Document:

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          AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT, dated as of June
28, 2000, by and among DILLARD ASSET FUNDING COMPANY, a Delaware business trust,
as Transferor, DILLARD NATIONAL BANK, a national banking association, as
Servicer, and THE CHASE MANHATTAN BANK, as Trustee.

          WHEREAS, the Transferor, the Servicer and the Trustee are parties to
the Pooling and Servicing Agreement, dated as of August 1, 1998 (the "Original
Agreement");

          WHEREAS, the parties desire to amend and restate the Original
Agreement to read in its entirety as set forth below;

          NOW, THEREFORE, pursuant to Section 13.01(b) of the Original
Agreement, the parties hereto hereby agree that effective on and as of the date
hereof, the Original Agreement is hereby amended to read in its entirety as
follows:

          In consideration of the mutual agreements herein contained, each party
agrees as follows for the benefit of the other parties and the
Certificateholders:

                                    ARTICLE I

                                   DEFINITIONS

          Section 1.1  Definitions.  Whenever used in this Agreement,
the following words and phrases shall have the following meanings:

          "Account" shall mean each credit card account established pursuant to
a Credit Card Agreement between an Originator (whether originated or acquired by
such Originator), and any Person identified by account number and by the
Receivable balance as of the Cut-Off Date and as of each Addition Date in each
computer file or microfiche list delivered to the Trustee by the Transferor
pursuant to Section 2.1 or 2.6. The definition of Account shall include each
Transferred Account. The term "Account" shall be deemed to refer to an
Additional Account only from and after the Addition Date with respect thereto,
and the term "Account" shall be deemed to refer to any Removed Account only
prior to the Removal Date with respect thereto.

          "Account Information" shall have the meaning specified in subsection
2.2(b).

          "Accumulation Period" shall mean, with respect to any Series, or any
Class within a Series, a period following the Revolving Period during which
Collections of Principal Receivables are accumulated in an account for the
benefit of the Investor Certificateholders of a Series, or a Class within such
Series, which shall be the controlled accumulation period, the rapid
accumulation period or other accumulation period, in each case as defined with
respect to such Series in the related Supplement.

          "Addition Date" shall mean each date as of which Additional Accounts
will be included as Accounts pursuant to Section 2.6.

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          "Additional Accounts" shall have the meaning specified in subsection
2.6(a).

          "Affiliate" of any Person shall mean any other Person controlling,
controlled by or under common control with such Person.

          "Aggregate Investor Default Amount" shall have, with respect to any
Series of Certificates, the meaning stated in the related Supplement.

          "Aggregate Investor Interest" shall mean, as of any date of
determination, the sum of the Investor Interests of all Series of Certificates
issued and outstanding on such date of determination.

          "Aggregate Investor Percentage" with respect to Principal Receivables,
Finance Charge Receivables and Receivables in Defaulted Accounts, as the case
may be, shall mean, as of any date of determination, the sum of such Investor
Percentages of all Series of Certificates issued and outstanding on such date of
determination; provided, however, that the Aggregate Investor Percentage shall
not exceed 100%.

          "Agreement" shall mean this Amended and Restated Pooling and Servicing
Agreement and all amendments hereof and supplements hereto, including any
Supplement.

           "Amortization Period" shall mean, with respect to any Series, or any
Class within a Series, a period following the Revolving Period during which
principal is distributed to Investor Certificateholders, which shall be the
controlled amortization period, the principal amortization period, the rapid
amortization period, or other amortization period, in each case as defined with
respect to such Series in the related Supplement.

          "Annual Membership Fee" shall have the meaning specified in the Credit
Card Agreement applicable to each Account for annual membership fees or similar
terms.

          "Annual Account Additions" shall mean on any date of determination,
(i) the number of Accounts the Receivables of which have been added to the Trust
pursuant to subsection 2.6(b) and (d) from and including the first day of the
eleventh Monthly Period preceding such date of determination; plus (ii) the
number of Accounts, if any, the Receivables of which have been designated to be
added to the Trust pursuant to subsection 2.6(a), from and including the first
day of the eleventh Monthly Period preceding such date of determination.

          "Annual Quotient" shall have the meaning specified in subsection
     2.6(c)(ii).

          "Applicants" shall have the meaning specified in Section 6.7.

