid by the Owner Trustee, if
to the Owner Participant, by transferring such amount in immediately available
funds to the account of the Owner Participant specified in Schedule 2 to the
                                                           ----------
Participation Agreement or, if to the Indenture Trustee, in the manner specified
in the Indenture.  The Owner Trustee shall pay such amounts on the day received,
or on the next succeeding Business Day if the funds to be so paid shall not have
been received by the Owner Trustee by 1:00 p.m. New York time, provided that the
                                                               --------
Owner Trustee shall use reasonable efforts to invest overnight in Specified
Investments at the direction and for the benefit of the Owner Participant all
funds received by it at or later than 1:00 p.m. New York time.

          (b) Notwithstanding the foregoing, the Owner Trustee will pay, if so
requested by the Owner Participant in writing, any or all amounts in immediately
available funds payable by the Owner Trustee hereunder to the Owner Participant
either  by crediting such amount or amounts to an account or accounts maintained
by the Owner Participant with Trust Company,  by payment to such account at such
financial institution as the Owner Participant may from time to time direct in
writing or  by mailing an official bank check or checks in such amount or
amounts payable to the Owner Participant at such address as the Owner
Participant may from time to time designate in writing.

                                  ARTICLE IV
                      CERTAIN DUTIES OF THE OWNER TRUSTEE

     Section 4.1    Notice of Certain Events.  In the event that the Owner
                    ------------------------
Trustee shall have Actual Knowledge of any Lease Default, Lease Event of
Default, Indenture Default, Indenture Event of Default or Event of Loss, the
Owner Trustee shall give prompt telephonic notice thereof (promptly confirmed in
writing) to the Owner Participant, the Lessee and the Indenture Trustee unless
such Lease Default, Lease Event of Default, Indenture Default, Indenture Event
of Default or Event of Loss, as the case may be, has been remedied before the
giving of such notice and the Owner Trustee has Actual Knowledge that such Lease
Default, Lease Event of Default, Indenture Default, Indenture Event of Default
or Event of Loss has been so remedied.  Subject to the terms of Section 4.3, the
Owner Trustee shall take or refrain from taking such action with respect
thereto, not inconsistent with the provisions of the Operative Agreements, as
the Owner Trustee shall be instructed in writing by the Owner Participant.

                                       3
<PAGE>

     Section 4.2    Action Upon Instructions.  Subject to the terms of Sections
                    ------------------------
4.1 and 4.3, upon the written instructions at any time and from time to time of
the Owner Participant, the Owner Trustee will take such of the following actions
as may be specified in such instructions: give such notice or direction or
exercise such right, remedy or power under the Owner Trustee Agreements with
respect thereto or to any Accepted Equipment, including, without limitation, the
right to transfer, assign or convey the Owner Trustee's interest in the Owner
Trustee Agreements or any Accepted Unit, or take such other action with respect
to the Owner Trustee Agreements or any Accepted Unit as shall be specified in
such instructions; and  after the expiration or earlier termination of the Lease
with respect to any Accepted Unit, convey all of the Owner Trustee's right,
title and interest in and to such Accepted Unit to the Owner Participant or for
such amount, on such terms and to such purchaser or purchasers as shall be
designated in such instructions, or net lease such Accepted Unit as designated
in such instructions; provided, however, that if such instructions have not been
                      --------  -------
delivered to the Owner Trustee prior to the expiration of one year following
such expiration or earlier termination of the Lease, the Owner Trustee shall
transfer title to such right, title and interest to the Owner Participant.

     Section 4.3    Indemnification.  The Owner Trustee shall not be required to
                    ---------------
take or refrain from taking any action under Section 4.1 or 4.2 (other than the
actions specified in the first sentence of Sections 3.1 and 4.1 and the last
sentence of Section 4.4) unless the Owner Trustee shall have been indemnified,
in manner and form reasonably satisfactory to the Owner Trustee, against any
liability, fee, cost or expense (including, without limitation, reasonable
attorneys' fees and expenses) which may be incurred or charged in connection
therewith, other than any such liability, fee, cost or expense arising as a
result of any action or circumstance for which the Owner Trustee is answerable
or accountable pursuant to the third sentence of Section 5.1.  The Owner Trustee
shall not be required to take any action under any Operative Agreement or any
Owner Trustee Agreement (other than the actions specified in the first sentence
of Section 4.1 or in the second sentence of Section 4.4) if the Owner Trustee
reasonably shall determine, or shall have been advised by counsel, that such
action is likely to result in unindemnified personal liability to the Owner
Trustee or is contrary to the terms hereof or of any documents contemplated
hereby to which the Owner Trustee is a party, or otherwise contrary to law, and
the Owner Trustee in such case shall deliver promptly to the Owner Participant
written notice of the basis of its refusal to act.

     Section 4.4    No Duties Except as Specified.  The Owner Trustee shall not
                    -----------------------------
have any duty or obligation to manage, control, use, make any payment in respect
of, register, record, insure, inspect, sell, dispose of or otherwise deal with
any Accepted Unit or any other part of the Trust Estate, or to otherwise take or
refrain from taking any action under, or in connection with, any Owner Trustee
Agreement or any of the other Operative Agreements, except as expressly provided
by the terms of this Trust Agreement, the Indenture or the Owner Trustee
Agreements or in written instructions from the Owner Participant received
pursuant to Section 4.1 or 4.2; and no implied duties or obligations shall be
read into this Trust Agreement against the Owner Trustee.  Notwithstanding and
without limiting the foregoing, Trust Company agrees that it will promptly
(without any right to indemnification hereunder) take all action necessary to
discharge any Lessor's Lien attributable to Trust Company on any part of the
Trust Estate or Indenture Estate.  Trust Company agrees to indemnify, protect,
save and keep harmless the Owner Participant from and against any loss, cost or
expense (including reasonable legal fees and expenses) incurred by the Owner
Participant as a result of the imposition or enforcement of any

                                       4
<PAGE>

such Lessor's Lien against the Accepted Units, any interest herein or on the
Trust Estate or the Indenture Estate resulting from the Lessor's Liens
attributable to Trust Company.

     Section 4.5    No Action Except Under Specified Agreements or Instructions.
                    -----------------------------------------------------------
The Owner Trustee shall have no right, power or authority to, and the Owner
Trustee agrees that it will not, manage, control, use, sell, dispose of or
otherwise deal with any Accepted Unit or any other part of the Trust Estate
except as  expressly provided by the terms of this Trust Agreement, expressly
required by the terms of any Owner Trustee Agreement or  expressly directed or
authorized in written instructions from the Owner Participant pursuant to
Section 4.1 or 4.2.

     Section 4.6    Tax Returns; Records.  The Owner Trustee shall be
                    --------------------
responsible for the keeping of all appropriate books and records relating to the
receipt and disbursement of all money which it may receive or be entitled to
hereunder or under any agreement contemplated hereby.  The Owner Trustee agrees
at the expense of the Lessee to file an application with the Internal Revenue
Service for a taxpayer identification number with respect to the trust created
by this Trust Agreement.  The Owner Participant shall be responsible for causing
to be prepared all income tax returns required to be filed by the Owner
Participant.  The Owner Trustee shall be responsible for causing to be prepared,
at the request of the Owner Participant and the expense of the Lessee, all
income tax returns required to be filed with respect to the trusts created
hereby and shall execute and file such returns.  The Owner Trustee and the Owner
Participant, upon request, will furnish each other with all such information as
may be reasonably required in connection with the preparation of such tax
returns; provided that the Owner Trustee shall send a completed copy of such
return to the Owner Participant not more than 60 nor less than 30 days prior to
the due date of the return (provided that the Owner Trustee shall have timely
received all necessary information to complete and deliver to the Owner
Participant such return).  The Owner Trustee shall keep copies of all returns
delivered to or filed by it.

     Section 4.7    Absence of Certain Duties.  Except in accordance with
                    -------------------------
written instructions furnished pursuant to Sections 4.1 and 4.2, and except as
expressly provided in any Owner Trustee Agreement, and without limiting the
generality of Section 4.4, the Owner Trustee shall not have any duty to  file,
record or deposit any Operative Agreement or Owner Trustee Agreement, including
without limitation this Trust Agreement, or any other document, or to maintain
any such filing, recording or deposit, or to refile, re-record or redeposit any
such document, except that the Owner Trustee shall, upon written request by the
Lessee or the Owner Participant, sign and file such documents as Lessee or the
Owner Participant prepares as necessary to maintain the filing and recordation
for the Lease, any Lease Supplement, the Indenture and any Indenture Supplement
in the name of the Owner Trustee with the STB pursuant to 49 U.S.C. (S)11301 of
the Interstate Commerce Act or Registrar General of Canada pursuant to Section
90 of the Railway Act of Canada, or as otherwise required under applicable law,
and to the extent that such documents for that purpose are supplied by the
Lessee pursuant to any of the Operative Agreements, timely submit any and all
such documents and reports with respect to the Accepted Units which may from
time to time be required by the STB, the AAR, or any other authority having
jurisdiction,  obtain insurance with respect to any Accepted Unit or to effect
or maintain any such insurance, other than to receive and promptly forward to
the Owner Participant any notices, policies, certificates or binders furnished
to the Owner Trustee by the Lessee or its insurance brokers,  maintain or mark
any Accepted Unit,  pay or discharge any tax, assessment or other governmental
charge, or any Lien or encumbrance of any kind, owing with

                                       5
<PAGE>

respect to or assessed or levied against any part of the Trust Estate, except as
provided in Sections 4.4 or 5.1 hereof, and Section 6.3 of the Participation
Agreement confirm, verify, investigate or inquire into the failure to receive
any reports or financial statements of the Lessee, inspect the Accepted
Equipment at any time, or ascertain or inquire as to the performance or
observance of any of the covenants of the Lessee or any other Person under any
Operative Agreement or Owner Trustee Agreement with respect to any Accepted Unit
or any other part of the Trust Estate or manage, control, use, sell, dispose of
or otherwise deal with any Accepted Unit or any other part of the Trust Estate,
or any part thereof, except as provided in Sections 3.5(a) or 4.5 hereof.

     Section 4.8    Furnishing of Documents.  The Owner Trustee will furnish to
                    -----------------------
the Owner Participant, promptly upon receipt thereof, duplicates or copies of
all reports, notices, requests, demands, opinions, certificates, financial
statements and any other instruments furnished to the Owner Trustee under any
Operative Agreement or any Owner Trustee Agreement, unless the Owner Trustee
shall have determined that the same already has been furnished to the Owner
Participant.

                                   ARTICLE V
                               THE OWNER TRUSTEE

     Section 5.1    Acceptance of Trusts and Duties.  Trust Company accepts the
                    -------------------------------
trusts hereby created and agrees to perform the same on the terms of this Trust
Agreement.  Trust Company also agrees to disburse all moneys actually received
by it constituting part of the Trust Estate pursuant to the terms of this Trust
Agreement.  Trust Company shall not be answerable or accountable under any
circumstances except  for its own willful misconduct or gross negligence
(including, without limitation, in connection with any activities of the Owner
Trustee in violation of Section 4.5),  in the case of the breach or inaccuracy
of any of its representations or warranties contained in any Operative Agreement
given expressly in its individual capacity and not in its capacity as a trustee
hereunder,  as arising from its failure to perform obligations expressly
undertaken by it in the penultimate and last sentence of Section 4.4 hereof or
expressly undertaken by it in its individual capacity under the Participation
Agreement,  for any Taxes based on or measured by any fees, commissions or
compensation received by it for acting as Owner Trustee in connection with any
of the transactions contemplated by the Operative Agreements or for its failure
to disburse or invest funds actually received by it in accordance with the terms
hereof or the Lease or for any negligence or willful misconduct of the Owner
Trustee arising out of its obligations under Sections 4.1 or 4.4.

     Section 5.2    No Representations or Warranties as to Equipment or
                    ---------------------------------------------------
Documents.
---------

          (a) NEITHER TRUST COMPANY NOR THE OWNER TRUSTEE MAKES ANY
REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE DESIGN,
OPERATION OR CONDITION OF ANY UNIT OR ANY PART THEREOF, THE MERCHANTABILITY
THEREOF OR THE FITNESS THEREOF FOR ANY PARTICULAR PURPOSE, TITLE TO ANY UNIT OR
ANY PART THEREOF, THE QUALITY OF THE MATERIALS OR WORKMANSHIP THEREOF OR
CONFORMITY THEREOF TO SPECIFICATIONS, OR THE PRESENCE OR ABSENCE OF ANY LATENT
OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, except that Trust Company hereby

                                       6
<PAGE>

represents and warrants that on the Closing Date for such Accepted Unit, the
Owner Trustee shall have received whatever title thereto was conveyed to it by
the Lessee and (ii) while a part of the Trust Estate, such Accepted Unit shall
be free and clear of Lessor's Liens attributable to it.

          (b) Neither Trust Company nor the Owner Trustee makes any
representation or warranty as to the validity or enforceability of any Operative
Agreement, or as to the correctness of any statement therein, except to the
extent that any such representation, warranty or statement is expressly made
therein or in any written certificate delivered pursuant thereto by the Owner
Trustee or Trust Company and except that Trust Company hereby represents and
warrants that this Trust Agreement has been duly executed and delivered by Trust
Company and each of the Owner Trustee Agreements has been or will be executed
and delivered by officers of the Owner Trustee who are or will be duly
authorized to execute and deliver documents on its behalf, and that each of this
Agreement and each of the other Owner Trustee Agreements constitutes (assuming
the due authorization, execution, and delivery of this Agreement and each such
other agreement by the other parties thereto) the legal, valid and binding
obligation of the Trust Company (or the Owner Trustee if expressly stated
therein) enforceable against it in accordance with its terms except as limited
by bankruptcy, insolvency, reorganization or other similar laws or equitable
principles of general application to or affecting the enforcement of creditors
rights generally from time to time in effect.

     Section 5.3    No Segregation of Moneys; No Interest.  Except as required
                    -------------------------------------
by Section 2.4 of the Participation Agreement, moneys received by the Owner
Trustee hereunder need not be segregated in any manner except to the extent
required by law, and such moneys may be deposited under such general conditions
as may be prescribed by law, and the Owner Trustee shall not be liable for any
interest thereon.

     Section 5.4    Reliance; Advice of Counsel.  The Owner Trustee shall not
                    ---------------------------
incur any liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, bond or other
document or paper reasonably believed by it in good faith to be genuine and
reasonably believed by it in good faith to be signed by the proper party or
parties.  Any request, direction, order or demand of the Owner Participant or
the Lessee mentioned herein or in any other Operative Agreement to which the
Owner Trustee is a party shall be sufficiently evidenced by an Officer's
Certificate of the Owner Participant or the Lessee, as the case may be.  The
Owner Trustee may accept in good faith a certified copy of a resolution of the
board of directors or other governing body of any corporate party as conclusive
evidence that such resolution has been duly adopted by such body and that the
same is in full force and effect.  As to any fact or matter the manner of
ascertainment of which is not specifically prescribed herein, the Owner Trustee
may for all purposes hereof rely on an Officer's Certificate of the relevant
party as to such fact or matter, and such Officer's Certificate shall constitute
full protection to the Owner Trustee for any action taken or omitted to be taken
by it in good faith in reliance thereon.  In the administration of the trusts
hereunder, the Owner Trustee may execute any of the trusts or powers hereof and
perform its powers and duties hereunder directly or through agents or attorneys,
and may consult with counsel, accountants and other skilled persons to be
selected and employed by it (other than persons regularly employed by it), and
the Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written advice or opinion within the
scope of the competence of any such counsel,

                                       7
<PAGE>

accountants or other skilled persons and not contrary to this Trust Agreement,
except for the use of due care in the appointment of counsel, accountants or
other skilled persons.

     Section 5.5    Not Acting in Individual Capacity.  Trust Company is
                    ---------------------------------
entering into this Agreement and accepting the trust created hereby in its
individual capacity.  Otherwise, except as provided in this Trust Agreement and
in the other Operative Agreements, Trust Company agrees to act solely as trustee
hereunder and not in its individual capacity; and all Persons having any claim
against the Owner Trustee by reason of the transactions contemplated by the
Operative Agreements or the Owner Trustee Agreements shall look only to the
Trust Estate (or a part thereof, as the case may be) for payment or satisfaction
thereof, except as specifically provided in this Trust Agreement and except to
the extent the Owner Trustee otherwise shall agree in any Owner Trustee
Agreement.

                                  ARTICLE VI
                                INDEMNIFICATION

     Section 6.1    Indemnification of Trust Company.  The Owner Participant
                    --------------------------------
agrees to assume liability for, and to indemnify and hold harmless Trust Company
against and from any and all liabilities, obligations, losses, damages, taxes
(excluding any taxes, fees or other charges payable by Trust Company or measured
by any compensation received by Trust Company for its services hereunder),
penalties, claims, actions, suits, proceedings, costs, expenses and
disbursements of any kind and nature whatsoever, including, without limitation,
the reasonable fees and expenses of counsel (collectively, "Trust Expenses")
                                                            --------------
which may be imposed on, incurred by or asserted against Trust Company whether
or not also indemnified by any other Person (provided, however, that to the
                                             --------  -------
extent Trust Company shall have actually received any payment in the nature of
an indemnity payment from any such other Person relating to a claim hereunder,
Trust Company shall not be entitled to the amount of any such payment pursuant
to this Section 6.1) in any way relating to or arising out of  the
administration of the Trust Estate or the action or inaction of Trust Company
hereunder or under the other Operative Agreements, any Accepted Equipment or any
part thereof,  the Operative Agreements or any of them, or the enforcement by
Trust Company of any of its rights under the Operative Agreements, or  the
design, manufacture, financing, refinancing, installation, acceptance,
rejection, ownership, delivery, nondelivery, lease, sublease, possession,
control, use, operation, condition, modification, servicing, maintenance,
repair, improvement, replacement, sale, return or other disposition of the
Accepted Equipment, any Accepted Unit or any part thereof including, without
limitation, (A) any inadequacy or deficiency or defect therein, including latent
defects, whether or not discoverable or any claim based on negligence or arising
from any violation of law or for strict liability in tort or any claim for
patent, trademark or copyright tort or any claim for patent, trademark or
copyright infringement, and (B) any loss or damage to property or the
environment or injury or death to any Person; except only that the Owner
Participant shall not be required to indemnify Trust Company for Trust Expenses
arising or resulting from any of the matters described in the last sentence of
Section 5.1; provided that the Owner Participant shall be liable under this
             --------
Section 6.1 only to the extent that the Owner Trustee is indemnified by the
Lessee pursuant to Section 7 of the Participation Agreement (with the exception
of the limitations to Lessee's indemnification obligations set forth in Sections
7.1(c)(ii), 7.1(c)(iv) (to the extent relating to any such transfer by the Owner
Participant or transfer by the Owner Trustee at the direction of the Owner
Participant), 7.2(d)(i), 7.2(d)(iv) (to the extent relating to any such

                                       8
<PAGE>

transfer by the Owner Participant or transfer by the Owner Trustee at the
direction of the Owner Participant) and 7.2(d)(vi) (when the Owner Trustee is
acting on instructions from the Owner Participant) of the Participation
Agreement); provided, further, that before asserting its right to
            --------  -------
indemnification pursuant to this Section 6.1, the Owner Trustee shall first
demand its corresponding right to indemnification, if any, pursuant to Section 7
of the Participation Agreement (but need not exhaust any or all remedies
available thereunder), and the Owner Participant shall have the right to pursue
any such remedies against the Lessee which are not pursued by the Owner Trustee.
The indemnities contained in this Section 6.1 shall survive the termination of
this Trust Agreement. To secure the foregoing indemnities, the Owner Trustee
shall be entitled to apply any amount otherwise distributable to the Owner
Participant pursuant to Section 3.2 against any such indemnity which has not
been paid when due. The indemnities contained in this Section 6.1 extend to
Trust Company only and shall not be construed as indemnities of the Trust
Estate. The payor of any indemnity under this Section 6.1 shall be subrogated to
any right of the Person indemnified in respect of the matter as to which such
indemnity was paid.

     Section 6.2    Expenses.  The Owner Participant shall pay, or reimburse the
                    --------
Owner Trustee for, all reasonable expenses of the Owner Trustee, including,
without limitation, the reasonable expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and duties under the
Operative Agreements, unless and to the extent that the Owner Trustee otherwise
receives payment or reimbursement pursuant to any Operative Agreement, whether
or not the transactions contemplated hereby are consummated; provided that the
                                                             --------
Owner Participant shall have no obligation hereunder to the extent Lessee is not
obligated to pay such amounts pursuant to Section 2.5 of the Participation
Agreement.  The Owner Trustee agrees to look first to the Lessee for such
payment pursuant to Section 2.5 of the Participation Agreement.  Except as
provided herein, the Owner Trustee and Trust Company shall have no right to
compensation with respect to the transactions contemplated by the Operative
Agreements.

                                  ARTICLE VII
                        TERMINATION OF TRUST AGREEMENT

     Section 7.1    Termination of Trust Agreement.
                    ------------------------------

          (a) Subject to the terms of the Participation Agreement, the Indenture
and Section 7.2, this Trust Agreement and the trusts created hereby shall
terminate and the Trust Estate shall be distributed to the Owner Participant,
and this Trust Agreement shall be of no further force or effect, upon the
earlier of  the sale or other final disposition by the Owner Trustee of all
property constituting part of the Trust Estate and the final distribution by the
Owner Trustee of all moneys or other property or proceeds constituting part of
the Trust Estate in accordance with the terms of Article III and one hundred ten
(110) years after the earlier execution of this Trust Agreement by either party
hereto, but if any rights, privileges or options hereunder shall be or become
valid under applicable law for a period subsequent to one hundred ten (110)
years after the earlier execution of this Trust Agreement by either party hereto
(or, without limiting the generality of the foregoing, if legislation shall
become effective providing for the validity or permitting the effective grant of
such rights, privileges and options for a period in gross exceeding the period
for which such rights, privileges and options are hereinabove stated

                                       9
<PAGE>

to extend and be valid), then such rights, privileges or options shall not
terminate as aforesaid but shall extend to and continue in effect, but only if
such nontermination and extension shall then be valid under applicable law,
until such time as the same shall cease to be valid under applicable law.

          (b) Except as expressly provided in Section 7.2, the Owner Participant
shall not be entitled to revoke or terminate this Trust Agreement or the trust
created hereby.  Except as otherwise provided herein, the Owner Participant may
not withdraw any of the Trust Estate until the Lien of the Indenture on the
Trust Estate shall have been discharged pursuant to the terms thereof.