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          "Appointment Day" shall have the meaning specified in subsection
9.2(a).

          "Assignment" shall have the meaning specified in subsection
2.6(c)(iii).

          "Authorized Newspaper" shall mean a newspaper of general circulation
in the Borough of Manhattan, The City of New York printed in the English
language and customarily published on each Business Day, whether or not
published on Saturdays, Sundays and holidays.

          "Average Principal Receivables" shall mean, for any period, an amount
equal to (a) the sum of the aggregate amount of Principal Receivables at the end
of each day during such period divided by (b) the number of days in such period.

          "Bankruptcy Code" shall mean the United States federal Bankruptcy
Code, Title 11 of the United States Code, as amended.

          "Base Amount" shall mean, at any date of determination, with reference
to Annual Account Additions or Semi-annual Account Additions, the number of
Accounts included in the Trust on the first day of the relevant measurement
period before giving effect to any Accounts added to the Trust on such first
day.

          "Base Rate" shall have the meaning, with respect to any Series,
specified in the related Supplement.

          "Bearer Certificates" shall have the meaning specified in Section 6.1.

          "Bearer Rules" shall mean the provisions of the Internal Revenue Code,
in effect from time to time, governing the treatment of bearer obligations,
including sections 163(f), 871, 881, 1441, 1442 and 4701, and any regulations
thereunder including, to the extent applicable to any Series, Proposed or
Temporary Regulations.

          "Book-Entry Certificates" shall mean certificates evidencing a
beneficial interest in the Investor Certificates, ownership and transfers of
which shall be made through book entries by a Clearing Agency as described in
Section 6.10; provided, however, that after the occurrence of a condition
whereupon book-entry registration and transfer are no longer authorized and
Definitive Certificates are to be issued to the Certificate Owners, such
certificates shall no longer be "Book-Entry Certificates."

          "Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions in New York, New York (or, with respect to any
Series, any additional city specified in the related Supplement) are authorized
or obligated by law or executive order to be closed.

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          "Certificate" shall mean any one of the Investor Certificates of any
Series or the Transferor Certificate.

          "Certificateholder" or "Holder" shall mean the Person in whose name a
Certificate is registered in the Certificate Register and, if applicable, the
holder of any Bearer Certificate or Coupon, as the case may be.

          "Certificate Interest" shall mean interest payable in respect of the
Investor Certificates of any Series pursuant to Article IV of the Supplement for
such Series.

          "Certificate Owner" shall mean, with respect to a Book- Entry
Certificate, the Person who is the beneficial owner of such Book- Entry
Certificate, as may be reflected on the books of the Clearing Agency, or on the
books of a Person maintaining an account with such Clearing Agency (directly or
as an indirect participant, in accordance with the rules of such Clearing
Agency).

          "Certificate Principal" shall mean principal payable in respect of the
Investor Certificates of any Series pursuant to Article IV of this Agreement.

          "Certificate Rate" shall mean, with respect to any Series of
Certificates (or, for any Series with more than one Class, for each Class of
such Series), the percentage (or formula on the basis of which such rate shall
be determined) stated in the related Supplement.

          "Certificate Register" shall mean the register maintained pursuant to
Section 6.3, providing for the registration of the Certificates and transfers
and exchanges thereof.

          "Class" shall mean, with respect to any Series, any one of the classes
of Certificates of that Series as specified in the related Supplement.

          "Clearing Agency" shall mean an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.

          "Clearing Agency Participant" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency or Foreign Clearing Agency effects book- entry transfers and pledges of
securities deposited with the Clearing Agency or Foreign Clearing Agency.

          "Clearstream Banking" shall mean Clearstream Banking, societe anonyme
(formerly known as Cedelbank).

          "Closing Date" shall mean, with respect to any Series, the date of
issuance of such Series of Certificates, as specified in the related Supplement.

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          "Collateral Interest" shall have the meaning, with respect to any
Series, specified in the related Supplement.

          "Collection Account" shall have the meaning specified in subsection
4.2(a).