     Section 7.2    Termination at Option of the Owner Participant.  The
                    ----------------------------------------------
provisions of Section 7.1 notwithstanding, this Trust Agreement and the trusts
created hereby shall terminate and the Trust Estate shall be distributed to the
Owner Participant, and this Trust Agreement shall be of no further force and
effect, upon the election of the Owner Participant by notice to the Owner
Trustee to revoke the trusts created hereby; provided that, in addition to the
                                             --------
giving of such notice, the Owner Participant, with the cooperation of the Owner
Trustee, shall execute and deliver such written agreements and instruments and
take such actions as shall be necessary in order to cause the succession of the
Owner Participant to all the rights, title, interests, duties and liabilities of
the Owner Trustee under the Operative Agreements (other than obligations
attributable to any gross negligence or willful misconduct of Trust Company or
any breach by the Owner Trustee of its obligations under the Operative
Agreements); provided, however, that until the Lien of the Indenture on the
             --------  -------
Trust Estate shall have been discharged pursuant to the terms thereof the Owner
Participant may not revoke such trusts without the consent of the Indenture
Trustee.  The written agreements and instruments referred to in the preceding
sentence shall be reasonably satisfactory in form and substance to the Owner
Trustee and shall release the Owner Trustee from all further obligations of the
Owner Trustee hereunder and under the agreements and other instruments mentioned
in the preceding sentence.

                                  ARTICLE VII
                  SUCCESSOR OWNER TRUSTEES, CO-OWNER TRUSTEES
                          AND SEPARATE OWNER TRUSTEES

     Section 8.1    Resignation of the Owner Trustee; Appointment of Successor.
                    ----------------------------------------------------------

          (a) The Owner Trustee may resign as the Owner Trustee at any time
without cause by giving at least thirty (30) days' prior written notice to the
Owner Participant, the Indenture Trustee and the Lessee, such resignation to be
effective on the acceptance of appointment by a successor to the Owner Trustee
under paragraph (b) of this Section 8.1.  In addition, the Owner Participant at
any time may remove the Owner Trustee without cause by an instrument in writing
delivered to the Owner Trustee, the Indenture Trustee and the Lessee, such
removal to be effective upon the acceptance of appointment by a successor to the
Owner Trustee under paragraph (b) of this Section 8.1.  In case of the
resignation or removal of the Owner Trustee, the Owner Participant may appoint a
successor to the Owner Trustee by an instrument in writing, signed by the Owner
Participant.  If a successor to the Owner Trustee shall not have been appointed
within thirty (30) days after the giving of written notice of such resignation
or the delivery of the written instrument with respect to such removal, the
Owner Trustee or the Owner

                                       10
<PAGE>

Participant may apply to any court of competent jurisdiction to appoint a
successor to the Owner Trustee to act until such time, if any, as a successor
shall have been appointed as above provided in this Section 8.1. Any successor
to the Owner Trustee so appointed by such court shall immediately and without
further act be superseded by any successor to the Owner Trustee appointed as
above provided in this Section 8.1.

          (b) Any successor Owner Trustee, however appointed, shall execute and
deliver to the predecessor Owner Trustee an instrument accepting such
appointment and shall give the Owner Participant, the Indenture Trustee and
Lessee written notice of such acceptance. Upon the execution and delivery of
such instrument, such successor Owner Trustee, without further act, shall become
vested with all the estates, properties, rights, powers, duties and trusts of
the predecessor Owner Trustee in the trusts hereunder with like effect as if
originally named a trustee herein; provided, however, that upon the written
                                   --------  -------
request of such successor Owner Trustee, such predecessor Owner Trustee shall
execute and deliver an instrument transferring to such successor Owner Trustee,
upon the trusts herein expressed, all the estates, properties, rights, powers,
duties and trusts of such predecessor trustee as the Owner Trustee hereunder,
and such predecessor trustee shall duly assign, transfer, deliver and pay over
to such successor Owner Trustee all moneys or other property then held by such
predecessor trustee as the Owner Trustee upon the trusts herein expressed.  Upon
the appointment of any successor Owner Trustee hereunder, the predecessor Owner
Trustee, pursuant to written instructions of the Owner Participant, will execute
all documents and take all reasonable action within its control in order to
cause title to the Trust Estate to be transferred to the successor Owner
Trustee.

          (c) Any successor Owner Trustee, however appointed, shall be a bank or
trust company incorporated and doing business within the United States of
America and having a combined capital and surplus of at least $100,000,000, if
there be such an institution willing, able and legally qualified to perform the
duties of the Owner Trustee hereunder upon reasonable or customary terms.

          (d) Any corporation into which the Owner Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Owner Trustee shall be
a party, or any corporation to which substantially all the corporate trust
business of the Owner Trustee may be transferred, shall be, subject to
compliance with the terms of paragraph (c) of this Section 8.1, the Owner
Trustee under this Trust Agreement without further act; provided, that such
                                                        --------
corporation shall in no event be the Indenture Trustee.

     Section 8.2    Additional and Separate Trustees.
                    --------------------------------

          (a) If the Owner Trustee or the Owner Participant shall conclude that
it is necessary or prudent in order to conform to the law of any jurisdiction in
which all or any part of the Trust Estate shall be situated, or to make or
defend any claim or bring or defend any suit with respect to the Trust Estate or
any Operative Agreement, or pursuant to advice of counsel satisfactory to it, or
if the Owner Trustee shall have been instructed to do so by the Owner
Participant, the Owner Trustee shall appoint another Person to act as additional
or separate trustee for all or any part of the Trust Estate with such property,
title, right, power or duty of the Owner Trustee as the Owner Trustee and the
Owner Participant may determine.  In case any such

                                       11
<PAGE>

additional trustee or separate trustee shall resign or be removed, all the
assets, property, rights, powers or duties of such additional trustee or
separate trustee, as the case may be, so far as permitted by any applicable law,
shall vest in and be exercised by a new successor to such additional trustee,
appointed in the manner otherwise provided in this Trust Agreement.

          (b) In the event that either the Owner Participant or the Owner
Trustee shall determine to appoint another Person as additional or separate
trustee, the Owner Trustee and the Owner Participant shall execute and deliver
an agreement supplemental hereto, and all other instruments and agreements
necessary or proper to constitute another bank or trust company, or one or more
Persons approved by the Owner Trustee and the Owner Participant, either to act
as an additional trustee or trustees of all or any part of the Trust Estate,
jointly with the Owner Trustee, or to act as separate trustee or trustees of all
or any part of the Trust Estate, in any such case with such powers of the Owner
Trustee as may be provided in such agreement supplemental hereto, and to vest in
such bank, trust company or Person as such additional trustee or separate
trustee, as the case may be, any property, title, right or power of the Owner
Trustee deemed necessary or proper by the Owner Trustee or the Owner
Participant, subject to the remaining provisions of this Section 8.2.  The Owner
Trustee may execute, deliver and perform any deed, conveyance, assignment or
other instrument in writing as may be required by an additional trustee or
separate trustee for more fully and certainly vesting in and confirming to such
person any property, title, right or power which, by the terms of such agreement
supplemental hereto, are expressed to be conveyed or conferred to or upon such
additional trustee or separate trustee, and the Owner Participant shall, upon
the Owner Trustee's request, join therein and execute, acknowledge and deliver
the same.

          (c) Every additional trustee and separate trustee hereunder shall, to
the extent permitted by law, be appointed to act and the Owner Trustee shall
act, subject to the following provisions and conditions:

               (i) all powers, duties, obligations and rights conferred or
          imposed upon the Owner Trustee in respect of the receipt, custody,
          investment and payment of moneys, shall be exercised solely by the
          Owner Trustee;

               (ii) all other rights, powers, duties, and obligations conferred
          or imposed upon the Owner Trustee shall be conferred or imposed upon
          and exercised or performed by the Owner Trustee and such additional
          trustee or trustees and separate trustee or trustees jointly, except
          to the extent that under any law of the jurisdiction in which any
          particular act or acts are to be performed by the Owner Trustee shall
          be incompetent or unqualified to perform such act or acts, in which
          event such rights, powers, duties and obligations (including the
          holding of title to the Trust Estate in any such jurisdiction) shall
          be exercised and performed by such additional trustee or trustees or
          separate trustee or trustees;

               (iii) no power hereby given to, or which may be exercised by, any
          such additional trustee or separate trustee shall be exercised
          hereunder by such additional trustee or separate trustee except
          jointly with, or with the consent of, the Owner Trustee; and

                                       12
<PAGE>

               (iv)  no trustee hereunder shall be personally liable by reason
          of any act or omission of any other trustee hereunder.

          (d) If at any time the Owner Trustee and the Owner Participant shall
deem it no longer necessary or prudent in order to conform to any applicable law
or shall be advised by its counsel that it is no longer necessary or prudent in
the interest of the Owner Trustee and the Owner Participant to maintain the
appointment of such additional or separate trustee as provided herein, the Owner
Trustee and the Owner Participant shall execute and deliver any agreement
supplemental hereto and all other instruments and agreements necessary or proper
to remove any such additional or separate trustee.  The Owner Participant, at
any time, by an instrument in writing may remove any separate trustee or
additional trustee.

          (e) Any additional trustee or separate trustee may at any time by an
instrument in writing constitute the Owner Trustee its agent or attorney-in-fact
with full power and authority, to the extent which may be authorized by
applicable law, to do all acts and things and exercise all discretion which it
is authorized or permitted to do or exercise, for and in its behalf and in its
name.  In case any such additional trustee or separate trustee shall die, become
incapable of acting, resign or be removed, all the assets, property, rights,
powers, trusts, duties and obligations of such additional trustee or separate
trustee, as the case may be, so far as permitted by law, shall vest in and be
exercised by the Owner Trustee without necessity of any act by any party and
without the appointment of a new successor to such additional or separate
trustee, unless and until a successor is appointed in the manner provided in
this Section 8.2.

                                  ARTICLE IX
                          SUPPLEMENTS AND AMENDMENTS

     Section 9.1    Supplements and Amendments.  Subject to Section 9.05 of the
                    --------------------------
Indenture, at the written request of the Owner Participant (and subject to the
provisions of Sections 6.5 and 6.6 of the Participation Agreement), this Trust
Agreement and each other Owner Trustee Agreement shall be amended by a written
instrument signed by Trust Company and the Owner Participant; provided, however,
                                                              --------  -------
if in the reasonable opinion of Trust Company any instrument required to be so
executed adversely affects any right, duty or liability of, or immunity or
indemnity in favor of, Trust Company under this Trust Agreement or any of the
documents contemplated hereby to which it is a party, or would cause or result
in any conflict with or breach of any term, condition or provision of, or
default under, its charter documents or by-laws, Trust Company in its reasonable
discretion may decline to execute such instrument, unless the Trust Company is
indemnified therefor under Section 4.3, as determined by the Trust Company in
its reasonable discretion.

                                   ARTICLE X
                                 MISCELLANEOUS

     Section 10.1   No Legal Title to Trust Estate in the Owner Participant. The
                    -------------------------------------------------------
Owner Participant shall not have legal title to any part of the Trust Estate. No
transfer, by operation of law or otherwise, of any right, title and interest of
the Owner Participant in and to the Trust Estate or hereunder, or insolvency,
dissolution or other termination of the Owner Participant, shall operate to
terminate this Trust Agreement or the trusts created hereby or entitle any

                                       13
<PAGE>

successor or transferee to an accounting or to the transfer to it of legal title
to any part of the Trust Estate.

     Section 10.2    Sale of Accepted Equipment by the Owner Trustee is Binding.
                     ----------------------------------------------------------
Any sale, transfer or other conveyance of any Accepted Unit or part thereof by
the Owner Trustee made pursuant to the terms of this Trust Agreement or the
Lease shall bind the Owner Participant and shall be effective to transfer or
convey all right, title and interest of the Owner Trustee and the Owner
Participant in and to such Accepted Unit or part thereof, as the case may be.
No purchaser or other grantee shall be required to inquire as to the
authorization, necessity, expediency or regularity of such sale or conveyance or
as to the application of any sale or other proceeds with respect thereto by the
Owner Trustee.

     Section 10.3    Notices.  Unless otherwise expressly specified or permitted
                     -------
by the terms hereof, all notices hereunder shall be given as provided in Section
10.4 of the Participation Agreement.

     Section 10.4    Severability.  If any term or provision of this Trust
                     ------------
Agreement is invalid or unenforceable in any jurisdiction, such term or
provision shall be ineffective to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable any remaining
terms and provisions hereof, and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

     Section 10.5    Separate Counterparts.  This Trust Agreement may be
                     ---------------------
executed by the parties hereto in any number of counterparts and by the parties
hereto on separate counterparts, each of which when so executed and delivered
shall be an original, and all of which shall together constitute but one and the
same instrument.

     Section 10.6    Waivers, etc.  No term or provision hereof may be changed,
                     -------------
waived, discharged or terminated orally, but may be changed, waived, discharged
or terminated by an instrument in writing, and any waiver of the terms hereof
shall be effective only in the specific instance and for the specific purpose
given.

     Section 10.7    Successors and Assigns.  This Trust Agreement, including
                     ----------------------
the terms and provisions hereof, shall be binding upon the Owner Participant and
Trust Company or the Owner Trustee, whichever is applicable pursuant to the
terms hereof, and their respective successors and assigns, and inure to the
benefit of the Owner Participant and Trust Company or the Owner Trustee,
whichever is applicable pursuant to the terms hereof, and their respective
successors and permitted assigns, all as herein provided. Any request, notice,
direction, consent, waiver or other instrument or action by the Owner
Participant shall bind the successors and assigns of the Owner Participant.

     Section 10.8    Transfer of Owner Participant's Interest.  All provisions
                     ----------------------------------------
of Section 6.1 of the Participation Agreement shall (with the same force and
effect as if set forth in full, mutatis mutandis, in this Section 10.8) be
applicable to any assignment, conveyance or other transfer by the Owner
Participant of any of its right, title or interest in and to the Trust Estate or
this Trust Agreement or any other Operative Agreement.

                                       14
<PAGE>

     Section 10.9    Actions of the Owner Participants.  If at any time prior to
                     ---------------------------------
the termination of this Trust Agreement there is more than one Owner
Participant, then during such time, if any action is required to be taken by the
Owner Participant, such action shall be taken by or on behalf of all Owner
Participants and whenever any direction, authorization, approval, consent,
instruction or other action is permitted to be given or taken by the Owner
Participant it shall be given or taken only upon such percentage agreement of
the Owner Participants as all Owner Participants may instruct the Owner Trustee.

     Section 10.10    Headings; Table of Contents.  The division of this Trust
                      ---------------------------
Agreement into sections, the provision of a table of contents and the insertion
of headings are for convenience of reference only and shall not affect the
construction or interpretation hereof.

     Section 10.11    Governing Law.  The terms of this Trust Agreement and the
                      -------------
rights and obligations of the parties hereto shall be governed by, and construed
in accordance with, the laws of the State of Delaware applicable to contracts
made and to be performed entirely within such state.

     Section 10.12    Benefit.  Nothing herein, whether express or implied,
                      -------
shall be construed to give any Person other than the Owner Trustee, the
Indenture Trustee and the Owner Participant any legal or equitable right, remedy
or claim under or in respect of this Trust Agreement.

     Section 10.13    Performance by the Owner Participant.  Any obligation of
                      ------------------------------------
Trust Company or the Owner Trustee hereunder or under any other Operative
Agreement or other document contemplated hereby, may be performed by the Owner
Participant and any such performance shall not be construed as a revocation of
the trusts created hereby.

     Section 10.14    Conflict with Operative Agreements.  If this Trust
                      ----------------------------------
Agreement (or any instructions given by the Owner Participant pursuant hereto)
shall require that any action be taken with respect to any matter or any other
Operative Agreement (or any instruction duly given in accordance with the terms
thereof) shall require that a different action be taken with respect to such
matter, and such actions shall be mutually exclusive, the provisions of this
Trust Agreement, in respect thereof, shall control.

     Section 10.15    Limitation on Owner Participant's Liability.  The Owner
                      -------------------------------------------
Participant shall not have any liability for the performance of this Trust
Agreement, except as expressly set forth herein.

     Section 10.16    Identification of Trust. The trust created hereunder may
                      -----------------------
be referred to for convenience as GATX Rail Trust No. 2000-2.

                               *       *       *

                                       15
<PAGE>

     In Witness Whereof, the parties hereto have each caused this Trust
Agreement to be duly executed and delivered as of the day and year first above
written.

                              By:____________________
                              Name:__________________
                              Title:_________________

                              WILMINGTON TRUST COMPANY

                              By:____________________
                              Name:__________________
                              Title:_________________

                                       16<PAGE>

                                                                   Exhibit 10.16

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

                        RECEIVABLES PURCHASE AGREEMENT

                         Dated as of December 23, 1999

                                     Among

                        KOHL'S DEPARTMENT STORES, INC.,

                                as the Seller,

                              VARIOUS PURCHASERS,

                                      and

                                 BANK ONE, NA,

                                   as Agent

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                 Page
<S>                                                                                              <C>
ARTICLE 1. AMOUNTS AND TERMS OF THE PURCHASES................................................    3
   Section 1.1    Purchase Facility..........................................................    3
   Section 1.2    Making Incremental Purchases...............................................    5
   Section 1.3    PREFCO Funding.............................................................    5
   Section 1.4    Investor Funding...........................................................    6
   Section 1.5    Percentage Evidenced by Receivable Interests...............................    7
   Section 1.6    Reinvestment Purchases and Settlements.....................................    7
   Section 1.7    Liquidation Settlement Procedures..........................................    8
   Section 1.8    Limited Recourse...........................................................    9
   Section 1.9    Payments and Computations, Etc.............................................   10
   Section 1.10   Maximum Aggregate Receivables Interest; Grant of Security Interest.........   11
   Section 1.11   Non-Performing Investors...................................................   11
   Section 1.12   Characterization...........................................................   12
   Section 1.13   Seller's Extinguishment....................................................   12
ARTICLE 2. LIQUIDITY FACILITY................................................................   12
   Section 2.1    Transfer to Investors......................................................   12
   Section 2.2    Transfer Price Reduction Discount..........................................   12
   Section 2.3    Payments to PREFCO.........................................................   13
   Section 2.4    Limitation on Commitment to Purchase from PREFCO...........................   13
   Section 2.5    Defaulting Investors.......................................................   13
   Section 2.6    Representations of the Investors...........................................   13
ARTICLE 3. REPRESENTATIONS AND WARRANTIES....................................................   15
   Section 3.1    Seller Representations and Warranties......................................   15
   Section 3.2    Investor Representations and Warranties....................................   17
ARTICLE 4. CONDITIONS OF PURCHASES...........................................................   18
   Section 4.1    Conditions Precedent to Initial Purchase...................................   18
   Section 4.2    Conditions Precedent to Purchases and Reinvestments........................   18
ARTICLE 5. COVENANTS.........................................................................   19
   Section 5.1    Affirmative Covenants of Seller............................................   19
   Section 5.2    Negative Covenants of Seller...............................................   22
ARTICLE 6. ADMINISTRATION AND COLLECTION.....................................................   23
   Section 6.1    Designation of Servicer....................................................   24
   Section 6.2    Duties of Servicer.........................................................   24
   Section 6.3    Collection Notices.........................................................   26
   Section 6.4    Responsibilities of the Seller.............................................   26
   Section 6.5    Reports....................................................................   26
ARTICLE 7. SERVICER DEFAULTS AND TERMINATION EVENTS..........................................   26
   Section 7.1    Servicer Defaults..........................................................   26
   Section 7.2    Termination Events.........................................................   27
ARTICLE 8. INDEMNIFICATION...................................................................   28
   Section 8.1    Indemnities by the Seller..................................................   28
   Section 8.2    Increased Costs and Reduced Return.........................................   31
   Section 8.3    Other Costs and Expenses...................................................   32
ARTICLE 9. THE AGENT.........................................................................   32
   Section 9.1    Authorization and Action...................................................   33
   Section 9.2    Delegation of Duties.......................................................   33
   Section 9.3    Exculpatory Provisions.....................................................   33
   Section 9.4    Reliance by Agent..........................................................   34
   Section 9.5    Non-Reliance on Agent and Other Purchasers.................................   34
   Section 9.6    Reimbursement and Indemnification..........................................   34
   Section 9.7    Agent in its Individual Capacity...........................................   34
   Section 9.8    Successor Agent............................................................   35
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                                             <C>
ARTICLE 10. ASSIGNMENTS; PARTICIPATIONS......................................................   35
   Section 10.1   Assignments................................................................   35
   Section 10.2   Participations.............................................................   36
ARTICLE 11. MISCELLANEOUS....................................................................   36
   Section 11.1   Waivers and Amendments.....................................................   36
   Section 11.2   Notices....................................................................   38
   Section 11.3   Ratable Payments...........................................................   38
   Section 11.4   Protection of Ownership Interests of the Purchasers........................   38
   Section 11.5   Confidentiality............................................................   40
   Section 11.6   Bankruptcy Petition........................................................   41
   Section 11.7   Limitation of Liability....................................................   41
   Section 11.8   CHOICE OF LAW..............................................................   41
   Section 11.9   CONSENT TO JURISDICTION....................................................   41
   Section 11.10  WAIVER OF JURY TRIAL.......................................................   42
   Section 11.11  Integration; Survival of Terms.............................................   42
   Section 11.12  Counterparts; Severability.................................................   43
   Section 11.13  Bank One Roles.............................................................   43
   Section 11.14  Characterization...........................................................   43
</TABLE>

                                      ii
<PAGE>

                        RECEIVABLES PURCHASE AGREEMENT

THIS RECEIVABLES PURCHASE AGREEMENT, dated as of December 23, 1999, is entered
into by and among KOHL'S DEPARTMENT STORES, INC., a Delaware corporation (the
"Seller"), the INVESTORS (hereinafter defined), PREFERRED RECEIVABLES FUNDING
CORPORATION, a Delaware corporation ("PREFCO"), and BANK ONE, NA, as Agent.
Unless defined elsewhere herein, capitalized terms used in this Agreement shall
have the meanings assigned to such terms in Exhibit I hereto.

                            PRELIMINARY STATEMENTS

The Seller desires to transfer and assign Receivable Interests to the Purchasers
from time to time.

PREFCO may, in its absolute and sole discretion, purchase Receivable Interests
from the Seller from time to time.

The Investors shall, at the request of the Seller, purchase Receivable Interests
from time to time.  In addition, the Investors have agreed to provide a
liquidity facility to PREFCO.

Bank One, NA has been requested and is willing to act as Agent on behalf of
PREFCO and the Investors in accordance with the terms hereof.

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

AMOUNTS AND TERMS OF THE PURCHASES

Purchase Facility Upon the terms and subject to the conditions hereof, the
-----------------
Seller may, at its option, sell and assign Receivable Interests to the Agent for
the benefit of one or more of the Purchasers. From time to time during the
period from the date hereof to but not including the Facility Termination Date:
PREFCO may, at its option, instruct the Agent to purchase a particular
Receivable Interest on behalf of PREFCO, or if PREFCO does not purchase such
Receivable Interest, the Agent shall purchase such Receivable Interest on behalf
of the Investors. The Seller hereby assigns, transfers and conveys to the Agent
for the benefit of the relevant Purchaser or Purchasers, and the Agent hereby
acquires all of the Seller's now owned and existing and hereafter arising or
acquired right, title and interest in and to the Receivable Interests.

The Seller may, upon at least five (5) days' notice to the Agent, terminate in
whole or reduce in part, ratably among the Investors, the unused portion of the
Purchase Limit; provided that each partial reduction of the Purchase Limit shall
be in an amount equal to $5,000,000 or an integral multiple thereof.
<PAGE>

The Seller may, upon at least thirty (30) days' notice (or less, if mutually
agreed upon) to the Agent, request one or more increases in the Purchase Limit
in a minimum amount of $25,000,000 (or a larger integral multiple of
$1,000,000).  If the Agent and all of the Investors agree to such increase, such
increase shall become effective on the Business Day on which all conditions
precedent to the amendment to this Agreement giving effect to such increase have
been satisfied.  Notwithstanding anything to the contrary contained in Section
                                                                       -------
8.3, the Seller shall not be obligated to reimburse the Agent and the Purchasers
---
for more than $1,000 in expenses per amendment to this Agreement entered into to
increase the Purchase Limit in accordance with this Section 1.1(c).
                                                    --------------

Seller shall provide the Agent with prior written notice in conformity with the
Required Notice Period (a "Reduction Notice") of any proposed reduction of
Aggregate Capital from Collections.  Such Reduction Notice shall designate (i)
the date (the "Proposed Reduction Date") upon which any such reduction of
Aggregate Capital shall occur (which date shall give effect to the applicable
Required Notice Period), and (ii) the amount of Aggregate Capital to be reduced
which shall be applied ratably to the Receivable Interests of PREFCO and the
Investors in accordance with the amount of Capital (if any) owing to PREFCO, on
the one hand, and the amount of Capital (if any) owing to the Investors
(ratably, based on their respective Pro Rata Shares), on the other hand (the
"Aggregate Reduction").  Only one (1) Reduction Notice shall be outstanding at
any time.  No Aggregate Reduction will be made following the occurrence of the
Liquidation Day without the consent of the Agent.

The Seller may, by written notice to the Agent given not less than 60 days nor
more than 180 days prior to the Liquidity Termination Date as in effect at the
time of such notice (each such notice, an "Extension Request"), request that the
Liquidity Termination Date be extended for a period not to exceed 360 days from
the date of such Extension Request.  The Agent shall promptly provide copies of
each Extension Request to the Purchasers.  Provided each of the Purchasers gives
its written consent to an Extension Request on or within 30 days after such
Purchaser's receipt of a copy of such Extension Request, the existing Liquidity
Termination Date shall be extended to the date specified in such written
consent.  The Seller acknowledges that any consent to an Extension Request will
be subject to each Purchaser's receipt of all necessary credit approvals and
must be in writing signed by all of the Purchasers and acknowledged by the
Agent.  In the event that any Investor does not give its written consent to an
Extension Request:

the Agent will notify the Seller and the remaining Purchasers of such fact and
will use its reasonable best efforts to find another Investor or Eligible Person
who is willing to accept an assignment of such dissenting Investor's Commitment
and Pro Rata Share of the Receivable Interests pursuant to an Assignment
Agreement,

not later than 10 Business Days prior to the existing Liquidity Termination
Date, the Agent or the Seller may nominate another Investor or Eligible Person
who is willing to accept an assignment of such dissenting Investor's Commitment
and Pro Rata Share of the Receivable Interests pursuant to an Assignment
Agreement, and

                                       4
<PAGE>

if the Agent or the Seller is able to find another Investor or Eligible Person
who is willing to enter into an Assignment Agreement, the dissenting Investor
shall assign the same pursuant to an Assignment Agreement effective as of the
existing Liquidity Termination Date and executed and delivered to the Agent and
the Seller not later than 2 Business Days prior to the existing Liquidity
Termination Date; provided that the assigning Investor receives payment in full,
pursuant to an Assignment Agreement, of an amount equal to such assigning
Investor's Pro Rata Share of the Capital and Discount owing to the Investors and
all accrued but unpaid fees and other costs and expenses payable in respect of
its Pro Rata Share of the Receivable Interests, and

upon the Agent's receipt of an executed Assignment Agreement in accordance with
the preceding clause (iii), the Agent shall notify the remaining Purchasers and
the Seller that the Liquidity Termination Date will be extended as per their
above-described written consent, and the Liquidity Termination Date shall be so
extended.

Making Incremental Purchases.  The Seller shall provide the Agent with written
----------------------------
notice (a "Purchase Notice") of each Incremental Purchase not later than 12:00
noon (Chicago time) on the Business Day immediately prior to the date of the
proposed Incremental Purchase; provided, however, that the Seller shall endeavor
to provide each Purchase Notice at least three Business Days prior to the
proposed date of the Incremental Purchase. Each Purchase Notice shall, except as
set forth below, be irrevocable and shall specify the requested Purchase Price
(which shall not be less than $1,000,000) and the date of purchase (which shall
be a Business Day). Following receipt of a Purchase Notice, the Agent shall
determine whether PREFCO agrees to make the purchase. If PREFCO does not make a
proposed purchase, the Seller may cancel the Purchase Notice or the Incremental
Purchase of the Receivable Interests shall be made by the Investors (in which
case the Seller, prior to such Incremental Purchase, shall notify the Agent in
writing of the duration of the initial Tranche Period and the initial Discount
Rate related thereto). On the date of each Incremental Purchase, upon
satisfaction of the applicable conditions precedent set forth in Article 4,
                                                                 ---------
PREFCO or each Investor, as applicable, shall initiate a wire transfer (or in
the case of a transfer from PREFCO, or Bank One, an intrabank transfer) to the
Facility Account, of immediately available funds, no later than 11:00 a.m.
(Chicago time), in an amount equal to (i) in the case of PREFCO, the aggregate
of the Purchase Prices of each of the Receivable Interests PREFCO is purchasing,
or (ii) in the case of an Investor, such Investor's Pro Rata Share of the
Purchase Prices of each of the Receivable Interests the Investors are
purchasing.

PREFCO Funding.  Seller shall pay CP Costs with respect to the Capital
--------------
associated with each Receivable Interest of PREFCO for each day that any Capital
in respect of such Receivable Interest is outstanding. Each Receivable Interest
funded substantially with Pooled Commercial Paper will accrue CP Costs each day
on a pro rata basis, based upon the percentage share the Capital in respect of
such Receivable Interest represents in relation to all assets held by PREFCO and
funded substantially with Pooled Commercial Paper.

On each Settlement Date, Seller shall pay to the Agent (for the benefit of
PREFCO) an aggregate amount equal to all accrued and unpaid CP Costs in respect
of the Capital associated with all Receivable Interests of PREFCO for the
immediately preceding Accrual Period in accordance herewith.

                                       5
<PAGE>

On the third Business Day immediately preceding each Settlement Date, PREFCO
shall calculate the aggregate amount of CP Costs for the applicable Accrual
Period and shall notify Seller of such aggregate amount.

Investor Funding. Each Receivable Interest of the Investors shall accrue
----------------
Discount for each day during its Tranche Period at either the LIBO Rate or the
Prime Rate in accordance with the terms and conditions hereof. Until Seller
gives notice to the Agent of another Discount Rate in accordance with Section
1.4(d), the initial Discount Rate for any Receivable Interest transferred to the
Investors pursuant to the terms and conditions hereof shall be the Prime Rate.
If the Investors acquire by assignment from PREFCO any Receivable Interest
pursuant to Article 2, each Receivable Interest so assigned shall each be deemed
to have a new Tranche Period commencing on the date of any such assignment.

On the Settlement Date for each Receivable Interest of the Investors, Seller
shall pay to the Agent (for the benefit of the Investors) an aggregate amount
equal to the accrued and unpaid Discount for the entire Tranche Period of each
such Receivable Interest in accordance herewith.

(i)  With consultation from (and approval by) the Agent, Seller shall from time
to time request Tranche Periods for the Receivable Interests of the Investors.

          (ii) Seller or the Agent, upon notice to and consent by the other
received at least three (3) Business Days prior to the end of a Tranche Period
(the "Terminating Tranche") for any Receivable Interest, may, effective on the
last day of the Terminating Tranche:  (i) divide any such Receivable Interest
into multiple Receivable Interests, (ii) combine any such Receivable Interest
with one or more other Receivable Interests that have a Terminating Tranche
ending on the same day as such Terminating Tranche or (iii) combine any such
Receivable Interest with a new Receivable Interest to be purchased on the day
such Terminating Tranche ends, provided, that in no event may a Receivable
Interest of PREFCO be combined with a Receivable Interest of the Investors.

Seller may select the LIBO Rate or the Prime Rate for each Receivable Interest
of the Investors.  Seller shall (i) by 11:00 a.m. (Chicago time):  at least
three (3) Business Days prior to the expiration of any Terminating Tranche with
respect to which the LIBO Rate is being requested as a new Discount Rate and
(ii) by at least 9:00 a.m. (Chicago time) on the date of expiration of any
Terminating Tranche with respect to which the Prime Rate is being requested as a
new Discount Rate, give the Agent irrevocable notice of the new Discount Rate
for the Receivable Interest associated with such Terminating Tranche.   Until
Seller gives notice to the Agent of another Discount Rate, the initial Discount
Rate for any Receivable Interest transferred to the Investors pursuant to the
terms and conditions hereof shall be the Prime Rate.

                                       6
<PAGE>

If any Investor notifies the Agent that it has determined that funding its Pro
Rata Share of the Receivable Interests of the Investors at a LIBO Rate would
violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or that (i) deposits of a type and maturity appropriate
to match fund its Receivable Interests at such LIBO Rate are not available or
(ii) such LIBO Rate does not accurately reflect the cost of acquiring or
maintaining a Receivable Interest at such LIBO Rate, then the Agent shall
suspend the availability of such LIBO Rate and require Seller to select the
Prime Rate for any Receivable Interest accruing Discount at such LIBO Rate.  In
the event of any such notice by an Investor, at Seller's request, such Investor
shall assign its rights and obligations under this Agreement to (x) another
Investor (if any such Investor is willing to accept such assignment) or (y)
another Eligible Person nominated by the Seller who is willing to participate in
this Agreement through the Liquidity Termination Date; provided that the
assigning Investor receives payment in full, pursuant to an Assignment
Agreement, of an amount equal to such assigning Investor's Pro Rata Share of the
Capital and Discount owing to the Investors and all accrued but unpaid fees and
other costs and expenses payable in respect of its Pro Rata Share of the
Receivable Interests.

Percentage Evidenced by Receivable Interests.  Each Receivable Interest shall be
--------------------------------------------
initially computed on its date of purchase. Thereafter, until its Liquidation
Day, each Receivable Interest shall be automatically recomputed (or deemed to be
recomputed) on each day prior to its Liquidation Day. The variable percentage
represented by any Receivable Interest as computed (or deemed recomputed) as of
the close of business on the day immediately preceding its Liquidation Day shall
remain constant at all times after such Liquidation Day.

Reinvestment Purchases and Settlements.  At any time that any Collection is
--------------------------------------
received by the Servicer after the initial purchase, or any other Incremental
Purchase, of a Receivable Interest hereunder and on or prior to the Liquidation
Day of such Receivable Interest:

          first, at any time the Servicer is not the Seller or an Affiliate
          -----
     thereof, the Servicer may retain a portion of such Collection in payment of
     any Servicer Fee that is then due and owing;

          second, the Servicer is hereby directed to pay a portion of the
          ------
     remainder, if any, of such Collection to the Agent in payment of any
     accrued and unpaid CP Costs and Discount that is then due and owing;

          third, except to the extent the Seller wishes to reduce the
          -----
     outstanding amount of Capital of a Receivable Interest (in which case the
     provisions of Section 1.7 shall be applicable to the portion of such
                   -----------
     Receivable Interest represented by such reduction in Capital), the Seller
     hereby requests and the Purchasers hereby agree to make, simultaneously
     with such receipt, a reinvestment (each, a "Reinvestment") with that
     portion of the remainder of such Collection that is part of such Receivable
     Interest such that after giving effect to such Reinvestment, the amount of
     the Capital of such Receivable Interest immediately after any such receipt
     and corresponding Reinvestment shall be equal to the amount of the Capital
     immediately prior to such receipt; and

                                       7
<PAGE>

          fourth, any remaining portion of such Collection may be applied to
          ------
     making an additional Incremental Purchase in accordance with the terms of
     this Agreement or paid to the Seller, in either case, as the Seller may
     direct.

Liquidation Settlement Procedures.  On the Liquidation Day of a Receivable
---------------------------------
Interest and on each day thereafter (a) the Servicer shall set aside and hold in
trust for the holder(s) of such Receivable Interest, the percentage evidenced by
such Receivable Interest of all Collections received on such day, including, but
not limited to, Collections deemed to have been received on or prior to such day
pursuant to Section 1.8 which have not otherwise been paid by the Seller and (b)
            -----------
the Servicer shall set aside and hold in trust for the Seller and the holder(s)
of such Receivable Interest, as their interests may appear, the remaining
portion of the Collections received on such day (the "Remaining Collections").
On and after the Liquidation Day, the Servicer shall, at any time upon the
request by (or pursuant to standing instructions from) the Agent (i) remit to
the Agent's account the amounts set aside pursuant to the preceding sentence,
and (ii) apply such amounts to reduce the Capital associated with each such
Purchaser Interest and any other Aggregate Unpaids. If there shall be
insufficient funds on deposit for the Servicer to distribute funds in payment in
full of the aforementioned amounts, the Servicer shall distribute funds:

          first, to reimbursement of the Agent's costs of collection and
          -----
     enforcement of this Agreement,

          second, to the Servicer (if the Servicer is not the Seller or an
          ------
     Affiliate thereof) in payment of all accrued Servicer Fee in respect of
     such Receivable Interest,

          third, in payment of all accrued and unpaid CP Costs or Discount, as
          -----
     applicable for such Receivable Interest that are then due and owing,

          fourth, in reduction of the Capital of such Receivable Interest, and
          ------

          fifth, in payment of all other amounts (including, without limitation,
          -----
     Deemed Collections, Early Collection Fees and Default Fees, if any), that
     are then due and owing to the Purchasers.

Collections allocated to the Receivable Interests of the Investors shall be
shared ratably by the Investors in accordance with their Pro Rata Shares.
Collections applied to the payment of fees, expenses, CP Costs, Discount and all
other amounts payable or reimbursable by the Seller to the Agent and/or the
Purchasers hereunder or under any of the other Transaction Documents shall be
allocated ratably among the Agent and the Purchasers in accordance with such
amounts owing to each of them.  To the extent Collections are available for such
purpose in accordance with the foregoing, the accrued Servicer Fee in respect of
each Receivable Interest shall be remitted to the Servicer.  Remaining
Collections shall be held in trust by the Servicer and invested in Permitted
Investments selected from time to time by the Seller, with all income and losses
from such Permitted Investments and transaction fees arising in connection with
the making or liquidation of such Permitted Investments being for the account of
the Seller.  If any amount payable by the Seller to the Agent or the Purchasers
under this Agreement or any of the other Transaction

                                      8
<PAGE>

Documents is not paid within one (1) Business Day after the date when due (such
unpaid amount, together with any Default Fee due in respect thereof, being
hereinafter referred to as a "Deficiency"), the Servicer shall promptly
liquidate a portion of the Permitted Investments in the amount of such
Deficiency and shall pay such amount to the Agent for the account of the
relevant Purchaser(s). From and after the Business Day on which all Aggregate
Unpaids have been paid in full, the Servicer shall pay to Seller all remaining
Collections.

Limited Recourse.  If on any day the Outstanding Balance of a Receivable is (i)
----------------
reduced as a result of any rejected or returned goods or services, any cash
discount or any adjustment by the Seller, or (ii) reduced or cancelled as a
result of a setoff in respect of any claim by any Person (whether such claim
arises out of the same or a related transaction or an unrelated transaction),
the Seller shall be deemed to have received on the following Business Day a
Collection of such Receivable in the amount of such reduction or cancellation.

If on any day on or after the Facility Termination Date the Outstanding Balance
of a Receivable is charged-off as uncollectible, the Seller shall be deemed to
have received on the following Business Day a Collection of such Receivable;
provided, however, that the aggregate amount of Collections the Seller shall be
deemed to have received under this Section 1.8(b) shall not exceed the Loss
                                   --------------
Recourse Percentage of the aggregate Capital outstanding on the Facility
Termination Date.

If on any day any of the representations or warranties in Section 3.1 is no
                                                          -----------
longer true with respect to a Receivable, the Seller shall be deemed to have
received on the following Business Day a Collection of such Receivable in full.

If the Seller receives any Collections or is deemed to receive Collections
pursuant to this Section 1.8 or otherwise, the Seller shall immediately pay such
                 -----------
Collections or deemed Collections to the Servicer and, at all times prior to
such payment, such Collections shall be held in trust by the Seller for the
exclusive benefit of the Purchasers and the Agent.

                                       9
<PAGE>

Payments and Computations, Etc.  Notwithstanding any limitation on recourse
------------------------------
contained in this Agreement, the Seller shall pay to the Agent, for the account
of the relevant Purchasers, such fees as set forth in the Fee Letter, all CP
Costs, all amounts payable as Discount, all amounts payable pursuant to Article
                                                                        -------
8, if any, all Servicer costs, if any, payable pursuant to Section 6.2, any and
-                                                          -----------
all issuing and paying agent fees and commissions of commercial paper dealers
and, to the extent not duplicative of commercial paper dealer commissions,
placement agents in respect of Commercial Paper issued to fund any Receivable
Interest of PREFCO hereunder (to the extent each of the foregoing has not been
included in the determination of the CP Rate), and on demand therefor, any Early
Collection Fee. If any Person fails to pay any amount when due hereunder and
such non-payment results in either a Servicer Default under Section 7.1(a)(i) or
                                                            -----------------
a Termination Event under Section 7.2(a)(i), such Person agrees to pay, on
                          -----------------
demand, the Default Fee.

All amounts to be paid or deposited by any Person hereunder shall be paid or
deposited in accordance with the terms hereof no later than 11:00 A.M. (Chicago
time) on the day when due in immediately available funds; if such amounts are
payable (i) to a Purchaser they shall be paid to the Agent, for the account of
such Purchaser, at 1 Bank One Plaza, Chicago, Illinois 60670 until otherwise
notified by the Agent or (ii) to the Seller, they shall be paid or deposited to
the Facility Account until otherwise notified by the Seller.  In addition, the
Seller hereby authorizes, until further written notice is actually received by
Bank One, Bank One to debit the Facility Account for amounts due hereunder and
to distribute such amounts to the applicable Persons.

                                      10
<PAGE>

Maximum Aggregate Receivables Interest; Grant of Security Interest.  The Seller
------------------------------------------------------------------
shall ensure that the aggregate Receivable Interests of the Purchasers shall at
no time exceed 100%. If, on any day, the aggregate Receivable Interests of the
Purchasers exceeds 100%, the Seller shall immediately pay to the Agent an amount
to be applied to reduce the Capital of the Receivable Interests, such that after
giving effect to such payment the aggregate of the Receivable Interest equals or
is less than 100%. Such amount shall be applied to the reduction of the Capital
of the Receivable Interests ratably in accordance with the percentages of the
Receivable Interests. Any amounts received by the Investors pursuant to the
preceding sentence shall be applied ratably in accordance with their Pro Rata
Shares. The Seller hereby grants to the Agent for the ratable benefit of the
Purchasers a security interest in all of its now existing and hereafter arising
or acquired right, title and interest in and to the Receivables, the Related
Security, the Collection Accounts, the Collections and all proceeds of the
foregoing to secure payment of the Aggregate Unpaids, including its indemnity
obligations under Article 8 and all other obligations owed hereunder and under
                  ---------
the Fee Letter to the Agent and/or the Purchasers.

Non-Performing Investors.  If one or more Investors defaults in its obligation
------------------------
to pay its Pro Rata Share of the Purchase Price for a Receivables Interest
pursuant to Section 1.2(ii) (each such Investor shall be called a "Non-
            ---------------
Performing Investor" and the aggregate amount of such defaulted obligations
being herein called the "Purchase Price Deficit"), then upon notice from the
Agent, each other Investor (a "Performing Investor") shall promptly pay to the
Agent, in immediately available funds, an amount equal to the lesser of (x) such
Performing Investor's proportionate share (based upon the relative Commitments
of the Performing Investors) of the Purchaser Price Deficit and (y) the unused
portion of such Performing Investor's Commitment. A Non-Performing Investor
shall forthwith upon demand pay to the Agent for the account of the Performing
Investors all amounts paid by each Performing Investor on behalf of such Non-
Performing Investor, together with interest thereon, for each day from the date
a payment was made by a Performing Investor until the date such Performing
Investor has been paid such amounts in full, at a rate per annum equal to the
Federal Funds Effective Rate plus 2%. In addition, without prejudice to any
other rights that the Seller may have under applicable law, each Non-Performing
Investor shall pay to the Seller forthwith upon demand, the difference between
the Purchase Price Deficit and the amount paid with respect thereto pursuant to
this Section 1.11 by the Performing Investors, together with interest thereon,
     ------------
for each day from the date of the Agent's request for such Non-Performing
Investor's Pro Rata Share of the Purchase Price pursuant to Section 1.2(ii)
                                                            ---------------
until the date the requisite amount is paid to the Seller in full, at a rate per
annum equal to the Federal Funds Effective Rate plus 2%.

                                      11
<PAGE>

Characterization.  If the conveyance by the Seller to the Purchasers of
----------------
interests in Receivables hereunder shall be characterized as a secured loan and
not a sale, it is the intention of the parties hereto that this Agreement shall
constitute a security agreement under applicable law, and that the Seller shall
be deemed to have granted to the Agent for the ratable benefit of the Purchasers
a duly perfected Security Interest in all of the Seller's right, title and
interest in, to and under the Receivables, the Collections, each Collection
Account, all Related Security, all payments on or with respect to such
Receivables, all other rights relating to and payments made in respect of the
Receivables, and all proceeds of any thereof, prior to all other Security
Interests therein. After a Termination Event, the Agent and the Purchasers shall
have, in addition to the rights and remedies which they may have under this
Agreement, all other rights and remedies provided to a secured creditor after
default under the UCC and other applicable law, which rights and remedies shall
be cumulative.