          "Collections" shall mean all payments (including Insurance Proceeds)
received by the Servicer in respect of the Receivables, in the form of cash,
checks, wire transfers, ATM transfers or other form of payment in accordance
with the Credit Card Agreement in effect from time to time. A Collection
processed on an Account in excess of the aggregate amount of Receivables in such
Account as of the Date of Processing of such Collection shall be deemed to be a
payment in respect of Principal Receivables to the extent of such excess.
Collections with respect to any Monthly Period shall include the amount of
Recoveries (if any) allocable to the Trust with respect to such Monthly Period,
to be applied as if such amounts were Collections of Finance Charge Receivables
for all purposes. Collections with respect to any Monthly Period shall also
include the amount deposited by the Transferor into the Finance Charge Account
(or Series Account if provided in any supplement) pursuant to Section 2.8.

          "Commission" shall mean the Securities and Exchange
Commission.

          "Companion Series" shall mean (i) each Series which has been paired
with another series (which Series may be prefunded in whole or in part), such
that the reduction of the Investor Interest of such Series results in the
increase of the Investor Interest of such other Series, as described in the
related Supplements, and (ii) such other Series, as described in the related
Supplements.

          "Controlled Distribution Amount," with respect to any Series, shall
have the meaning specified in the related Supplement.

          "Corporate Trust Office" shall mean the principal office of the
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Agreement is
located at 450 West 33rd Street, 14th Floor, New York, New York 10001,
Attention: Capital Markets Fiduciary Services, Dillard 2000, except that for
purposes of subsection 6.3(d) and Section 11.16, such term shall mean the office
or agency of the Trustee in the Borough of Manhattan, the City of New York,
which office at the date hereof is located at 55 Water Street, New York, New
York 10041.

          "Coupon" shall have the meaning specified in Section 6.1.

          "Credit Adjustment" shall have the meaning specified in subsection
4.3(c).

          "Credit Card Agreement" shall mean the agreement and Federal Truth in
Lending Statement for credit card accounts between any

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Obligor and an Originator (whether such accounts are originated or acquired by
such Originator), as such agreement may be amended, modified or otherwise
changed from time to time.

          "Credit Card Guidelines" shall mean the Transferor's policies and
procedures relating to the operation of its credit card business, including,
without limitation, the policies and procedures for determining the
creditworthiness of credit card customers, the extension of credit to credit
card customers, and relating to the maintenance of credit card accounts and
collection of credit card receivables, as such policies and procedures may be
amended from time to time.

          "Credit Card Portfolio" shall mean the Receivables owned by the
Transferor arising under the Accounts.

          "Credit Enhancement" shall mean, with respect to any Series, the
subordination, the cash collateral guaranty or account, collateral interest,
letter of credit, surety bond, insurance policy, spread account, reserve
account, cross-support feature or any other contract or agreement for the
benefit of the Certificateholders of such Series (or Certificateholders of a
Class within such Series) as designated in the applicable Supplement.

          "Credit Enhancement Provider" shall mean, with respect to any Series,
the Person, if any, designated as such in the related Supplement.

          "Cut-Off Date" shall mean July 31, 1998.

          "Date of Processing" shall mean, with respect to any transaction, the
date on which such transaction is first recorded on the Servicer's computer
master file of Dillard's or Mercantile accounts (without regard to the effective
date of such recordation).

          "Default Amount" shall mean, with respect to any Defaulted Account,
the amount of Principal Receivables (other than Ineligible Receivables) in such
Defaulted Account on the day such Account became a Defaulted Account.

          "Defaulted Account" shall mean each Account with respect to which, in
accordance with the Credit Card Guidelines or the Servicer's or the related
Originator's customary and usual servicing procedures for servicing credit card
receivables comparable to the Receivables, the Servicer has charged off the
Receivables in such Account as uncollectible. An Account shall become a
Defaulted Account on the day on which such Receivables are recorded as charged
off as uncollectible on the computer master file of the respective Originator's
accounts. Notwithstanding any other provision hereof, any Receivables in a
Defaulted Account that are Ineligible Receivables shall be treated as Ineligible
Receivables rather than Receivables in Defaulted Accounts.

          "Definitive Certificate" shall have the meaning
specified in Section 6.10.

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          "Depository" shall have the meaning specified in Section 6.10.

          "Depository Agreement" shall mean, with respect to a Series having
Book-Entry Certificates, the agreement among the Transferor, the Trustee and the
Clearing Agency, or as otherwise provided in the related Supplement.