Seller's Extinguishment.  The Seller shall have the right, on not less than
-----------------------
thirty (30) Business Days' written notice to the Agent, at any time following
the reduction of the Capital to a level that is less than 5.0% of the original
Purchase Limit, to repurchase from the Purchasers all, but not less than all, of
the then outstanding Receivable Interests. The purchase price in respect thereof
shall be an amount equal to the Aggregate Unpaids through the date of such
repurchase, payable in immediately available funds. Such repurchase shall be
without representation, warranty or recourse of any kind by, on the part of, or
against any Purchaser or the Agent.

LIQUIDITY FACILITY

Transfer to Investors.  Each Investor hereby agrees, subject to Section 2.4,
---------------------                                           -----------
that immediately upon written notice from PREFCO delivered on or prior to the
Liquidity Termination Date, it shall acquire by assignment from PREFCO, without
recourse or warranty, its Pro Rata Share of one or more of the Receivable
Interests of PREFCO as specified by PREFCO. The Agent shall promptly notify the
Seller of each notice from PREFCO received under this Section 2.1. Each Investor
                                                      -----------
shall promptly pay to the Agent at an account designated by the Agent, for the
benefit of PREFCO, its Acquisition Amount. Unless an Investor has notified the
Agent that it does not intend to pay its Acquisition Amount, the Agent may
assume that such payment has been made and may, but shall not be obligated to,
make the amount of such payment available to PREFCO in reliance upon such
assumption. PREFCO hereby sells and assigns to the Agent for the ratable benefit
of the Investors, and the Agent hereby purchases and assumes from PREFCO,
effective upon the receipt by PREFCO of the PREFCO Transfer Price, the
Receivable Interests of PREFCO which are the subject of any transfer pursuant to
this Article 2.
     ---------

Transfer Price Reduction Discount.  If the Adjusted Liquidity Price is included
---------------------------------
in the calculation of the PREFCO Transfer Price for any Receivable Interest,
each Investor agrees that the Agent shall pay to PREFCO the Reduction Percentage
of any Discount received by the Agent with respect to such Receivable Interest.

                                      12
<PAGE>

Payments to PREFCO.  In consideration for the reduction of the PREFCO Transfer
------------------
Prices by the PREFCO Transfer Price Reductions, effective only at such time as
the aggregate amount of the Capital of the Receivable Interests of the Investors
equals the PREFCO Residual, each Investor hereby agrees that the Agent shall not
distribute to the Investors and shall immediately remit to PREFCO any Discount,
Collections or other payments received by it to be applied pursuant to the terms
hereof or otherwise to reduce the Capital of the Receivable Interests of the
Investors.

Limitation on Commitment to Purchase from PREFCO.  Notwithstanding anything to
------------------------------------------------
the contrary in this Agreement, but without limiting the Investors' obligations
to the Seller to purchase Receivable Interests under Section 1.1, no Investor
                                                     -----------
shall have any obligation to purchase any Receivable Interest from PREFCO,
pursuant to Section 2.1 or otherwise, if:
            -----------

PREFCO shall have voluntarily commenced any proceeding or filed any petition
under any bankruptcy, insolvency or similar law seeking the dissolution,
liquidation or reorganization of PREFCO or taken any corporate action for the
purpose of effectuating any of the foregoing; or

involuntary proceedings or an involuntary petition shall have been commenced or
filed against PREFCO by any Person under any bankruptcy, insolvency or similar
law seeking the dissolution, liquidation or reorganization of PREFCO and such
proceeding or petition shall have not been dismissed.

                                      13
<PAGE>

Defaulting Investors.  If one or more Investors defaults in its obligation to
--------------------
pay its Acquisition Amount pursuant to Section 2.1 (each such Investor shall be
                                       -----------
called a "Defaulting Investor" and the aggregate amount of such defaulted
obligations being herein called the "PREFCO Transfer Price Deficit"), then upon
notice from the Agent, each Investor other than the Defaulting Investors (a
"Non-Defaulting Investor") shall promptly pay to the Agent, in immediately
available funds, an amount equal to the lesser of (x) such Non-Defaulting
Investor's proportionate share (based upon the relative Commitments of the Non-
Defaulting Investors) of the PREFCO Transfer Price Deficit and (y) the unused
portion of such Non-Defaulting Investor's Commitment. A Defaulting Investor
shall forthwith upon demand pay to the Agent for the account of the Non-
Defaulting Investors all amounts paid by each Non-Defaulting Investor on behalf
of such Defaulting Investor, together with interest thereon, for each day from
the date a payment was made by a Non-Defaulting Investor until the date such
Non-Defaulting Investor has been paid such amounts in full, at a rate per annum
equal to the Federal Funds Effective Rate plus 2%. In addition, without
prejudice to any other rights that PREFCO may have under applicable law, each
Defaulting Investor shall pay to PREFCO forthwith upon demand, the difference
between such Defaulting Investor's unpaid Acquisition Amount and the amount paid
with respect thereto by the non-Defaulting Investors, together with interest
thereon, for each day from the date of the Agent's request for such Defaulting
Investor's Acquisition Amount pursuant to Section 2.1 until the date the
                                          -----------
requisite amount is paid to PREFCO in full, at a rate per annum equal to the
Federal Funds Effective Rate plus 2%.

Representations of the Investors.  Each of the Investors hereby represents and
--------------------------------
warrants to the Seller, the Agent and PREFCO as follows:

This Agreement has been duly executed and delivered by such Investor,

The execution, delivery and performance by such Investor of this Agreement have
been duly authorized by all necessary corporate action,

Assuming the due authorization, execution and delivery of this Agreement by each
of the other parties hereto, this Agreement constitutes the legal, valid and
binding obligation of such Investor enforceable against such Investor in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws relating
to or limiting creditors' rights generally.

                                      14
<PAGE>

REPRESENTATIONS AND WARRANTIES

Seller Representations and Warranties.  The Seller hereby represents and
-------------------------------------
warrants to the Agent and the Purchasers that:

Corporate Existence and Power.  The Seller is a corporation duly organized,
----------------------------
validly existing and in good standing under the laws of its state of
incorporation, and has all corporate power and all governmental licenses,
authorizations, consents and approvals required to carry on its business in each
jurisdiction in which its business is conducted, except for such failures which
will not, individually or in the aggregate, have a Material Adverse Effect.

No Conflict.  The execution, delivery and performance by the Seller of this
-----------
Agreement and each other document to be delivered hereunder to which it is a
party, and the Seller's use of the proceeds of purchases made hereunder, are
within its corporate powers, have been duly authorized by all necessary
corporate action, do not contravene or violate (i) its certificate or articles
of incorporation or by-laws, (ii) any law, rule or regulation applicable to it,
(iii) any restrictions under any agreement, contract or instrument to which it
is a party or by which it or any of its property is bound, or (iv) any order,
writ, judgment, award, injunction or decree binding on or affecting it or its
property, and do not result in the creation or imposition of any Adverse Claim
on assets of the Seller (except created hereunder); and no transaction
contemplated hereby requires compliance with any bulk sales act or similar law.
This Agreement and each other document to be executed and delivered by the
Seller hereunder has been duly executed and delivered by the Seller.

Governmental Authorization.  Other than the filing of the financing statements
--------------------------
required hereunder, no authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Seller of this
Agreement, any Collection Account Agreement or any other document to be
delivered hereunder.

Binding Effect.  This Agreement and each Collection Account Agreement
--------------
constitutes the legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors' rights generally.

Accuracy of Information.  All relevant information heretofore furnished by the
-----------------------
Seller or any of its Affiliates to the Agent or the Purchasers for purposes of
or in connection with this Agreement or any transaction contemplated hereby is,
and all such information hereafter furnished by the Seller to the Purchasers
will be, true and accurate in every material respect, on the date such
information is stated or certified and does not and will not contain any
material misstatement of fact or omit to state a material fact or any fact
necessary to make the statements contained therein not misleading.

                                      15
<PAGE>

Use of Proceeds.  No proceeds of any Purchase will be used (i) for a purpose
---------------
which violates, or would be inconsistent with, Regulation T, U or X promulgated
by the Board of Governors of the Federal Reserve System from time to time or
(ii) to acquire any security in any transaction which is subject to Section 13
or 14 of the Securities Exchange Act of 1934, as amended.

Title to Receivables; Perfection.  The Seller has legal and equitable title to,
--------------------------------
and has the legal right to sell and encumber, each Receivable, its Collections
and the Related Security. Each such Receivable has been originated by the
Seller. Without limiting the foregoing, there has been duly filed all financing
statements or other similar instruments or documents necessary under the UCC of
all appropriate jurisdictions (or any comparable law) to perfect the Seller's
ownership interest in such Receivable. Immediately prior to each purchase
hereunder, the Seller shall be the legal and beneficial owner of the Receivables
and Collections and Related Security with respect thereto, free and clear of any
Adverse Claim, except as created by this Agreement and the documents entered
into in connection herewith and except for such Adverse Claims as to which the
Agent has received (i) an estoppel letter stating that upon receipt of
immediately available funds in an amount not to exceed the applicable Purchase
Price, such Adverse Claim(s) will be automatically terminated, and (ii)
irrevocable wire transfer instructions from the Seller directing the payment of
the applicable Purchase Price (or portion thereof necessary to effect such
automatic release of an Adverse Claim) directly to the holder of such Adverse
Claim. This Agreement is effective to, and shall, upon each purchase hereunder,
transfer to the relevant Purchaser or Purchasers (and such Purchaser or
Purchasers shall acquire from the Seller) a valid and perfected first priority
Security Interest in each Receivable existing or hereafter arising and in the
Related Security and Collections with respect thereto, free and clear of any
Adverse Claim, except as created by this Agreement and the documents entered
into in connection herewith.

Places of Business.  The principal places of business and chief executive office
------------------
of the Seller and the primary office where the Seller keeps Records is located
at the address(es) listed on Exhibit II or such other locations notified to the
Agent in accordance with Section 5.2(a) in jurisdictions where all action
                         --------------
required by Section 5.2(a) has been taken and completed. The Seller's Federal
            --------------
Employer Identification Number is correctly set forth on Exhibit II.

Collection Banks; etc.  Except as otherwise notified to the Agent in accordance
---------------------
with Section 5.2(b), (i) the Seller has instructed all Obligors to pay all
     --------------
Collections (A) directly to a lock-box listed on Exhibit III over which the
Seller has exclusive dominion and control or (B) at one of the Seller's or one
of its Wholly-Owned Subsidiaries' stores, (ii) all proceeds from such lock-boxes
are deposited directly by a Collection Bank into one of the depository accounts
listed on Exhibit III, (iii) the names and addresses of all Collection Banks,
together with the account numbers of the Collection Accounts of the Seller at
each Collection Bank, are listed on Exhibit III. The Seller has not granted any
Person, other than the Agent as contemplated by this Agreement, dominion and
control of any Collection Account, or the right to take dominion and control of
any Collection Account at a future time or upon the occurrence of a future
event.

Material Adverse Effect.  Since April 29, 1995, except as disclosed to the Agent
-----------------------
in writing prior to the date of this Agreement, no event has occurred which
would have a Material Adverse Effect.

                                      16
<PAGE>

Names.  In the past five years, the Seller has not used any corporate names,
-----
trade names or assumed names other than those listed on Exhibit II and names
notified to the Agent after the date of this Agreement in accordance with
Section 5.2(a).
--------------

Actions, Suits.  There are no actions, suits or proceedings pending, or to the
--------------
best of the Seller's knowledge, threatened, against or affecting the Seller, or
any of the respective properties of the Seller, in or before any court,
arbitrator or other body, which constitutes a Material Adverse Effect.

Credit and Collection Policy.  With respect to each Receivable, each of the
----------------------------
Seller and the Servicer has complied in all material respects with the Credit
and Collection Policy.

Payments to SPC.  With respect to each Receivable sold to the Seller by the SPC,
---------------
the Seller has given reasonably equivalent value to the SPC in consideration for
such Receivable and the Related Security with respect thereto and such transfer
was not made for or on account of an antecedent debt. No transfer by the SPC of
any Receivable is or may be voidable under any Section of the Bankruptcy Reform
Act of 1978 (11 U.S.C. (S) 101 et seq.), as amended.

Not an Investment Company.  The Seller is not an "investment company" within the
-------------------------
meaning of the Investment Company Act of 1940, as amended from time to time, or
any successor statute.

Purpose.  The Seller has determined that, from a business viewpoint, the sale of
-------
Receivable Interests to the Purchasers and the other transactions contemplated
herein, are in the best interest of the Seller.

Net Receivables Balance.  Both before and after giving effect to each
-----------------------
Incremental Purchase and Reinvestment, the Net Receivables Balance exceeds the
aggregate Capital then outstanding.

Investor Representations and Warranties.  Each Investor hereby represents and
---------------------------------------
warrants to the Agent and PREFCO that:

Existence and Power.  Such Investor is a corporation or a banking association
-------------------
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, and has all corporate power to
perform its obligations hereunder.

No Conflict.  The execution, delivery and performance by such Investor of this
-----------
Agreement are within its corporate powers, have been duly authorized by all
necessary corporate action, do not contravene or violate (i) its certificate or
articles of incorporation or association or by-laws, (ii) any law, rule or
regulation applicable to it, (iii) any restrictions under any agreement,
contract or instrument to which it is a party or any of its property is bound,
or (iv) any order, writ, judgment, award, injunction or decree binding on or
affecting it or its property, and do not result in the creation or imposition of
any Adverse Claim on its assets. This Agreement has been duly authorized,
executed and delivered by such Investor.

Governmental Authorization.  No authorization or approval or other action by,
--------------------------
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by such Investor of
this Agreement.

                                      17
<PAGE>

Binding Effect.  This Agreement constitutes the legal, valid and binding
--------------
obligation of such Investor enforceable against such Investor in accordance with
its terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws relating to or limiting
creditors' rights generally.

CONDITIONS OF PURCHASES

Conditions Precedent to Initial Purchase.  The initial purchase of a Receivable
----------------------------------------
Interest under this Agreement is subject to the conditions precedent that the
Agent shall have received on or before the date of such purchase those documents
listed on Schedule A hereto.

Conditions Precedent to Purchases and Reinvestments.  Each Incremental Purchase
---------------------------------------------------
of a Receivable Interest (other than pursuant to Section 2.1) and each
                                                 -----------
Reinvestment shall be subject to the further conditions precedent that:

in the case of each such Incremental Purchase, the Servicer shall have delivered
to the Agent on or prior to the date of such purchase, in form and substance
satisfactory to the Agent, all Periodic Reports due under Section 6.5;
                                                          -----------

on the date of each such Incremental Purchase and each Reinvestment, the
following statements shall be true both before and after giving effect to such
Incremental Purchase or Reinvestment (and acceptance of the proceeds of such
Incremental Purchase or Reinvestment shall be deemed a representation and
warranty by the Seller that such statements are then true):

the representations and warranties set forth in Section 3.1 are correct on and
                                                -----------
as of the date of such purchase or Reinvestment as though made on and as of such
date;

no event has occurred, or would result from such purchase or Reinvestment, that
will constitute a Termination Event, and, in the case of an Incremental
Purchase, no event has occurred and is continuing, or would result from such
Incremental Purchase that would constitute a Potential Termination Event; and

the Liquidity Termination Date shall not have occurred and the aggregate
Receivable Interests shall not exceed 100% and the aggregate outstanding Capital
does not exceed the Purchase Limit.

                                      18
<PAGE>

COVENANTS

Affirmative Covenants of Seller.  Until the date on which the Aggregate Unpaids
-------------------------------
have been indefeasibly paid in full, the Seller hereby covenants that:

Financial Reporting.  The Seller will maintain a system of accounting
-------------------
established and administered in accordance with generally accepted accounting
principles, and furnish to the Agent:

Annual Reporting.  Within 90 days after the close of each of its fiscal years,
----------------
consolidated financial statements of Kohl's Corporation for such fiscal year
certified in a manner acceptable to the Agent by independent public accountants
acceptable to the Agent.

Quarterly Reporting.  Within 45 days after the close of the first three
-------------------
quarterly periods of each of its fiscal years, consolidated balance sheets of
Kohl's Corporation as at the close of each such period and related consolidated
statements of income and retained earnings and a consolidated statement of cash
flows for the period from the beginning of such fiscal year to the end of such
quarter, all certified by its chief financial officer.

Compliance Certificate.  Together with the financial statements required
----------------------
hereunder, a compliance certificate in substantially the form of Exhibit IV
signed by the Seller's corporate comptroller or chief financial officer and
dated the date of such annual financial statement or such quarterly financial
statement, as the case may be.

Shareholders Statements and Reports.  Promptly upon the furnishing thereof to
-----------------------------------
the shareholders of Kohl's Corporation, copies of all financial statements,
reports and proxy statements so furnished.

S.E.C. Filings.  Promptly upon the filing thereof, copies of all registration
--------------
statements and annual, quarterly, monthly or other regular reports which the
Seller or Kohl's Corporation files with the Securities and Exchange Commission.

Change in Credit and Collection Policy.  At least 30 days prior to the
--------------------------------------
effectiveness of any material change in or amendment to the Credit and
Collection Policy, a copy of the Credit and Collection Policy then in effect and
a notice indicating such change or amendment.

Notices under Transaction Documents.  Forthwith upon its receipt of any notice,
-----------------------------------
request for consent, financial statements, certification, report or other
communication under or in connection with any Transaction Document from any
Person other than the Agent or PREFCO, copies of the same.

                                      19
<PAGE>

Notices.  The Seller will notify the Agent in writing of any of the following
-------
immediately upon learning of the occurrence thereof, describing the same and, if
applicable, the steps being taken with respect thereto:

Termination Events, Servicer Defaults, Potential Termination Events and
-----------------------------------------------------------------------
Potential Servicer Defaults.  The occurrence of each Termination Event, (for so
---------------------------
long as the Seller is the Servicer) Servicer Default or each Potential
Termination Event or (for so long as the Seller is the Servicer) Potential
Servicer Default, by a statement of the corporate comptroller or senior
financial officer of the Seller.

Judgment.  The entry of any judgment or decree against the Seller if the
--------
aggregate amount of all judgments and decrees then outstanding against the
Seller exceeds $10,000,000 after deducting (a) the amount with respect to which
the Seller is insured and with respect to which the insurer has assumed
responsibility in writing, and (b) the amount for which the Seller is otherwise
indemnified if the terms of, and creditworthiness of the provider of, such
indemnification are reasonably satisfactory to the Agent.

Downgrade.  Any downgrade in the rating of any Indebtedness of the Seller or any
---------
downgrade below investment grade in the rating of any Indebtedness of Kohl's
Corporation by Standard & Poor's Ratings Group or by Moody's Investors Service,
Inc., setting forth the Indebtedness affected and the nature of such change.

                                      20
<PAGE>

Compliance with Laws.  The Seller will comply in all respects with all
--------------------
applicable laws, rules, regulations, orders writs, judgments, injunctions,
decrees or awards to which it may be subject, the failure to comply with which,
individually or in the aggregate, will or could reasonably be expected to have a
Material Adverse Effect.

Audits.  The Seller will furnish to the Agent from time to time such information
------
with respect to it and the Receivables as the Agent may reasonably request. The
Seller shall, from time to time during regular business hours as requested by
the Agent upon reasonable notice, permit the Agent, or its agents or
representatives at their expense except as hereinafter provided: (i) to examine
and make copies of and abstracts from all Records in the possession or under the
control of the Seller relating to Receivables and the Related Security,
including, without limitation, the related Contracts, and (ii) to visit the
offices and properties of the Seller for the purpose of examining such materials
described in clause (i) above, and to discuss matters relating to the Seller's
financial condition or the Receivables and the Related Security or the Seller's
performance under any of the Transaction Documents or the Seller's performance
under the Contracts with any of the officers or employees of the Seller having
knowledge of such matters. Notwithstanding the foregoing, the Seller shall
reimburse the Agent for up to $7,500 of the reasonable costs of each audit
conducted by the Agent not more than once every two years. From and after the
occurrence of a Servicer Default, the timing and expense limitations contained
in the foregoing sentence shall no longer apply.

Keeping and Marking of Records and Books.
----------------------------------------

The Seller will maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate records evidencing
Receivables in the event of the destruction of the originals thereof), and keep
and maintain all documents, books, records and other information reasonably
necessary or advisable for the collection of all Receivables (including, without
limitation, records adequate to permit the immediate identification of each new
Receivable and all Collections of and adjustments to each existing Receivable).
The Seller will give the Agent notice of any material change in the
administrative and operating procedures referred to in the previous sentence.

The Seller will (A) on or prior to the date hereof, mark its master data
processing records and other books and records relating to the Receivable
Interests with a legend stating that the Receivables are subject to a Security
Interest in favor of the Agent for the benefit of the Purchasers and (B) upon
the request of the Agent following a Servicer Default:  (1) mark each Contract
(other than sales receipts) with a legend describing the Security Interest of
the Agent and (2) deliver to the Agent all Contracts (including, without
limitation, all multiple originals in the Seller's possession of any such
Contract which constitutes an instrument, a letter of credit or chattel paper)
relating to the Receivables.

                                      21
<PAGE>

Compliance with Contracts and Credit and Collection Policy.  The Seller will
----------------------------------------------------------
timely and fully (i) perform and comply with all provisions, covenants and other
promises required to be observed by it under the Contracts related to the
Receivables, and (ii) comply in all material respects with the Credit and
Collection Policy in regard to each Receivable and the related Contract. The
Seller will pay when due any sales, use, excise, stamp or other transactional
taxes payable in connection with the Receivables or the sale of goods or
services giving rise thereto.

Ownership Interest.  The Seller shall take all necessary action to establish and
------------------
maintain a valid and perfected first priority undivided percentage ownership
interest in the Receivables and the Related Security and Collections with
respect thereto, to the full extent contemplated herein, in favor of the Agent
and the Purchasers, including, without limitation, taking such action to
perfect, protect or more fully evidence the interest of the Agent and the
Purchasers hereunder as the Agent may reasonably request.

Collections.  The Seller shall instruct all Obligors to pay all Collections
-----------
directly to (i) a segregated lock-box or other Collection Account listed on
Exhibit III, each of which is subject to a Collection Account Agreement, or (ii)
at one of the Seller's or one of its Wholly-Owned Subsidiaries' stores. The
Seller shall maintain exclusive dominion and control (subject to the terms of
this Agreement) to each Collection Account. In the case of any Collections
received by the Seller or at one of its or its Wholly-Owned Subsidiary's stores
following the occurrence of a Servicer Default, the Seller shall remit such
Collections to a Collection Account of the Seller not later than the Business
Day immediately following the date of receipt of such Collections, and, at all
times prior to such remittance, the Seller shall itself hold such Collections in
trust, for the exclusive benefit of the Agent and the Purchasers. In the case of
any remittances received by the Seller in any such Collection Account that shall
have been identified, to the satisfaction of the Servicer, to not constitute
Collections or other proceeds of the Receivables or the Related Security, the
Seller shall promptly remit such items to the Person identified to it as being
the owner of such remittances. From and after the date the Agent delivers to any
of the Collection Banks a Collection Notice pursuant to Section 6.3, the Agent
                                                        -----------
may request that the Seller direct all Obligors on Receivables to remit all
payments thereon to a new depositary account (the "New Concentration Account")
specified by the Agent and, at all times thereafter the Seller shall not deposit
or otherwise credit, and shall not permit any Person to deposit or otherwise
credit to the New Concentration Account any cash or payment item other than
Collections. Alternatively, the Agent may request that the Seller, and the
Seller thereupon promptly shall, direct all Persons then making remittances to
any Collection Account listed on Exhibit III which remittances are not payments
on Receivables to deliver such remittances to a location other than an account
listed on Exhibit III.

Negative Covenants of Seller.  Until the date on which the Aggregate Unpaids
----------------------------
have been indefeasibly paid in full, the Seller hereby covenants that:

                                      22
<PAGE>

Name Change, Offices, Records and Books of Accounts.  The Seller will not change
---------------------------------------------------
its name, identity or corporate structure (within the meaning of Section
9-402(7) of any applicable enactment of the UCC), use any new trade name or
assumed business name to identify itself, or relocate its chief executive office
or any office where Records are kept unless it shall have: (i) given the Agent
at least 45 days prior notice thereof and (ii) delivered to the Agent all
financing statements, instruments and other documents requested by the Agent in
connection with such change or relocation.

Change in Payment Instructions to Obligors. The Seller will not add or terminate
------------------------------------------
any bank as a Collection Bank from those listed in Exhibit III, or make any
change in its instructions to Obligors regarding payments to be made to the
Seller or payments to be made to any Collection Account or Collection Bank,
unless the Agent shall have received, at least 10 days before the proposed
effective date therefor, (i) written notice of such addition, termination or
change and (ii) with respect to the addition of a Collection Bank or a
Collection Account, an executed account agreement from, and executed copies of a
Collection Account Agreement to, the Collection Bank; provided, however, that
the Seller may make changes in instructions to Obligors regarding payments if
such new instructions require such Obligor to make payments to another existing
Collection Account.

Modifications of Receivables and Contracts.  Except as provided in Section
------------------------------------------                         -------
6.2(c), the Seller, acting as Servicer or otherwise, will not extend, amend or
------
otherwise modify the economic terms of any Receivable or of any Contract related
thereto other than in accordance with the Credit and Collection Policy, or amend
any Contract to convert it into "chattel paper", except that the Seller may
amend the economic terms of any Contract (and, to the extent applicable, the
Credit and Collection Policy) to: (x) comply with applicable laws and
regulations from time to time in effect in any state in which the Seller now or
hereafter extends consumer credit, (y) increase the interest rate, fees or
minimum monthly installments payable thereunder, and/or (z) shorten the maturity
of amounts outstanding thereunder (all of the foregoing, "Permitted Amendments")
provided the Seller promptly provides copies of each Permitted Amendment to the
Agent for distribution to the Purchasers.

Sales, Liens, Etc.  The Seller shall not sell, assign (by operation of law or
-----------------
otherwise) or otherwise dispose of, or grant any option with respect to, or
create or suffer to exist any Adverse Claim upon (including, without limitation,
the filing of any financing statement) or with respect to, any Receivable or
Related Security or Collections in respect thereof, or upon or with respect to
any Contract under which any Receivable arises, or any lock-box or Collection
Account or assign any right to receive income in respect thereof (other than, in
each case, the creation of the interests therein in favor of the Agent and the
Purchasers provided for herein), and the Seller shall defend the right, title
and interest of the Agent and the Purchasers in, to and under any of the
foregoing property, against all claims of third parties claiming through or
under the Seller.

Amendments to Corporate Documents.  The Seller shall not amend its Articles of
---------------------------------
Incorporation or By-Laws in any respect that would impair its ability to comply
with the terms or provisions of any of the Transaction Documents.

ADMINISTRATION AND COLLECTION

                                      23
<PAGE>

Designation of Servicer The servicing, administration and collection of the
-----------------------
Receivables shall be conducted by such Person (the "Servicer") so designated
from time to time in accordance with this Section 6.1. The Seller is hereby
                                          -----------
designated as, and hereby agrees to perform the duties and obligations of, the
Servicer pursuant to the terms of this Agreement. The Agent may at any time
following a Servicer Default designate as Servicer any Person to succeed the
Seller or any successor Servicer.

The Seller is permitted to delegate, with the prior written consent of the
Required Investors, which consent shall not be unreasonably withheld, certain of
its duties and responsibilities as Servicer hereunder. Notwithstanding the
foregoing, (i) the Seller shall be and remain primarily liable to the Agent and
the Purchasers for the full and prompt performance of all duties and
responsibilities of the Servicer hereunder and (ii) the Agent and the Purchasers
shall be entitled to deal exclusively with the Seller in matters relating to the
discharge by the Servicer of its duties and responsibilities hereunder, and the
Agent and the Purchasers shall not be required to give notice, demand or other
communication to any Person other than the Seller in order for communication to
the Servicer and its subservicer or other delegate in respect thereof to be
accomplished.  The Seller, at all times that it is the Servicer, shall be
responsible for providing its subservicer or other delegate with any notice
given under this Agreement.

Duties of Servicer.  The Servicer shall take or cause to be taken all such
------------------
actions as may be necessary or reasonably advisable to collect each Receivable
from time to time, all in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Credit and Collection Policy.

The Servicer shall administer the Collections in accordance with the procedures
described herein and in Article 1.  The Servicer shall set aside and hold in
                        ---------
trust for the account of the Seller and the Purchasers their respective shares
of the Collections of Receivables in accordance with Section 1.7.  The Servicer
                                                     -----------
shall upon the request of the Agent after the occurrence of a Termination Event,
segregate, in a manner acceptable to the Agent, all cash, checks and other
instruments received by it from time to time constituting Collections from the
general funds of the Servicer or the Seller prior to the remittance thereof in
accordance with Section 1.7.  If the Servicer shall be required to segregate
                -----------
Collections pursuant to the preceding sentence, the Servicer shall segregate and
deposit with a bank designated by the Agent such allocable share of Collections
of Receivables set aside for the Purchasers on the first Business Day following
receipt by the Servicer of such Collections, duly endorsed or with duly executed
instruments of transfer. From and after a Servicer Default, all Collection
Accounts shall be required to be concentrated on a daily basis into a
concentration account at the Agent or at another bank but under the Agent's
exclusive dominion and control for the benefit of the Seller and the applicable
Purchasers, as their interests may appear, to be distributed in accordance with
Section 1.7.
-----------

                                      24
<PAGE>

The Servicer, may, in accordance with the Credit and Collection Policy, extend
the maturity of any Receivable or adjust the Outstanding Balance of any
Receivable as the Servicer may determine to be appropriate to maximize
Collections thereof; provided, however, that such extension or adjustment shall
not alter the status of such Receivable as a Delinquent Receivable or Defaulted
Receivable or limit the rights of the Seller, the Agent or the Purchasers under
this Agreement.  Notwithstanding anything to the contrary contained herein,
following the occurrence of a Servicer Default, the Agent shall have the
absolute and unlimited right to direct the Servicer to commence or settle any
legal action with respect to any Receivable or to foreclose upon or repossess
any Related Security.

The Servicer shall hold in trust for the Seller and the Purchasers, in
accordance with their respective Receivable Interests, all Records that evidence
or relate to the Receivables, the related Contracts and Related Security and/or
the Collections or that are otherwise necessary or desirable to collect the
Receivables and shall, as soon as practicable upon demand of the Agent following
a Servicer Default, deliver or make available to the Agent all such Records, at
a place selected by the Agent.  The Servicer shall, as soon as practicable
following receipt thereof, turn over to the Seller (i) that portion of
Collections of Receivables representing the Seller's undivided fractional
ownership interest therein, less, in the event the Seller is not the Servicer,
all reasonable out-of-pocket costs and expenses of the Servicer of servicing,
administering and collecting the Receivables, and (ii) any cash collections or
other cash proceeds received with respect to Indebtedness not constituting
Receivables.  The Servicer shall, from time to time at the request of any
Purchaser, furnish to the Purchasers (promptly after any such request) a
calculation of the amounts set aside for the Purchasers pursuant to Section 1.7.
                                                                    -----------

Any payment by an Obligor in respect of any indebtedness owed by it to the
Seller shall, except as otherwise specified by such Obligor or otherwise
required by contract or law and unless otherwise instructed by the Agent, be
applied as a Collection of any Receivable of such Obligor (starting with the
oldest such Receivable) to the extent of any amounts then due and payable
thereunder before being applied to any other receivable or other obligation of
such Obligor.

                                      25
<PAGE>

Collection Notices. The Agent is authorized at any time after a Servicer Default
------------------
to date and to deliver to the Collection Banks, the Collection Notices. The
Seller hereby transfers to the Agent for the benefit of the Purchasers,
effective when the Agent delivers such notice, the exclusive ownership and
control of the Collection Accounts. In case any authorized signatory of the
Seller whose signature appears on a Collection Account Agreement shall cease to
have such authority before the delivery of such Collection Notice, such
Collection Notice shall nevertheless be valid as if such authority had remained
in force. The Seller hereby authorizes the Agent, and agrees that at any time
and from time to time following a Servicer Default, the Agent shall be entitled
to: (i) endorse the Seller's name on checks and other instruments representing
Collections, (ii) enforce the Receivables, the related Contracts and the Related
Security, and (iii) take such action as shall be necessary or desirable to cause
all cash, checks and other instruments constituting Collections of Receivables
to come into the possession of the Agent rather than the Seller.

Responsibilities of the Seller. Anything herein to the contrary notwithstanding,
------------------------------
the exercise by the Agent and the Purchasers of their rights hereunder shall not
release the Servicer or the Seller from any of their duties or obligations with
respect to any Receivables or under the related Contracts. The Purchasers shall
have no obligation or liability with respect to any Receivables or related
Contracts, nor shall any of them be obligated to perform the obligations of the
Seller.

Reports. On the 20th day after each of the Seller's (approximately monthly)
-------
fiscal accounting periods and at such other times as the Agent shall reasonably
request, the Servicer shall prepare and forward to the Agent a Periodic Report.

SERVICER DEFAULTS AND TERMINATION EVENTS

Servicer Defaults. The occurrence of any one or more of the following events
-----------------
shall constitute a Servicer Default:

The Servicer shall fail to make any payment or deposit required hereunder on or
within one Business Day after the date when required to be made.

The Servicer shall fail to perform or observe any term, covenant or agreement
under Article 6 or Section 11.6, which failure remains unremedied for five
      ---------    ------------
Business Days after notice from the Agent, and such failure shall have a
Material Adverse Effect.

                                      26
<PAGE>

(i) The Seller or the Servicer shall generally not pay its debts as such debts
become due or shall admit in writing its inability to pay its debts generally or
shall make a general assignment for the benefit of creditors; (ii) any
proceeding shall be instituted by the Seller or the Servicer seeking to
adjudicate it bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee or other similar official for it or any
substantial part of its property (each of the foregoing proceedings being
hereinafter referred to as an "Insolvency Proceeding"); (iii) any Insolvency
Proceeding shall be instituted against the Seller and either (A) shall result in
the entry of an order for relief against the Seller, or (B) shall continue
undischarged, undismissed or unstayed for a period of 60 consecutive days; or
(iv) the Seller or the Servicer shall take any corporate action to authorize any
of the actions set forth in clauses (i)-(iii) above in this subsection (c).

Termination Events. The occurrence of any one or more of the following events
------------------
shall constitute a Termination Event:

The Seller shall fail (i) to make any payment or deposit required under this
Agreement or any of the other Transaction Documents on or within one Business
Day after the date when required to be made, or (ii) to perform or observe any
term, covenant or agreement hereunder and such failure shall remain unremedied
for five Business Days after notice from the Agent.

Any representation, warranty, certification or statement made by the Seller, or
the Servicer in this Agreement, any other Transaction Document or in any other
document delivered pursuant hereto or thereto shall prove to have been incorrect
in any material respect when made or deemed made and shall have a Material
Adverse Effect.

(i) Failure of the Seller to pay any Indebtedness in excess of $10,000,000 when
due; or the default by the Seller in the performance of any term, provision or
condition contained in any agreement under which any Indebtedness in excess of
$10,000,000 was created or is governed, the effect of which is to cause, or to
permit the holder or holders of such Indebtedness to cause, such Indebtedness to
become due prior to its stated maturity; or any Indebtedness in excess of
$10,000,000 of the Seller shall be declared to be due and payable or required to
be prepaid (other than by a regularly scheduled payment) prior to the date of
maturity thereof.

A Servicer Default shall occur.

The average of the Delinquency Ratios for the most recent three (3) consecutive
calendar months shall exceed 4.5%.

The Loss-to-Liquidation Ratio for the three most recent consecutive calendar
months shall exceed 3.5%.

A Change of Control shall occur.

                                      27
<PAGE>

The Seller shall fail to perform or observe any term, covenant or agreement
contained in the Transaction Documents and such failure shall continue
unremedied beyond any applicable grace or cure period provided therein.

The aggregate Receivable Interests hereunder shall at any time exceed 100%.

Kohl's Corporation fails to maintain any of the financial ratios set forth in
Section 7.8 of the Credit Agreement as in effect on the date hereof and as
hereafter waived, amended, restated, or otherwise modified or replaced from time
to time with the consent of the Agent (and, if any such modification or
replacement makes such financial ratios more restrictive to or more burdensome
on Kohl's Corporation, the consent of the Seller) (it being agreed that if any
of such financial ratios are modified or replaced and any consent contemplated
by this clause (j) has not been obtained, the financial ratios for the purposes
of this clause (j) shall mean the financial ratios without giving effect to such
modification or replacement).

INDEMNIFICATION

Indemnities by the Seller. Without limiting any other rights which the Agent
-------------------------
or any Purchaser may have hereunder or under applicable law, the Seller hereby
agrees to indemnify the Agent and each Purchaser and their respective officers,
directors, agents and employees (each, an "Indemnified Party") from and against
any and all damages, losses, claims, taxes, liabilities, costs, expenses and for
all other amounts payable, including reasonable attorneys' fees (which attorneys
may be employees of the Agent or such Purchaser) and disbursements (all of the
foregoing being collectively referred to as "Indemnified Amounts") awarded
against or actually incurred by any of them arising out of or as a result of
this Agreement or the acquisition, either directly or indirectly, by a Purchaser
of an interest in the Receivables, excluding, however:

Indemnified Amounts to the extent final judgment of a court of competent
jurisdiction holds that (A) such Indemnified Amounts resulted primarily from
gross negligence or willful misconduct on the part of the Indemnified Party
seeking indemnification, or (B) such Indemnified Amounts resulted primarily
from, arose primarily out of, or would not have occurred but for:  (x) any
representation or warranty of such Indemnified Party being materially incorrect,
(y) the failure by such Indemnified Party to perform or observe any covenant in
this Agreement required to be performed or observed by it, and (z) any breach by
the Agent or any Investor of its duties and obligations hereunder;

Indemnified Amounts to the extent the same includes losses in respect of
Eligible Receivables which are uncollectible on account of the insolvency,
bankruptcy or lack of creditworthiness of the related Obligor and the aggregate
amount of such uncollectible Eligible Receivables exceeds the Loss Recourse
Percentage of the Capital outstanding on the Facility Termination Date;

taxes imposed by the country and state or province in which such Indemnified
Party's principal executive office is located, on or measured by the overall net
income, capital or assets of such Indemnified Party to the extent that the
computation of such taxes is consistent with the Intended Characterization;

                                      28
<PAGE>

attorneys' fees and other expenses incurred in connection with the making of any
assignment, or the sale of any participation, pursuant to Article 10;
                                                          ----------

Indemnified Amounts arising with respect to events occurring after payment in
full of the Aggregate Unpaids and termination of this Agreement; and

Indemnified Amounts to the extent the same (1) duplicate other Aggregate Unpaids
which have been paid pursuant to another provision of this Agreement, or (2)
represent expenses of the types addressed in Section 8.3 of this Agreement to
                                             -----------
the extent such expenses (A) exceed the applicable limitations set forth therein
or (B) are excluded from the Seller's reimbursement obligations thereunder;

provided, however, that nothing contained in this sentence shall limit the
liability of the Seller or the Servicer or limit the recourse of the Purchasers
to the Seller or Servicer for amounts otherwise specifically provided to be paid
by the Seller or (for so long as the Seller shall be the Servicer) the Servicer
under the terms of this Agreement.  Without limiting the generality of the
foregoing indemnification, the Seller shall indemnify the Agent and the
Purchasers for Indemnified Amounts (including, without limitation, losses in
respect of uncollectible receivables, regardless of whether reimbursement
therefor would constitute recourse to the Seller or the Servicer) relating to or
resulting from:

(a)  any representation or warranty made by the Seller or (for so long as the
Seller shall be the Servicer) the Servicer (or any officers of the Seller or
(for so long as the Seller shall be the Servicer) the Servicer) under or in
connection with this Agreement, any other Transaction Document, any Periodic
Report or any other information or report delivered by the Seller or (for so
long as the Seller shall be the Servicer) the Servicer pursuant hereto or
thereto, which shall have been false or incorrect when made or deemed made;

(b)  the failure by the Seller or (for so long as the Seller shall be the
Servicer) the Servicer to comply with any applicable law, rule or regulation
with respect to any Receivable or Contract related thereto, or the nonconformity
of any Receivable or Contract included therein with any such applicable law,
rule or regulation;

(c)  any failure of the Seller or (for so long as the Seller shall be the
Servicer) the Servicer to perform its duties or obligations in accordance with
the provisions of this Agreement or any of the other Transaction Documents;

(d)  any products liability or similar claim arising out of or in connection
with merchandise, insurance or services which are the subject of any Contract;

(e)  any dispute, claim, offset or defense (other than discharge in bankruptcy
of the Obligor) of the Obligor to the payment of any Receivable (including,
without limitation, a defense based on such Receivable or the related Contract
not being a legal, valid and binding obligation of such Obligor enforceable
against it in accordance with its terms), or any other claim resulting from the
sale of the merchandise or service related to such Receivable or the furnishing
or failure to furnish such merchandise or services;

                                      29
<PAGE>

(f)  the commingling of Collections of Receivables at any time with other funds;

(g)  any investigation, litigation or proceeding related to or arising from this
Agreement, any of the other Transaction Documents, the transactions contemplated
hereby or thereby, the use of the proceeds of a purchase, the ownership of the
Receivable Interests or any other investigation, litigation or proceeding
relating to the Seller in which any Indemnified Party becomes involved as a
result of any of the transactions contemplated hereby;

(h)  any inability to litigate any claim against any Obligor in respect of any
Receivable as a result of such Obligor being immune from civil and commercial
law and suit on the grounds of sovereignty or otherwise from any legal action,
suit or proceeding;

(i)  any Servicer Default described in Section 7.1(c);
                                       --------------

(j)  the failure to vest and maintain vested in the Agent and the Purchasers, or
to transfer to the Agent and the Purchasers, legal and equitable title to, and
ownership of, a first priority perfected undivided percentage ownership (to the
extent of the Receivable Interests contemplated hereunder) in the Receivables,
the Related Security and the Collections, free and clear of any Adverse Claim;
or

(k)  any failure of the Seller to give reasonably equivalent value to the SPC in
consideration of the transfer by the SPC of any Receivable, or any attempt by
any Person to void any such transfer under statutory provisions or common law or
equitable action, including, without limitation, any provision of the Bankruptcy
Code.

                                      30
<PAGE>

Increased Costs and Reduced Return.
----------------------------------

If after the date hereof, any Funding Source shall be charged any fee, expense
or increased cost on account of the adoption of any applicable law, rule or
regulation (including any applicable law, rule or regulation regarding capital
adequacy) or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency (a "Regulatory Change"): (i)
which subjects any Funding Source to any charge or withholding on or with
respect to any Funding Agreement or a Funding Source's obligations under a
Funding Agreement, or on or with respect to the Receivables, or changes the
basis of taxation of payments to any Funding Source of any amounts payable under
any Funding Agreement (except for changes in the rate of tax on the overall net
income of a Funding Source) or (ii) which imposes, modifies or deems applicable
any reserve, assessment, insurance charge, special deposit or similar
requirement against assets of, deposits with or for the account of a Funding
Source, or credit extended by a Funding Source pursuant to a Funding Agreement
or (iii) which imposes any other condition the result of which is to increase
the cost to a Funding Source of performing its obligations under a Funding
Agreement, or to reduce the rate of return on a Funding Source's capital as a
consequence of its obligations under a Funding Agreement, or to reduce the
amount of any sum received or receivable by a Funding Source under a Funding
Agreement or to require any payment calculated by reference to the amount of
interests or loans held or interest received by it, then, upon demand by the
Agent, the Seller shall pay to the Agent, for the benefit of the relevant
Funding Source, such amounts charged to such Funding Source or compensate such
Funding Source for such reduction; provided, however, that the Seller shall not
be obligated to reimburse any Funding Source other than an Investor for any of
the increased costs described in the foregoing clauses (i), (ii) or (iii) unless
such Funding Source is entitled to seek and, in fact demands, reimbursement
therefor from a Purchaser or its assets.

Each Investor agrees that it shall use its reasonable best efforts to attempt to
avoid the incurrence of the increased costs described in Section 8.2(a);
                                                         --------------
provided that such Investor shall not be obligated to take any action that
would, in the reasonable opinion of such Investor, be disadvantageous to such
Investor.  In the event that any Funding Source claims any increased costs
pursuant to Section 8.2(a), the applicable Purchaser will furnish to the Agent a
            --------------
certificate setting forth the basis and amount of each request for reimbursement
by such Funding Source.  Determinations by a Purchaser of increased costs
referred to in Section 8.2(a) shall be conclusive, absent manifest error.
               --------------

                                      31
<PAGE>

Other Costs and Expenses. The Seller shall pay to the Agent and PREFCO on
------------------------
demand all costs and out-of-pocket expenses in connection with the preparation,
execution, delivery, amendment, waiver and administration of this Agreement, the
transactions contemplated hereby and the other documents to be delivered
hereunder, including without limitation, the cost of PREFCO's auditors auditing
the books, records and procedures of the Seller, reasonable fees and out-of-
pocket expenses of legal counsel for PREFCO and the Agent (which such counsel
may be employees of PREFCO or the Agent) with respect thereto and with respect
to advising PREFCO and the Agent as to their respective rights and remedies
under this Agreement; provided, however, that (a) the Seller's obligation to
reimburse the Agent and PREFCO for legal fees in connection with any amendment
to increase the Purchase Limit in accordance with Section 1.1(c) shall not
                                                  --------------
exceed $1,000 per amendment, (b) the Seller's obligation to reimburse the Agent
for audit fees shall not exceed $7,500 for each biennial audit, (c) the Seller
shall not be obligated to reimburse the Agent or any Purchaser for any legal
fees or out-of-pocket expenses incurred in connection with any extension of the
Facility Termination Date and Liquidity Termination Date pursuant to Section
                                                                     -------
1.1(e), the making of any assignment or the sale of any participation pursuant
------
to Article 10 of this Agreement, or any dispute arising amongst any of the
Purchasers and/or between any Purchaser(s) and the Agent, and (d) the Seller
shall not be obligated to reimburse the Agent or any Purchaser for any fees or
expenses which are expressly excluded from the indemnifications set forth in
Sections 8.2 and 8.3. From and after the occurrence of a Servicer Default, the
------------     ---
timing and expense limitations on future audits contained in the foregoing
clause (c) shall no longer apply. The Seller shall pay to the Agent on demand
any and all costs and expenses of the Agent and the Purchasers, if any,
including reasonable counsel fees and expenses in connection with the
enforcement of this Agreement and the other documents delivered hereunder and in
connection with any restructuring or workout of this Agreement or such
documents, or the administration of this Agreement following a Servicer Default.

THE AGENT

                                      32
<PAGE>

Authorization and Action. Each Purchaser hereby designates and appoints Bank
------------------------
One to act as its agent hereunder and under each other Transaction Document, and
authorizes the Agent to take such actions as agent on its behalf and to exercise
such powers as are delegated to the Agent by the terms of this Agreement and the
other Transaction Documents together with such powers as are reasonably
incidental thereto. The Agent shall not have any duties or responsibilities,
except those expressly set forth herein or in any other Transaction Document, or
any fiduciary relationship with any Purchaser, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities on the part of
the Agent shall be read into this Agreement or any other Transaction Document or
otherwise exist for the Agent. In performing its functions and duties hereunder
and under the other Transaction Documents, the Agent shall act solely as agent
for the Purchasers and does not assume nor shall be deemed to have assumed any
obligation or relationship of trust or agency with or for the Seller or any of
its successors or assigns. The Agent shall not be required to take any action
which exposes the Agent to personal liability or which is contrary to this
Agreement, any other Transaction Document or applicable law. The appointment and
authority of the Agent hereunder shall terminate upon the indefeasible payment
in full of all Aggregate Unpaids. Each Purchaser hereby authorizes the Agent to
execute each of the Uniform Commercial Code financing statements and the
Collections Notices on behalf of such Purchaser (the terms of which shall be
binding on such Purchaser).

Delegation of Duties. The Agent may execute any of its duties under this
--------------------
Agreement and each other Transaction Document by or through agents or attorneys-
in-fact and shall be entitled to advice of counsel concerning all matters
pertaining to such duties. The Agent shall not be responsible to any Purchaser
for the negligence or misconduct of any agents or attorneys-in-fact selected by
the Agent with reasonable care.

Exculpatory Provisions. Neither the Agent nor any of its directors, officers,
----------------------
agents or employees shall be (i) liable for any action lawfully taken or omitted
to be taken by it or them under or in connection with this Agreement or any
other Transaction Document (except for its, their or such Person's own gross
negligence or willful misconduct), or (ii) responsible in any manner to any of
the Purchasers for any recitals, statements, representations or warranties made
by the Seller contained in this Agreement, any other Transaction Document or any
certificate, report, statement or other document referred to or provided for in,
or received under or in connection with, this Agreement, or any other
Transaction Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any other Transaction
Document or any other document furnished in connection herewith or therewith, or
for any failure of the Seller to perform its obligations hereunder or
thereunder, or for the satisfaction of any condition specified in Article 4, or
                                                                  ---------
for the perfection, priority, condition, value or sufficiency or any collateral
pledged in connection herewith. The Agent shall not be under any obligation to
any Purchaser to ascertain or to inquire as to the observance or performance of
any of the agreements or covenants contained in, or conditions of, this
Agreement or any other Transaction Document, or to inspect the properties, books
or records of the Seller. The Agent shall not be deemed to have knowledge of any
Servicer Default, Potential Servicer Default, Termination Event or Potential
Termination Event unless the Agent has received notice from the Seller or a
Purchaser.

                                      33
<PAGE>

Reliance by Agent. The Agent shall in all cases be entitled to rely, and shall
-----------------
be fully protected in relying, upon any document or conversation believed by it
to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Seller), independent accountants and other
experts selected by the Agent. Each of the Purchasers hereby agrees that: (a)
the Agent shall in all cases be fully justified in failing or refusing to take
any action under this Agreement or any other Transaction Document unless it
shall first receive such advice or concurrence of PREFCO or the Required
Investors or all of the Purchasers, as applicable, as it deems appropriate and
it shall first be indemnified to its satisfaction by the Purchasers, provided
that unless and until the Agent shall have received such advice, the Agent may
take or refrain from taking any action, as the Agent shall deem advisable and in
the best interests of the Purchasers, and (b) the Agent shall in all cases be
fully protected from any claims brought by or on behalf of any Purchaser(s) in
acting, or in refraining from acting, in accordance with a request of PREFCO or
the Required Investors or all of the Purchasers, as applicable, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Purchasers.

Non-Reliance on Agent and Other Purchasers. Each Purchaser expressly
------------------------------------------
acknowledges that neither the Agent, nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates has made any representations
or warranties to it and that no act by the Agent hereafter taken, including,
without limitation, any review of the affairs of the Seller, shall be deemed to
constitute any representation or warranty by the Agent. Each Purchaser
represents and warrants to the Agent that it has and will, independently and
without reliance upon the Agent or any other Purchaser and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, operations, property, prospects,
financial and other conditions and creditworthiness of the Seller and made its
own decision to enter into this Agreement, the other Transaction Documents and
all other documents related hereto or thereto.

Reimbursement and Indemnification. The Investors agree to reimburse and
---------------------------------
indemnify the Agent and its officers, directors, employees, representatives and
agents ratably according to their Pro Rata Shares, to the extent not paid or
reimbursed by the Seller (i) for any amounts for which the Agent, acting in its
capacity as Agent, is entitled to reimbursement by the Seller hereunder and (ii)
for any other expenses incurred by the Agent, in its capacity as Agent and
acting on behalf of the Purchasers, in connection with the administration and
enforcement of this Agreement and the other Transaction Documents.

Agent in its Individual Capacity. The Agent and its Affiliates may make loans
--------------------------------
to, accept deposits from and generally engage in any kind of business with the
Seller or any Affiliate of the Seller as though the Agent were not the Agent
hereunder. With respect to the acquisition of Receivable Interests pursuant to
this Agreement, the Agent shall have the same rights and powers under this
Agreement as any Purchaser and may exercise the same as though it were not the
Agent, and the terms "Investor," "Purchaser," "Investors" and "Purchasers" shall
include the Agent in its individual capacity.

                                      34
<PAGE>

Successor Agent. The Agent may, upon five days' notice to the Seller and the
---------------
Purchasers, and the Agent will, upon the direction of all of the Purchasers
(other than the Agent, in its individual capacity) resign as Agent. If the Agent
shall resign, then the Required Investors during such five-day period shall
appoint from among the Purchasers a successor agent. If for any reason no
successor Agent is appointed by the Required Investors during such five-day
period, then, effective upon the termination of such five day period, the
Purchasers shall perform all of the duties of the Agent hereunder and under the
other Transaction Documents and the Seller shall make all payments in respect of
the Aggregate Unpaids directly to the applicable Purchasers and for all purposes
shall deal directly with the Purchasers. After the effectiveness of any retiring
Agent's resignation hereunder as Agent, the retiring Agent shall be discharged
from its duties and obligations to the Purchasers hereunder and under the other
Transaction Documents, and the provisions of this Article 9 and Article 8 shall
                                                  ---------     ---------
continue in effect for its benefit with respect to any actions taken or omitted
to be taken by it while it was Agent under this Agreement and under the other
Transaction Documents.

ASSIGNMENTS; PARTICIPATIONS

Assignments. The Seller and each Investor hereby agree and consent to the
-----------
complete or partial assignment by PREFCO of all of its rights under, interest
in, title to and obligations under this Agreement to the Investors pursuant to
Section 2.1, and upon such assignment, PREFCO shall be released from its
-----------
obligations so assigned. Each Investor hereby further agrees and consents to the
complete or partial assignment by PREFCO of all of its rights under, interest
in, title to and obligations under this Agreement to any other Eligible Person,
and upon such assignment, PREFCO shall be released from its obligations so
assigned. Further, the Seller and each Investor hereby agree that any assignee
of PREFCO of this Agreement or all or any of the Receivable Interests of PREFCO
shall have all of the rights and benefits under this Agreement as if the term
"PREFCO" explicitly referred to such party, and no such assignment shall in any
way impair the rights and benefits of PREFCO hereunder. The Seller shall not
have the right to assign its rights or obligations under this Agreement.

With the consent of the Seller (which consent shall not be unreasonably
withheld) and of PREFCO, any Investor may at any time and from time to time
assign to one or more Eligible Persons ("Purchasing Investors") all or any part
of its rights and obligations under this Agreement pursuant to an assignment
agreement, in a form satisfactory to the Agent (each, an "Assignment Agreement")
executed by such Purchasing Investor and such selling Investor.  Each Purchasing
Investor must be an Eligible Person and must deliver to the Agent and the Seller
an enforceability opinion in form and substance satisfactory to the Agent prior
to the effectiveness of any Assignment Agreement.  Upon delivery of the executed
Assignment Agreement to the Agent (with a copy to the Seller), such selling
Investor shall be released from its obligations hereunder to the extent of such
assignment.  Thereafter, the Purchasing Investor shall for all purposes be an
Investor party to this Agreement and shall have all the rights and obligations
of an Investor under this Agreement to the same extent as if it were an original
party hereto and no further consent or action by the Seller, the Purchasers or
the Agent shall be required.

                                      35
<PAGE>

Each of the Investors agrees that in the event that it shall cease to be an
Eligible Person (an "Affected Investor"), such Affected Investor shall be
obliged, at the request of PREFCO, the Seller or the Agent, to assign all of its
rights and obligations hereunder to (x) another Investor or (y) another Eligible
Person nominated by the Agent or the Seller and willing to participate in this
Agreement through the Liquidity Termination Date in the place of such Affected
Investor; provided that the Affected Investor receives payment in full, pursuant
to an Assignment Agreement, of an amount equal to such Investor's Pro Rata Share
of the Capital and Discount owing to the Investors and all accruing but unpaid
fees and other costs and expenses payable in respect of its Pro Rata Share of
the Receivable Interests.

Participations. Any Investor may, in the ordinary course of its business at any
--------------
time sell to one or more Eligible Persons (each, a "Participant") participating
interests in its Pro Rata Share of the Receivable Interests of the Investors,
its obligation to pay PREFCO its Acquisition Amounts or any other interest of
such Investor hereunder. Notwithstanding any such sale by an Investor of a
participating interest to a Participant, such Investor's rights and obligations
under this Agreement shall remain unchanged, such Investor shall remain solely
responsible for the performance of its obligations hereunder, and the Seller,
PREFCO and the Agent shall continue to deal solely and directly with such
Investor in connection with such Investor's rights and obligations under this
Agreement. Each Investor agrees that any agreement between such Investor and any
such Participant in respect of such participating interest shall not restrict
such Investor's right to agree to any amendment, supplement, waiver or
modification to this Agreement, except for any amendment, supplement, waiver or
modification described in clause (i) of Section 11.1(b).
                                        ---------------

MISCELLANEOUS

Waivers and Amendments. No failure or delay on the part of any party hereto in
----------------------
exercising any power, right or remedy under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or remedy preclude any other further exercise thereof or the exercise of
any other power, right or remedy. The rights and remedies herein provided shall
be cumulative and nonexclusive of any rights or remedies provided by law. Any
waiver of this Agreement shall be effective only in the specific instance and
for the specific purpose for which given.

No provision of this Agreement may be amended, supplemented, modified or waived
except in writing in accordance with the provisions of this Section 11.1(b).
                                                            ---------------
PREFCO, the Seller and the Agent, at the direction of the Required Investors,
may enter into written modifications or waivers of any provisions of this
Agreement, provided, however, that no such modification or waiver shall:

                                      36
<PAGE>

without the consent of each affected Purchaser, (A) extend the Liquidity
Termination Date or the date of any payment or deposit of Collections by the
Seller or the Servicer, (B) reduce the rate or extend the time of payment of CP
Costs or Discount (or any component thereof), (C) reduce any fee payable to the
Agent for the benefit of the Purchasers, (D) except pursuant to Article 10
                                                                ----------
hereof, change the amount of the Capital of any Purchaser, an Investor's Pro
Rata Share or an Investor's Commitment, (E) amend, modify or waive any provision
of the definition of Required Investors or this Section 11.1(b) or release all
                                                ---------------
or any substantial portion of the Receivable Interests, (F) consent to or permit
the assignment or transfer by the Seller of any of its rights and obligations
under this Agreement, (G) change the definition of "Eligible Receivable" or
"Loss Recourse Percentage," or (H) amend or modify any defined term (or any
defined term used directly or indirectly in such defined term) used in clauses
(A) through (G) above in a manner which would circumvent the intention of the
restrictions set forth in such clauses; or

without the written consent of the then Agent, amend, modify or waive any
provision of this Agreement if the effect thereof is to affect the rights or
duties of such Agent.

Notwithstanding the foregoing, (i) without the consent of the Investors, the
Agent may, with the consent of the Seller, amend this Agreement solely to add
additional Persons as Investors hereunder and (ii) without the consent of the
Seller, the Agent, the Required Investors and PREFCO may enter into amendments
to modify any of the terms or provisions of Article 2, Article 9, Article 10 or
                                            ---------  ---------  ----------
Section 11.13, provided that such amendment has no negative impact upon the
-------------
Seller and the Seller promptly receives a copy of each such amendment.  Any
modification or waiver made in accordance with this Section 11.1 shall apply to
                                                    ------------
each of the Purchasers equally and shall be binding upon the Seller, the
Purchasers and the Agent.

                                      37
<PAGE>

Notices. Except as provided below, all communications and notices provided
-------
for hereunder shall be in writing (including bank wire, telecopy or electronic
facsimile transmission or similar writing) and shall be given to the other
parties hereto at their respective addresses or telecopy numbers set forth on
the signature pages hereof. The Seller hereby authorizes the Agent to effect
purchases and Tranche Period and Discount Rate selections based on telephonic
notices made by any Person who identifies himself or herself as an individual
who has been identified in writing as an authorized representative of the Seller
by its chairman, president or senior vice president and chief financial officer
and whom the Agent in good faith believes to be such authorized representative.
The Seller agrees to deliver promptly to the Agent a written confirmation of
each telephonic notice signed by an authorized representative of the Seller.
However, the absence of such confirmation shall not affect the validity of such
notice. If the written confirmation differs from the action taken by the Agent,
the records of the Agent shall govern absent manifest error.

Ratable Payments. If any Purchaser, whether by setoff or otherwise, has payment
----------------
made to it with respect to any portion of the Aggregate Unpaids owing to such
Purchaser (other than payments received pursuant to Section 8.2 or 8.3) in a
                                                    -----------    ---
greater proportion than that received by any other Purchaser entitled to receive
a ratable share of such Aggregate Unpaids, such Purchaser agrees, promptly upon
demand, to purchase for cash without recourse or warranty a portion of the
Aggregate Unpaids held by the other Purchasers so that after such purchase each
Purchaser will hold its ratable proportion of the Aggregate Unpaids; provided
that if all or any portion of such excess amount is thereafter recovered from
such Purchaser, such purchase shall be rescinded and the purchase price restored
to the extent of such recovery, but without interest.

Protection of Ownership Interests of the Purchasers. The Seller agrees that from
---------------------------------------------------
time to time, at its expense, it will promptly execute and deliver all
instruments and documents, and take all actions, that may be necessary or
reasonably desirable, to perfect, protect or more fully evidence the Receivable
Interests, or to enable the Agent or the Purchasers to exercise and enforce
their rights and remedies hereunder. The Agent may, or the Agent may direct the
Seller to, notify the Obligors of Receivables, at any time following the
occurrence of a Servicer Default and at the Seller's expense, of the ownership
interests of the Purchasers under this Agreement and, following a Servicer
Default, may also direct that payments of all amounts due or that become due
under any or all Receivables be made directly to the Agent or its designee. The
Seller shall, at any Purchaser's request, withhold the identity of such
Purchaser in any such notification.

                                      38
<PAGE>

If the Seller or the Servicer fails to perform any of its obligations hereunder,
the Agent or any Purchaser may (but shall not be required to) perform, or cause
performance of, such obligation; and the Agent's or such Purchaser's costs and
expenses incurred in connection therewith shall be payable by the Seller (if the
Servicer that fails to so perform is the Seller or an Affiliate thereof) as
provided in Section 8.3, as applicable.  The Seller and the Servicer each
            -----------
irrevocably authorizes the Agent in the sole discretion of the Agent, and
appoints the Agent as its attorney-in-fact, to act on behalf of the Seller and
the Servicer at any time or times before the payment in full of the Aggregate
Unpaids: (i) to execute on behalf of the Seller as debtor and to file financing
statements necessary or desirable in the Agent's sole discretion to perfect and
to maintain the perfection and priority of the interest of the Purchasers in the
Receivables and (ii) to file a carbon, photographic or other reproduction of
this Agreement or any financing statement with respect to the Receivables as a
financing statement in such offices as the Agent in its sole discretion deems
necessary or desirable to perfect and to maintain the perfection and priority of
the interests of the Purchasers in the Receivables.  This appointment is coupled
with an interest and is irrevocable.

                                      39
<PAGE>

Confidentiality. The Seller shall maintain and shall cause each of its
---------------
employees and officers to maintain the confidentiality of this Agreement and the
other confidential proprietary information with respect to the Agent and PREFCO
and their respective businesses obtained by it or them in connection with the
structuring, negotiating and execution of the transactions contemplated herein,
except that the Seller and its officers and employees may disclose such
information to the Seller's external accountants and attorneys, to other Persons
conducting due diligence with respect to the Seller, to the Seller's and such
other Person's officers, directors, employees, outside consultants and attorneys
so long as such information is kept confidential by them, and as required by any
applicable law or order of any judicial or administrative proceeding; provided,
however, that "confidential proprietary information" shall not include
information which (i) is or becomes generally available to the public other than
as a result of a disclosure by the Seller; (ii) was available to the Seller on a
non-confidential basis prior to its disclosure to the Seller by a Purchaser or
the Agent; or (iii) becomes available to the Seller on a non-confidential basis
from a Person other than the Agent or PREFCO who, to the best knowledge of the
Seller, is not otherwise bound by a confidentiality agreement with the Agent or
any Purchaser or is not otherwise prohibited from transmitting the information
to the Seller.

Each of the Agent and the Purchasers shall maintain and shall cause each of its
employees and officers to maintain the confidentiality of all nonpublic
information concerning the Seller and its business obtained in connection with
this Agreement and the transactions contemplated herein; provided, however, that
"nonpublic information" shall not include information which (i) is or becomes
generally available to the public other than as a result of a disclosure by the
Agent or such Purchaser; (ii) was available to the Agent or such Purchaser on a
non-confidential basis prior to its disclosure to the Agent or such Purchaser by
the Seller; or (iii) becomes available to the Agent or a Purchaser on a non-
confidential basis from a Person other than the Seller who, to the best
knowledge of the Agent or such Purchaser, is not otherwise bound by a
confidentiality agreement with the Seller or is not otherwise prohibited from
transmitting the information to the Agent or such Purchaser.  Anything herein to
the contrary notwithstanding, the Seller hereby consents to the disclosure of
any nonpublic information with respect to it (i) to the Agent, the Investors or
PREFCO by each other, (ii) by the Agent or the Purchasers to any prospective or
actual assignee or participant of any of them who signs a written
confidentiality agreement containing terms and conditions consistent with the
terms of this Section 11.5(b), or (iii) by the Agent to any rating agency,
              ---------------
Commercial Paper dealer or provider of a surety, guaranty or credit or liquidity
enhancement to PREFCO or to any other financing or securitization conduit for
which Bank One provides managerial services or acts as the administrative agent
and to any officers, directors, employees, outside accountants and attorneys of
any of the foregoing; provided such information is kept confidential by such
Persons and used solely for evaluating matters pertaining to this Agreement and
the transaction contemplated herein.  In addition, the Purchasers and the Agent
may disclose any such nonpublic information pursuant to any law, rule,
regulation, direction, request or order of any judicial, administrative or
regulatory authority or proceedings (whether or not having the force or effect
of law).

                                      40
<PAGE>

Bankruptcy Petition. The Seller, the Servicer, the Agent and each Investor
-------------------
hereby covenants and agrees that, prior to the date which is one year and one
day after the payment in full of all outstanding senior Indebtedness of PREFCO,
it will not institute against, or join any other Person in instituting against,
PREFCO any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the laws of the United States or
any state of the United States.

Limitation of Liability. Except with respect to any claim arising out of the
-----------------------
willful misconduct or gross negligence of PREFCO, the Agent or any Investor, no
claim may be made by the Seller, the Servicer or any other Person against
PREFCO, the Agent or any Investor or their respective Affiliates, directors,
officers, employees, attorneys or agents for any special, indirect,
consequential or punitive damages in respect of any claim for breach of contract
or any other theory of liability arising out of or related to the transactions
contemplated by this Agreement, or any act, omission or event occurring in
connection therewith; and the Seller hereby waives, releases, and agrees not to
sue upon any claim for any such damages, whether or not accrued and whether or
not known or suspected to exist in its favor.

CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL
-------------
LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS.

CONSENT TO JURISDICTION. THE SELLER HEREBY IRREVOCABLY SUBMITS TO THE
-----------------------
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT
SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY THE SELLER PURSUANT TO THIS AGREEMENT
AND THE SELLER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND
IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT
IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR
ANY PURCHASER TO BRING PROCEEDINGS AGAINST THE SELLER IN THE COURTS OF ANY OTHER
JURISDICTION WHEREIN ANY ASSETS OF THE SELLER MAY BE LOCATED. ANY JUDICIAL
PROCEEDING BY THE SELLER AGAINST THE AGENT OR ANY PURCHASER OR ANY AFFILIATE OF
THE AGENT OR A PURCHASER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT
EXECUTED BY THE SELLER PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A
COURT IN CHICAGO, ILLINOIS.

                                      41
<PAGE>

WAIVER OF JURY TRIAL. THE AGENT, THE SELLER AND EACH PURCHASER HEREBY WAIVES
--------------------
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY THE
SELLER PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR
THEREUNDER.

Integration; Survival of Terms.
------------------------------

This Agreement, the Collection Account Agreements and the Fee Letter contain the
final and complete integration of all prior expressions by the parties hereto
with respect to the subject matter hereof and shall constitute the entire
agreement among the parties hereto with respect to the subject matter hereof
superseding all prior oral or written understandings.

The provisions of Article 8 and Section 11.6 shall survive any termination of
                  ---------     ------------
this Agreement.

                                      42
<PAGE>

Counterparts; Severability. This Agreement may be executed in any number of
--------------------------
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which when
taken together shall constitute one and the same Agreement. Any provisions of
this Agreement which are prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

Bank One Roles. Each of the Investors acknowledges that Bank One acts, or may
--------------
in the future act, (i) as administrative agent for PREFCO, (ii) as issuing and
paying agent for the Commercial Paper, (iii) to provide credit or liquidity
enhancement for the timely payment for the Commercial Paper and (iv) to provide
other services from time to time for PREFCO (collectively, the "Bank One
Roles"). Without limiting the generality of this Section 11.13, each Investor
                                                 -------------
hereby acknowledges and consents to any and all Bank One Roles and agrees that
in connection with any Bank One Role, Bank One may take, or refrain from taking,
any action which it, in its discretion, deems appropriate, including, without
limitation, in its role as administrative agent for PREFCO, the giving of notice
to the Agent of a mandatory purchase pursuant to Section 2.1.
                                                 -----------

Characterization. It is the intention of the parties hereto that each purchase
----------------
hereunder shall constitute an absolute and irrevocable sale, which purchase
shall provide the applicable Purchaser with the full benefits of ownership of
the applicable Receivable Interest. Except as specifically provided in this
Agreement, each sale of a Receivable Interest hereunder is made without recourse
to the Seller; provided, however, that (i) the Seller shall be liable to each
Purchaser and the Agent for all representations, warranties and covenants made
by the Seller pursuant to the terms of this Agreement, and (ii) such sale does
not constitute and is not intended to result in an assumption by any Purchaser
or the Agent or any assignee thereof of any obligation of the Seller or any
other person arising in connection with the Receivables, the Related Security,
or the related Contracts, or any other obligations of the Seller.

If the conveyance by the Seller to the Purchasers of interests in Receivables
hereunder shall be characterized as a secured loan and not a sale, it is the
intention of the parties hereto that this Agreement shall constitute a security
agreement under applicable law, and that the Seller shall be deemed to have
granted to the Agent for the ratable benefit of the Purchasers a duly perfected
security interest in all of the Seller's right, title and interest in, to and
under the Receivables, the Collections, each Collection Account, all Related
Security, all payments on or with respect to such Receivables, all other rights
relating to and payments made in respect of the Receivables, and all proceeds of
any thereof prior to all other liens on and security interests therein.  After a
Servicer Default, the Agent and the Purchasers shall have, in addition to the
rights and remedies which they may have under this Agreement, all other rights
and remedies provided to a secured creditor after default under the UCC and
other applicable law, which rights and remedies shall be cumulative.

                                      43
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their duly authorized officers or representatives as of the
date hereof.

                              KOHL'S DEPARTMENT STORES, INC.

                              By: /s/ Arlene Meier
                                  ----------------
                                      Arlene Meier
                                      Executive Vice President and
                                      Chief Financial Officer

                                             Address:

                                      N56 W17000 Ridgewood Drive
                                      Menomonee Falls, Wisconsin  53051

                                      Attn:  Arlene Meier
                                             Executive Vice President and Chief
                                             Financial Officer
                                      Phone: (262) 703-1646
                                      Fax:   (262) 703-6143

                              PREFERRED RECEIVABLES FUNDING CORPORATION

                              By: /s/ Elizabeth R. Cohen
                                  ----------------------
                                      Elizabeth R. Cohen
                                      Director

                                      Address:

                                      Preferred Receivables Funding Corporation
                                      c/o Bank One, NA
                                      1 Bank One Plaza
                                      Asset-Backed Markets, 21st Floor
                                      Chicago, Illinois 60670-0596

                                      Attn:  Lynn Baugh
                                      Phone: (312) 732-3632
                                      Fax:   (312) 732-4487

                                      44
<PAGE>

INVESTORS:

Commitment
----------

$155,000,000.00               BANK ONE, NA, as an Investor and as Agent

                              By: /s/ Elizabeth R. Cohen
                                  -----------------------------
                                      Elizabeth R. Cohen
                                      Vice President

                                             Address:

                              Bank One, NA
                              1 Bank One Plaza
                              Asset-Backed Markets, 21st Floor
                              Chicago, Illinois 60670-0597

                              Attn:  Brooks Crankshaw
                              Phone: (312) 732-5528
                              Fax:   (312) 732-8165

Commitment
----------

$15,000,000.00                THE BANK OF NEW YORK

                              By: /s/ William Barnum
                                  -----------------------------
                              Title: Vice President
                                     --------------------------

                                             Address:

                              The Bank of New York
                              1 Wall Street, 22/nd/ Floor
                              New York, New York 10286

                              Attn:  William Barnum
                              Phone: (212) 635-1019
                              Fax:   (212) 635-6434

                                      45
<PAGE>

Commitment
----------

$25,000,000                   COMERICA BANK

                              By: /s/ Harve C. Light
                                  ---------------------------
                              Title: Vice President
                                     ------------------------

                                             Address:

                              Comerica Bank
                              Comerica Tower, Detroit Center
                              500 Woodward Avenue
                              Detroit, Michigan 48226

                              Attn:  Harve C. Light
                              Phone: (313) 222-6198
                              Fax:   (313) 222-9516

Commitment
----------

$15,000,000                   FIRST UNION NATIONAL BANK

                              By: /s/ Mary Amatore
                                  ---------------------------
                              Title: Vice President
                                     ------------------------

                                             Address:

                              First Union National Bank
                              301 S. College Street, 4DC-5
                              Charlotte, North Carolina 28288-0735

                              Attn:  Mary Amatore
                                     Bill Fox
                              Phone: (704) 374-2641
                              Fax:   (704) 383-7236

                                      46
<PAGE>

Commitment
----------

$15,000,000                   FIRSTAR BANK MILWAUKEE, N.A.

                              By: /s/ James Spredemann
                                  ---------------------------
                              Title: Vice President
                                     ------------------------

                                        Address:

                              Firstar Bank Milwaukee, N.A.
                              777 E. Wisconsin Avenue
                              Milwaukee, Wisconsin 53202

                              Attn:  John Franceschi
                              Phone: (414) 765-5656
                              Fax:   (414) 765-5367

                                      47
<PAGE>

                                   EXHIBIT I

                                  DEFINITIONS

As used in this Agreement, the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):

"Account" means a retail credit or charge card account originated by the Seller.

"Accrual Period" means each calendar month, provided that the initial Accrual
Period hereunder means the period from (and including) the date of the initial
purchase hereunder to (and including) the last day of the calendar month
thereafter.

"Acquisition Amount" means, on the date of any purchase from PREFCO of
Receivable Interests pursuant to Section 2.1, (i) with respect to each Investor
                                 -----------
other than Bank One, the lesser of (a) such Investor's Pro Rata Share of the
PREFCO Transfer Price and (b) such Investor's unused Commitment and (ii) with
respect to Bank One, the difference between (a) the PREFCO Transfer Price and
(b) the aggregate amount payable by all other Investors on such date pursuant to
clause (i) above.

"Adjusted Liquidity Price" means, in determining the PREFCO Transfer Price for
any Receivable Interest, an amount equal to:

                         RI x [(i) DC + (ii) NDR + USR]

where:
          RI   =    the undivided percentage interest evidenced by such
                    Receivable Interest.
          DC   =    the Deemed Collections.
          NDR  =    the Outstanding Balance of all non-Defaulted Receivables.
          USR  =    the unused amount of any Seller recourse, i.e., the excess
                    of (a) the Loss Recourse Percentage of the aggregate Capital
                    outstanding on the Facility Termination Date over (b) the
                    amount of Collections deemed to have been received by the
                    Seller pursuant to Section 1.8(b).
                                       -------------

Each of the foregoing shall be determined from the most recent Periodic Report
received from the Servicer.

"Adverse Claim" means a lien, Security Interest, charge or encumbrance, or other
right or claim in, of or on any Person's assets or properties in favor of any
other Person.
<PAGE>

"Affiliate" means any Person directly or indirectly controlling, controlled by,
or under direct or indirect common control with, another Person or any
Subsidiary of such other Person.  A Person shall be deemed to control another
Person if the controlling Person owns 10% or more of any class of voting
securities of the controlled Person or possesses, directly or indirectly, the
power to direct or cause the direction of the management or policies of the
controlled Person, whether through ownership of stock, by contract or otherwise.

"Agent" means Bank One, NA in its capacity as agent for the Purchasers pursuant
to Article 9, and not in its individual capacity as an Investor, and any
   ---------
successor Agent appointed pursuant to Article 9.
                                      ---------

"Aggregate Capital" means, on any date of determination, the aggregate amount of
Capital of all Receivable Interests outstanding on such date.

"Aggregate Reduction" has the meaning specified in Section 1.1(d).

"Aggregate Unpaids" means, at any time, an amount equal to the sum of all
accrued and unpaid CP Costs, Discount, Capital and all other amounts owed
(whether due or accrued) hereunder or under the Fee Letter to the Agent and the
Purchasers at such time.

"Agreement" means this Receivables Purchase Agreement, as it may be amended or
modified and in effect from time to time.

"Average Collection Period" means, at any time, that period of days equal to the
average maturity of the Receivables as of the last day of the prior month.

"Bank One" means Bank One, NA in its individual capacity and its successors.

"Business Day" means any day on which banks are not authorized or required to
close in New York, New York or Chicago, Illinois and The Depository Trust
Company of New York is open for business, and, if the applicable Business Day
relates to any computation or payment to be made with respect to the LIBO Rate,
any day on which dealings in dollar deposits are carried on in the London
interbank market.

"Capital" of any Receivable Interest means, at any time, the Purchase Price of
such Receivable Interest, minus the sum of the aggregate amount of Collections
and other payments received by the Agent which in each case are applied to
reduce such Capital; provided that such Capital shall be restored in the amount
of any Collections or payments so received and applied if at any time the
distribution of such Collections or payments are rescinded or must otherwise be
returned for any reason.

"Change of Control" means the earlier to occur of (a) the date of a public
announcement that a Person or group of affiliated or associated Persons (an
"Acquiring Person") has acquired, or has obtained the right to acquire, legal or
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of 50% or more of
the outstanding shares of voting stock of the Seller; or (b) the date an
Acquiring Person acquires all or substantially all of the assets of the Seller.
For purposes hereof, the term

                                      49
<PAGE>

"Acquiring Person" shall not include (i) Kohl's Corporation or any of its
subsidiaries, or (ii) any other Person 60% of the combined voting stock of which
is beneficially owned, directly or indirectly, by the Persons who were the
holders of the Seller's and Kohl's Corporation's (as the case may be) voting
stock immediately prior to such acquisition.

"Charged-Off Receivable" means a Receivable: (i) as to which the Obligor thereof
has taken any action, or suffered any event to occur, of the type described in
Section 7.1(c) (as if references to the Seller therein refer to such Obligor),
--------------
(ii) which, consistent with the Credit and Collection Policy, would be written
off the Seller's books as uncollectible, (iii) which has been identified by the
Seller as uncollectible, or (iv) which is a Defaulted Receivable.

"Collection Account" means each New Concentration Account, depository account,
lock-box account or similar account of the Seller in which any Collections are
collected or deposited.

"Collection Account Agreement" means, in the case of any actual or proposed
Collection Account, an agreement in substantially the form of Exhibit V hereto.

"Collection Bank" means, at any time, any of the banks or other financial
institutions holding one or more Collection Accounts.

"Collection Notice" means a notice, in substantially the form attached to the
Collection Account Agreement, from the Agent to a Collection Bank.

"Collections" means, with respect to any Receivable, all cash collections and
other cash proceeds in respect of such Receivable, including, without
limitation, all cash proceeds of Related Security with respect to such
Receivable including, without limitation, all Permitted Investments made
therewith and all amounts payable to the Purchasers by the Seller pursuant to
Section 1.8.
-----------

"Commercial Paper" means promissory notes of PREFCO issued by PREFCO in the
commercial paper market.

"Commitment" means, for each Investor, the commitment of such Investor to
purchase its Pro Rata Share of Receivable Interests from (i) the Seller and (ii)
PREFCO, such Pro Rata Share not to exceed, in the aggregate, the amount set
forth opposite such Investor's name on the signature pages of this Agreement, as
such amount may be modified in accordance with the terms hereof.

"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract or application for a letter of credit.

                                      50
<PAGE>

"Contract" means, with respect to any Receivable, any and all account agreements
and other agreements, instruments, charge slips, invoices or other writings
pursuant to which such Receivable arises or which evidences such Receivable.

"CP Costs" means, for each day, the sum of (i) discount or yield accrued on
Pooled Commercial Paper on such day, plus (ii) any and all accrued commissions
in respect of placement agents and Commercial Paper dealers, and issuing and
paying agent fees incurred, in respect of such Pooled Commercial Paper for such
day, plus (iii) other costs associated with funding small or odd-lot amounts
with respect to all receivable purchase facilities which are funded by Pooled
Commercial Paper for such day, minus (iv) any accrual of income net of expenses
received on such day from investment of collections received under all
receivable purchase facilities funded substantially with Pooled Commercial
Paper, minus (v) any payment received on such day net of expenses in respect of
Broken Funding Costs related to the prepayment of any Purchaser Interest of
Company pursuant to the terms of any receivable purchase facilities funded
substantially with Pooled Commercial Paper. In addition to the foregoing costs,
if Seller shall request any Incremental Purchase during any period of time
determined by the Agent in its sole discretion to result in incrementally higher
CP Costs applicable to such Incremental Purchase, the Capital associated with
any such Incremental Purchase shall, during such period, be deemed to be funded
by Company in a special pool (which may include capital associated with other
receivable purchase facilities) for purposes of determining such additional CP
Costs applicable only to such special pool and charged each day during such
period against such Capital.

"Credit Agreement" means that certain Credit Agreement dated as of July 13,
1997, by and among Kohl's Corporation, the Seller, various lenders, Bank One, NA
(formerly known as The First National Bank of Chicago), as Syndication Agent and
The Bank of New York, as Swing Line Lender and as Administrative Agent with BNY
Capital Markets, Inc., as Arranger.

"Credit and Collection Policy" means the Seller's credit and collection policies
and practices relating to Contracts and Receivables existing on the date hereof
and summarized in Exhibit VI hereto, as modified from time to time in accordance
with this Agreement. It is understood that the Credit and Collection Policy of
the Seller in respect of any Receivable shall be the credit and collection
policies of the originator thereof. To the extent the Seller shall not have
comprehensively reduced to writing its credit and collection policies, the
Credit and Collection Policy in respect of Receivables originated by the Seller
shall be those credit and collection policies of the Seller in effect on the
date hereof and disclosed to the Agent on or prior to the date hereof.

"Deemed Collections" means, in connection with the transfer by PREFCO of one or
more Receivable Interests to the Investors pursuant to Section 2.1, the
                                                       -----------
aggregate of all amounts owing to PREFCO pursuant to Sections 1.8 and 8.1
                                                     ------------     ---
relating to the Receivable Interests which are the subject of such transfer.

"Default Fee" means with respect to any amount due and payable by the Seller
hereunder or under the Fee Letter which is not paid when due, an amount equal to
interest on any such amount at a rate per annum equal to 2% above the Prime
Rate, provided, however, that such interest rate will not at any time exceed the
maximum rate permitted by applicable law. The Default Fee will

                                      51
<PAGE>

computed for actual days elapsed on the basis of a year consisting of 360 days
(unless such Default Fee arises with respect to nonpayment of Discount at the
Prime Rate, in which case the Default Fee will be computed for actual days
elapsed on the basis of a year consisting of 365 or, when appropriate, 366
days).

"Defaulted Receivable" means a Receivable as to which any payment, or part
thereof, remains unpaid for 180 days or more from the original due date for such
payment.

"Delinquency Ratio" means, for any month of determination, a percentage equal to
(i) the aggregate Outstanding Balance of all Receivables that were Delinquent
Receivables on the last day of such month divided by (ii) the average aggregate
Outstanding Balance of all Receivables during such month.

"Delinquent Receivable" means a Receivable as to which any payment, or part
thereof, remains unpaid for 90-179 days from the original due date for such
payment.

"Discount" means, for each Receivable Interest for any Tranche Period:

          DR X C X  AD
                    --
                    P

where:

          DR   =    the Discount Rate for such Receivable Interest for such
                    Tranche Period;

          C    =    the Capital of such Receivable Interest during such Tranche
                    Period; and

          AD   =    the actual number of days elapsed during such Tranche
                    Period;

          P    =    360 for Tranche Periods for which the Discount Rate is a
                    LIBO Rate and 365 (or, as appropriate, 366) for Tranche
                    Periods for which the Discount Rate is the Prime Rate

provided that no provision of this Agreement shall require the payment or permit
the collection of Discount in excess of the maximum permitted by applicable law;
and provided, further, that Discount for any Tranche Period shall not be
considered paid by any distribution to the extent that at any time all or a
portion of such distribution is rescinded or must otherwise be returned for any
reason.

"Discount Rate" means the LIBO Rate or the Prime Rate, as applicable.

"Early Collection Fee" means for any Receivable Interest which (i) has its
Capital reduced without compliance by Seller with the notice requirements
hereunder or (ii) does not become subject to an Aggregate Reduction following
the delivery of any Reduction Notice or (iii) is assigned under Article 2 or
terminated prior to the date on which it was originally scheduled to

                                      52
<PAGE>

end, an amount equal to the excess, if any, of (A) the CP Costs or Discount (as
applicable) that would have accrued during the remainder of the Tranche Periods
or the tranche periods for Commercial Paper determined by the Agent to relate to
such Receivable Interest (as applicable) subsequent to the date of such
reduction, assignment or termination (or in respect of clause (ii) above, the
date such Aggregate Reduction was designated to occur pursuant to the Reduction
Notice) of the Capital of such Receivable Interest if such reduction, assignment
or termination had not occurred or such Reduction Notice had not been delivered,
over (B) the sum of (x) to the extent all or a portion of such Capital is
allocated to another Receivable Interest, the amount of CP Costs or Discount
actually accrued during the remainder of such period on such Capital for the new
Receivable Interest, and (y) to the extent such Capital is not allocated to
another Receivable Interest, the income, if any, actually received during the
remainder of such period by the holder of such Receivable Interest from
investing the portion of such Capital not so allocated. In the event that the
amount referred to in clause (B) exceeds the amount referred to in clause (A),
the relevant Purchaser or Purchasers agree to pay to Seller the amount of such
excess. All Early Collection Fees shall be due and payable hereunder upon
demand.

"Eligible Account" means, at any time, an Account that:

(a)  has been (i) originated by the Seller in the ordinary course of its
business, (ii) originated by Citicorp Retail Services on behalf of the Seller
and acquired by the Seller, or (iii) acquired by the Seller from another
originator acceptable to the Agent,

(b)  has not been classified by the Seller as canceled, counterfeit or
fraudulent and any credit card issued in connection therewith has not been lost
or stolen,

(c)  is held by (i) a natural person who is a resident of the United States or
Canada, and is not deceased; (ii) a corporation or other business organization
organized under the laws of the United States or any political subdivision
thereof that has its chief executive office in the United States; and (iii) a
Person who is not a government or a governmental subdivision or agency, and

(d)  which is denominated and payable only in United States dollars in the
United States.

"Eligible Person" means a financial institution with a short-term debt rating of
A-1 or better by Standard & Poor's Corporation and P-1 by Moody's Investors
Service, Inc. which: (i) is reasonably acceptable to PREFCO, (ii) is approved by
the Seller (such approval not to be unreasonably withheld or delayed), (iii)
does not have an Affiliate in the retailing business, and (iv) is incorporated
or otherwise formed under the laws of the United States or has executed and
delivered to the Agent and the Seller United States Internal Revenue Service
Form 1001 or 4224, or any successor form(s) thereto.

"Eligible Receivable" means, at any time, a Receivable:

(a)  which arises under an Eligible Account,

(b)  which is an "eligible asset" as defined in Rule 3a-7(b)(1) promulgated by
the Securities and Exchange Commission under the Investment Company Act of 1940,
as amended,

                                      53
<PAGE>

(c)  a purchase of which with the proceeds of notes would constitute a "current
transaction" within the meaning of Section 3(a)(3) of the Securities Act of
1933, as amended,

(d)  which is an "account" within the meaning of Section 9-106 of the UCC of all
applicable jurisdictions,

(e)  which arises under a Contract in substantially the form of one of the form
contracts set forth on Exhibit VII hereto (subject to any Permitted Amendments
that may be made thereto) or otherwise approved by the Agent in writing, which,
together with such Receivable, is in full force and effect and constitutes the
legal, valid and binding obligation of the related Obligor enforceable against
such Obligor in accordance with its terms subject to no offset or offset
arrangement, counterclaim or other defense,

(f)  which arises under a Contract which (i) does not require the Obligor under
such Contract to consent to the transfer, sale or assignment of the rights and
duties of the Seller under such Contract and (ii) does not contain a
confidentiality provision that purports to restrict the ability of any Purchaser
to exercise its rights under this Agreement, including, without limitation, its
right to review the Contract,

(g)  which was generated in the ordinary course of the Seller's business and
relates to the retail sale of goods or services by one of the Seller's or one of
its Wholly-Owned Subsidiaries' stores,

(h)  which satisfies all applicable requirements of the Credit and Collection
Policy,

(i)  which is not a Defaulted Receivable,

(j)  which, together with the Contract related thereto, does not contravene any
law, rule or regulation applicable thereto (including, without limitation, any
law, rule and regulation relating to truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection practices and
privacy) and with respect to which no part of the Contract related thereto is in
violation of any such law, rule or regulation, and

(k)  the Outstanding Balance of which, if it arises under an Eligible Account
held by a resident of Canada, does not, when aggregated with the Outstanding
Balance of all other such Receivables, exceed 1% of the Net Receivables Balance.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time.

"Facility Account" means the Seller's account number 020002318 at Bank One, NA,
or such other account at BankOne as the Seller may notify the other parties
hereto in writing of from time to time.

"Facility Termination Date" means the earliest to occur of (a) the Liquidity
Termination Date, (b) a Termination Event, or (c) the 30th day following written
notice by the Seller to the Agent that the Seller wishes to terminate this
Agreement.

                                      54
<PAGE>

"Federal Funds Effective Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period equal to (a) the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the preceding Business Day) by
the Federal Reserve Bank of New York in the Composite Closing Quotations for
U.S. Government Securities; or (b) if such rate is not so published for any day
which is a Business Day, the average of the quotations at approximately 10:30
a.m. (Chicago time) for such day on such transactions received by the Reference
Bank from three federal funds brokers of recognized standing selected by it.

"Fee Letter" means that certain letter agreement dated as of the date hereof
between the Seller and the Agent, as it may be amended or modified and in effect
from time to time.

"Finance Charges" means, with respect to a Contract, any finance, interest, late
payment charges or similar charges owing by an Obligor pursuant to such
Contract.

"Funding Agreement" means this Agreement and any agreement or instrument
executed by any Funding Source with or for the benefit of PREFCO.

"Funding Source" means (i) any Investor or (ii) any insurance company, bank or
other financial institution providing liquidity, credit enhancement or back-up
purchase support or facilities to PREFCO.

"Incremental Purchase" means a purchase of one or more Receivable Interests
which increases the total outstanding Capital hereunder.

"Indebtedness" of a Person means such Person's (i) obligations for borrowed
money, (ii) obligations representing the deferred purchase price of property or
services (other than accounts payable arising in the ordinary course of such
Person's business payable on terms customary in the trade), (iii) obligations,
whether or not assumed, secured by liens or payable out of the proceeds or
production from property now or hereafter owned or acquired by such Person, (iv)
obligations which are evidenced by notes, acceptances, or other instruments, (v)
capitalized lease obligations, (vi) net liabilities under interest rate swap,
exchange or cap agreements, (vii) Contingent Obligations and (viii) liabilities
in respect of unfunded vested benefits under plans covered by Title IV of ERISA.

"Intended Characterization" means, for income tax purposes, the characterization
of the acquisition by the Purchasers of Receivable Interests as a loan or loans
by the Purchasers to the Seller secured by the Receivables, the Related Security
and the Collections.

"Investors" means the financial institutions listed on the signature pages of
this Agreement under the heading "Investors" and their respective successors and
assigns.

"Kohl's Corporation" means Kohl's Corporation, a Wisconsin corporation.

"LIBO Rate" means the rate per annum equal to the sum of (i) (a) the rate at
which deposits in U.S. Dollars are offered by the Reference Bank to first-class
banks in the London interbank

                                      55
<PAGE>

market at approximately 11:00 a.m. (London time) two Business Days prior to the
first day of the relevant Tranche Period, such deposits being in the approximate
amount of the Capital of the Receivable Interest to be funded or maintained,
divided by (b) one minus the Reserve Requirement (expressed as a decimal)
applicable to such Tranche Period plus (ii) 0.300% per annum. The LIBO Rate
shall be rounded, if necessary, to the next higher 1/16 of 1% and shall be
computed for actual days elapsed on the basis of a year consisting of 360 days.

"Liquidation Day" means, for any Receivable Interest, the earliest to occur of
(i) the fifth consecutive Business Day on which the conditions precedent set
forth in Section 4.2 remain unsatisfied, (ii) any Business Day so designated by
         -----------
the Seller or PREFCO after the occurrence of the Termination Date, and (iii) the
Business Day immediately prior to the occurrence of a Servicer Default set forth
in Section 7.1(c).
   --------------

"Liquidity Termination Date" means December 22, 2000 or such later date to which
the Agent and the Purchasers may agree in accordance with Section 1.1(e).
                                                          --------------

"Loss Recourse Percentage" means, at any time, the greater of (i) 3 times the
Loss-to-Liquidation Ratio for the three-month period then most recently ended,
or (ii) 10%.

"Loss-to-Liquidation Ratio" means, as of any date of determination, a percentage
equal to (i) the amount of Receivables which became Charged-Off Receivables
during the period of 3 consecutive calendar months then most recently ended less
any cash recoveries received during such period with respect to any Charged-Off
Receivables, divided by (ii) the aggregate amount of Collections during such 3-
month period.

"Material Adverse Effect" means a material adverse effect on (i) the financial
condition or operations of the Seller, (ii) the ability of the Seller to perform
its obligations under any Transaction Document to which it is a party, (iii) the
legality, validity or enforceability of this Agreement, any other Transaction
Document or any Collection Account Agreement or Collection Notice relating to a
Collection Account into which a material portion of Collections are deposited,
(iv) the Seller's or any Purchaser's interest in the Receivables generally or in
any significant portion of the Receivables, the Related Security or the
Collections with respect thereto, or (v) the collectibility of the Receivables
generally or of any material portion of the Receivables.

"Net Receivables Balance" means, at any time, the Outstanding Balance of all
Eligible Receivables at such time.

"Obligor" means a Person obligated to make payments pursuant to a Contract.

"Outstanding Balance" of any Receivable at any time means the then outstanding
balance thereof.

"Periodic Report" means a report, in substantially the form of Exhibit VIII
hereto (appropriately completed), furnished by the Servicer to the Agent
pursuant to Section 6.5.
            -----------

                                      56
<PAGE>

"Permitted Investments" means (i) short-term obligations of, or fully guaranteed
by, the United States of America, (ii) commercial paper rated A-1 or better by
Standard and Poor's Corporation or P-1 or better by Moody's Investors Service,
Inc., (iii) certificates of deposit issued by and time deposits with commercial
banks (whether domestic or foreign) having capital and surplus in excess of
$500,000,000 and short-term certificate of deposit ratings of A-1 or better from
Standard and Poor's Corporation and P-1 or better from Moody's Investors
Service, Inc., (iv) money market funds investing only in investments of the
types described in the foregoing clauses (i)-(iii), and (v) federal funds.

"Person" means an individual, partnership, corporation (including a business
trust), joint stock company, trust, unincorporated association, joint venture or
other entity, or a government or any political subdivision or agency thereof.

"Pooled Commercial Paper" means Commercial Paper of PREFCO subject to any
particular pooling arrangement by PREFCO, but excluding Commercial Paper issued
by PREFCO for a tenor and in an amount specifically requested by any Person in
connection with any agreement effected by PREFCO.

"Potential Servicer Default" means an event which, with the passage of time or
the giving of notice, or both, would constitute a Servicer Default.

"Potential Termination Event" means an event which, with the passage of time or
the giving of notice, or both, would constitute a Termination Event.

"PREFCO Residual" means the sum of the PREFCO Transfer Price Reductions.

"PREFCO Transfer Price" means, with respect to the assignment by PREFCO of one
or more Receivable Interests to the Agent for the benefit of the Investors
pursuant to Section 2.1, the sum of (i) the lesser of (a) the Capital of each
            -----------
Receivable Interest and (b) the Adjusted Liquidity Price of each Receivable
Interest and (ii) all accrued and unpaid CP Costs for such Receivable Interests.

"PREFCO Transfer Price Reduction" means in connection with the assignment of a
Receivable Interest by PREFCO to the Agent for the benefit of the Investors, the
positive difference between (i) the Capital of such Receivable Interest and (ii)
the Adjusted Liquidity Price for such Receivable Interest.

"Prime Rate" means a rate per annum equal to the prime rate of interest
announced from time to time by Bank One or Bank One Corporation (which is not
necessarily the lowest rate charged to any customer), changing when and as said
prime rate changes computed for actual number of days elapsed on the basis of a
year consisting of 365, or when appropriate, 366 days).

"Pro Rata Share" means, for each Investor, the Commitment of such Investor
divided by the Purchase Limit, adjusted as necessary to give affect to the
application of the terms of Sections 1.11 and 2.5.
                            -------------     ---

"Purchase Limit" means the aggregate of the Commitments of the Investors
hereunder.

                                      57
<PAGE>

"Purchase Price" means, with respect to any Purchase, the least of:

(a)  the amount of Capital requested by the Seller, and

(b)  the remaining unused portion of the Purchase Limit on the date of such
     Purchase.

"Purchaser" means PREFCO or an Investor, as applicable.

"Receivable" means the indebtedness and other obligations owed (at the time it
arises, and before giving effect to any transfer or conveyance contemplated
hereby) to the Seller under an Account, whether constituting an account, chattel
paper, instrument or general intangible, arising in connection with the sale of
goods or the rendering of services by the Seller or by a Wholly-Owned Subsidiary
and includes, without limitation, the obligation to pay any Finance Charges with
respect thereto. Indebtedness and other rights and obligations arising from any
one transaction, including, without limitation, indebtedness and other rights
and obligations represented by an individual invoice or Charge-slip, shall
constitute a Receivable separate from a Receivable consisting of the
indebtedness and other rights and obligations arising from any other
transaction.

"Receivable Interest" means, at any time, an undivided percentage ownership
interest associated with a designated amount of Capital in (i) all Receivables
arising thereunder prior to the time of the most recent computation or
recomputation of such undivided interest pursuant to Section 1.5, (ii) all
                                                     -----------
Related Security with respect to such Receivables, and (iii) all Collections
with respect to, and other proceeds of, such Receivables.  Such undivided
percentage interest shall equal:

                                       C
                                      ---
                                      NRB

     where:

          C    =  the Capital of such Receivable Interest.

          NRB  =  the Net Receivables Balance.

"Records" means, with respect to any Receivable, all Contracts and other
documents, books, records and other information (including, without limitation,
computer programs, tapes, disks, punch cards, data processing software and
related property and rights) relating to such Receivable, any Related Security
therefor and the related Obligor.

"Reduction Percentage" means, for any Receivable Interest acquired by the
Investors from PREFCO for less than the Capital of such Receivable Interest, a
percentage equal to (i) one, minus (ii) a fraction the numerator of which is the
PREFCO Transfer Price Reduction for such Receivable Interest and the denominator
of which is the Capital of such Receivable Interest.

"Reference Bank" means Bank One or such other bank as the Agent shall designate
with the consent of the Seller.

                                      58
<PAGE>

"Related Security" means, with respect to any Receivable:

(a)  all Security Interests or liens and property subject thereto from time to
time, if any, purporting to secure payment of the Contract related thereto,
whether pursuant to such Contract or otherwise, together with all financing
statements and security agreements describing any collateral securing such
Contract,

(b)  all guaranties, insurance and other agreements or arrangements of whatever
character from time to time supporting or securing payment of such Receivable
whether pursuant to the Contract related to such Receivable or otherwise,

(c)  all service contracts and other contracts and agreements associated with
such Receivables,

(d)  all Records related to such Receivables, and

(e)  all proceeds of any of the foregoing.

"Required Investors" means, at any time, Investors with Commitments in excess of
66-2/3% of the Purchase Limit, but in no event comprising fewer than two (2)
Investors, if there are two or more Investors.

"Required Notice Period" means the number of days required notice set forth
below applicable to the Aggregate Reduction indicated below:

          Aggregate Reduction                   Required Notice Period
          -------------------                   ----------------------
          $50,000,000 or less                   one Business Day

          over $50,000,000 but less than        two Business Days
          or equal to $100,000,000

          over $100,000,000                     three Business Days.

"Reserve Requirement" means the maximum aggregate reserve requirement (including
all basic, supplemental, marginal and other reserves) which is imposed against
the Reference Bank in respect of Eurocurrency liabilities, as defined in
Regulation D of the Board of Governors of the Federal Reserve System as in
effect from time to time.

"Section" means a numbered Section of this Agreement, unless another document is
specifically referenced.

"Security Interest" has the meaning specified in   1-201(37) of the UCC as in
effect in the State of Illinois on the date of this Agreement and includes,
without limitation, the interest of a buyer of accounts and chattel paper.

                                      59
<PAGE>

"Seller" means Kohl's Department Stores, Inc., a Delaware corporation, and its
successors and assigns.

"Servicer" means at any time the Person (which may be the Agent) then authorized
pursuant to Article 6 to service, administer and collect Receivables.
            ---------

"Servicer Default" has the meaning specified in Section 7.1.
                                                -----------

"Servicer Fee" means, for any Fiscal Accounting Period, a servicing and
collection fee.

"Settlement Date" means (A) the fifth Business Day of each month with respect to
Pooled Commercial Paper funding, and (B) the last day of the relevant Tranche
Period in respect of each Receivable Interest of the Investors with respect to
Investor funding.

"Settlement Period" means (A) in respect of each Receivable Interest of PREFCO,
the immediately preceding Accrual Period, and (B) in respect of each Receivable
Interest of the Investors, the entire Tranche Period of such Receivable
Interest.

"SPC" means Kohl's Receivables Corporation, a Wisconsin corporation.

"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which 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 or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled.  Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a
Subsidiary of the Seller.

"Termination Date" means, for any Receivable Interest, the Facility Termination
Date, and, solely with respect to a Receivable Interest of PREFCO, that Business
Day so designated by the Seller or PREFCO by notice to the other.

"Termination Event" has the meaning specified in Section 7.2.
                                                 -----------

"Tranche Period" means, with respect to any Receivable Interest held by an
Investor:

(a)  if Discount for such Receivable Interest is calculated on the basis of the
LIBO Rate, a period of one, two or three months, or such other period as may be
mutually agreeable to the Agent and the Seller, commencing on a Business Day
selected by the Seller or the Agent pursuant to this Agreement; and

(b)  if Discount for such Receivable Interest is calculated on the basis of the
Prime Rate, a period commencing on a Business Day and ending on the effective
date of any new Tranche Period under the foregoing clause (a).

If any Tranche Period would end on a day which is not a Business Day, such
Tranche Period shall end on the next succeeding Business Day, provided, however,
that in the case of Tranche

                                      60
<PAGE>

Periods corresponding to the LIBO Rate, if such next succeeding Business Day
falls in a new month, such Tranche Period shall end on the immediately preceding
Business Day. In the case of any Tranche Period for any Receivable Interest of
which commences before the Termination Date and would otherwise end on a date
occurring after the Termination Date, such Tranche Period shall end on the
Termination Date. The duration of each Tranche Period which commences after the
Termination Date shall be of such duration as selected by the Agent.

"Transaction Documents" means, collectively, this Agreement, the Fee Letter,
each Collection Account Agreement, each Collections Notice and all other
instruments, documents and agreements executed and delivered by the Seller in
connection herewith.

"Trigger Event" means the occurrence of any Servicer Default or a Termination
Event under Section 7.2(c).
            --------------

"UCC" means the Uniform Commercial Code as from time to time in effect in the
specified jurisdiction.

"Wholly-Owned Subsidiary" means each existing and future Subsidiary of the
Seller in which the Seller owns, directly or indirectly, 100% of the outstanding
capital stock.

All accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles. All terms used in
Article 9 of the UCC in the State of Illinois, and not specifically defined
herein, are used herein as defined in such Article 9.

                                      61
<PAGE>

                                  EXHIBIT II

          CHIEF EXECUTIVE OFFICE OF THE SELLER; LOCATIONS OF RECORDS;
              TRADE NAMES; FEDERAL EMPLOYER IDENTIFICATION NUMBER

Chief Executive Office: Kohl's Department Stores, Inc.
                        N56 W17000 Ridgewood Drive
                        Menomonee Falls, WI 53051

Location of Records: Kohl's Department Stores, Inc.
                     N56 W17000 Ridgewood Drive
                     Menomonee Falls, WI 53051

Federal Employer Identification Number: 13-3357362

Trade Names and Assumed Names: Kohl's
<PAGE>

                                  EXHIBIT III

                              COLLECTION ACCOUNTS

None, except:

                        KOHL'S DEPARTMENT STORES, INC.
                        -----------------------------

TYPE OF ACCT.       ACCOUNT #      BANK NAME           CITY, STATE
-------------       ---------      -------------------------------------

Lockbox Account     121664-030     Firstar Bank     Milwaukee, Wisconsin
                                   Milwaukee, N.A.
<PAGE>

                                  EXHIBIT IV

                        FORM OF COMPLIANCE CERTIFICATE

This Compliance Certificate is furnished pursuant to that certain Receivables
Purchase Agreement dated as of December 23, 1999 (the "Agreement"), among Kohl's
Department Stores, Inc. (the "Seller"), various Purchasers and Bank One, NA, as
Agent.  Capitalized terms used and not otherwise defined herein are used with
the meanings attributed thereto in the Agreement.

                    THE UNDERSIGNED HEREBY CERTIFIES THAT:

1.   I am the duly elected________of the Seller;

2.   I have reviewed the terms of the Agreement and I have made, or have caused
to be made under my supervision, a detailed review of the transactions and
conditions of the Seller during the accounting period covered by the attached
financial statements; and

3.   The examinations described in paragraph 2 did not disclose, and I have no
knowledge of, the existence of any condition or event which constitutes an Event
of Default or a Potential Event of  Default, as each such term is defined under
the Agreement, during or at the end of the accounting period covered by the
attached financial statements or as of the date of this Certificate, except as
set forth below.

Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Seller has taken, is taking, or proposes to
take with respect to each such condition or event:

The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered this _______ day of ____________ ,
19__.

                         ______________________________
                         [Name]
<PAGE>

                                   EXHIBIT V

                     FORM OF COLLECTION ACCOUNT AGREEMENT

                           [On letterhead of Seller]

                                                                 ____________ 19

[Lock-Box Bank/Concentration Bank/Depositary Bank]

Re: Kohl's Receivables Corporation
    Kohl's Department Stores, Inc.

Ladies and Gentlemen:

You have exclusive control of P.O. Box # _____________ in **[city, state, zip
code]** (the "Lock-Box") for the purpose of receiving mail and processing
payments therefrom pursuant to that certain **[name of lock-box agreement]**
between you and Kohl's Department Stores, Inc. dated _______________ (the
"Agreement").  You hereby confirm your agreement to perform the services
described therein.  Among the services you have agreed to perform therein, is to
endorse all checks and other evidences of payment, and credit such payments to
checking account no. _______________ maintained with you in the name of Kohl's
Department Stores, Inc. (the "Lock-Box Account").

Kohl's Receivables Corporation ("SPC") hereby transfers and assigns all of its
right, title and interest in and to, and exclusive ownership and control over,
the Lock-Box and the Lock-Box Account to Kohl's Department Stores, Inc.
("Seller"). Seller and SPC hereby request that the name of the Lock-Box Account
be changed to the Kohl's Department Stores, Inc., as "Collection Agent" for the
benefit of Bank One, NA ("Bank One"), as agent under that certain Receivables
Purchase Agreement (the "Receivables Purchase Agreement") dated as of December
23, 1999 among Seller, Preferred Receivables Funding Corporation, certain
financial institutions parties thereto and Bank One.

Seller hereby irrevocably instructs you, and you hereby agree, that upon
receiving notice from Bank One in the form attached hereto as Annex A: (i) the
name of the Lock-Box Account will be changed to Bank One for itself and as agent
(or any designee of Bank One) and Bank One will have exclusive ownership of and
access to such Lock-Box Account, and neither Seller nor any of its affiliates
will have any control of such Lock-Box Account or any access thereto, (ii) you
will either continue to send the funds from the Lock-Box to the Lock-Box
Account, or will redirect the funds as Bank One may otherwise request, (iii) you
will transfer monies on deposit in the Lock-Box Account, at any time, as
directed by Bank One, (iv) all services to be performed by you under the
Agreement will be performed on behalf of Bank One, and (v) all correspondence or
other mail which you have agreed to send to Seller will be sent to Bank One at
the following address:
<PAGE>

          Bank One, NA
          Suite 0079, 21st Floor
          1 Bank One Plaza
          Chicago, Illinois 60670
          Attention:  Credit Manager, Asset-Backed Finance

Moreover, upon such notice, Bank One for itself and as agent will have all
rights and remedies given to Seller under the Agreement. Seller agrees, however,
to continue to pay all fees and other assessments due thereunder at any time.

You hereby acknowledge that monies deposited in the Lock-Box Account or any
other account established with you by Bank One for the purpose of receiving
funds from the Lock-Box are subject to the liens of Bank One for itself and as
agent under the Receivables Purchase Agreement, and will not be subject to
deduction, set-off, banker's lien or any other right you or any other party may
have against Seller, except that you may debit the Lock-Box Account for any
items deposited therein that are returned or otherwise not collected and for all
charges, fees, commissions and expenses incurred by you in providing services
hereunder, all in accordance with your customary practices for the charge back
of returned items and expenses.

This letter agreement and the rights and obligations of the parties hereunder
will be governed by and construed and interpreted in accordance with the laws of
the State of Illinois. This letter agreement may be executed in any number of
counterparts and all of such counterparts taken together will be deemed to
constitute one and the same instrument.

This letter agreement contains the entire agreement between the parties, and may
not be altered, modified, terminated or amended in any respect, nor may any
right, power or privilege of any party hereunder be waived or released or
discharged, except upon execution by all parties hereto of a written instrument
so providing. In the event that any provision in this letter agreement is in
conflict with, or inconsistent with, any provision of the Agreement, this letter
agreement will exclusively govern and control. Each party agrees to take all
actions reasonably requested by any other party to carry out the purposes of
this letter agreement or to preserve and protect the rights of each party
hereunder.

Please indicate your agreement to the terms of this letter agreement by signing
in the space provided below. This letter agreement will become effective
immediately upon execution of a counterpart of this letter agreement by all
parties hereto.

                              Very truly yours,

                              KOHL'S DEPARTMENT STORES, INC.

                              By___________________________________

                              Title________________________________

                                      66
<PAGE>

                                        KOHL'S RECEIVABLES CORPORATION

                                        By____________________________________

                                        Title_________________________________

Acknowledged and agreed to
this _______ day of ____________, 1999:

[COLLECTION BANK]

By:___________________________________

Title:________________________________

Acknowledged and agreed to
this ________ day of ___________, 1999:

BANK ONE, NA (for itself and as Agent)

By____________________________________
     Authorized Agent

                                      67
<PAGE>

                                    ANNEX A

                           FORM OF COLLECTION NOTICE

                          [On letterhead of Bank One]

                                                        ____________________, 19

[Collection Bank/Depositary Bank/Concentration Bank]

Re: Kohl's Department Stores, Inc.

Ladies and Gentlemen:

We hereby notify you that we are exercising our rights pursuant to that certain
letter agreement among Kohl's Department Stores, Inc., you and us, to have the
name of, and to have exclusive ownership and control of, account number
_________________ (the "Lock-Box Account") maintained with you, transferred to
us.  Lock-Box Account will henceforth be a zero-balance account, and funds
deposited in the Lock-Box Account should be sent at the end of each day to
_________________.  You have further agreed to perform all other services you
are performing under that certain agreement dated ___________________ between
you and Kohl's Department Stores, Inc. on our behalf.

We appreciate your cooperation in this matter.

                              Very truly yours,

                              BANK ONE, NA
                              (for itself and as agent)

                              By:___________________________
                                    Authorized Agent

                                      68
<PAGE>

                                  EXHIBIT VI

                         CREDIT AND COLLECTION POLICY

                                   [omitted]

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