          "Determination Date" shall mean, unless otherwise specified in the
related Series Supplement, the fourth calendar day of each month, or if such day
is not a Business Day, the next preceding Business Day.

          "DIC" shall mean Dillard Investment Co., Inc., a
corporation organized under the laws of Delaware or any successor
thereto.

          "Dillard's" shall mean Dillard's Inc., a corporation
organized under the laws of Delaware or any successor thereto.

          "Discount Option Receivables" shall mean, on any date on and after the
date on which the Transferor's exercise of its discount option pursuant to
Section 2.8 takes effect, the sum of (a) the aggregate Discount Option
Receivables at the end of the prior day (which amount, prior to the date on
which the Transferor's exercise of its discount option takes effect and with
respect to Receivables generated prior to such date, shall be zero) plus (b) any
New Discount Option Receivables created on such day minus (c) any Discount
Option Receivables Collections received on such Date of Processing.

           "Discount Option Receivables Collections" shall mean on any Date of
Processing on and after the date on which the Transferor's exercise of its
discount option pursuant to Section 2.8 takes effect, the product of (a) a
fraction the numerator of which is the amount of the Discount Option Receivables
and the denominator of which is the sum of the Principal Receivables plus the
amount of Discount Option Receivables in each case (for both numerator and
denominator) at the end of the prior Monthly Period and (b) Collections of
Principal Receivables, prior to any reduction for Finance Charge Receivables
which are Discount Option Receivables, received on such Date of Processing.

           "Discount Percentage" shall have the meaning specified in Section
2.8.

           "Distribution Account" shall have the meaning specified in subsection
4.2(c).

           "Distribution Date" shall mean, with respect to each Series, the
dates specified in the related Supplement.

           "DNB" shall mean Dillard National Bank, a national banking
association organized and existing under the laws of the

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United States and having its headquarters, on the date hereof, in Gilbert,
Arizona, or any successor thereto.

           "DNB-La." shall mean Dillard National Bank (formerly known as
Mercantile Stores National Bank), a national banking association organized and
existing under the laws of the United States and having its headquarters, on the
date hereof, in Baton Rouge, Louisiana, or any successor thereto.

           "Dollars", "$" or "U.S. $" shall mean United States
dollars.

           "Eligible Account" shall mean, as of the Cut-Off Date (or, with
respect to Additional Accounts as of the relevant Addition Date), each Account
owned by an Originator:

           (a)   which is payable in Dollars;

           (b) the Obligor on which has provided, as its most recent billing
         address, an address which is located in the United States or its
         territories or possessions;

           (c)   which such Originator has not classified on its
         electronic records as counterfeit, deleted, fraudulent, stolen
         or lost;

           (d) which such Originator has not charged off in its customary and
         usual manner for charging off such Accounts as of the Cut-Off Date (or,
         with respect to Additional Accounts, as of the relevant Addition Date);
         and

           (e) the Obligor of which has not been identified by such Originator
         on its electronic records as being involved in a voluntary or
         involuntary bankruptcy proceeding.

           "Eligible Deposit Account" shall mean either (a) a segregated account
with an Eligible Institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the laws
of the United States or any one of the states thereof, including the District of
Columbia (or any domestic branch of a foreign bank), and acting as a trustee for
funds deposited in such account, so long as any of the securities of such
depository institution shall have a credit rating from each Rating Agency in one
of its generic credit rating categories which signifies investment grade.

           "Eligible Institution" shall mean (a) the Servicer so long as the
Rating Agency Condition is satisfied, (b) a depository institution (which may be
the Trustee or an Affiliate) organized under the laws of the United States or
any one of the states thereof which at all times (i) has either (x) a long-term
unsecured debt rating of "A2" or better by Moody's or (y) a certificate of
deposit rating of "P-1" by Moody's, (ii) has either (x) a long- term unsecured
debt rating of "AAA" by Standard & Poor's or (y) a certificate of deposit rating
of "A-l+" by

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Standard & Poor's and (iii) is a member of the FDIC or (c) any other institution
that is acceptable to the Rating Agencies.

           "Eligible Receivable" shall mean each Receivable:

           (a) which has arisen under an Eligible Account (in the case of
         Accounts conveyed to the Trust on the Initial Closing Date and in the
         case of Additional Accounts conveyed to the Trust on the relevant
         Addition Date);

           (b) which was created in compliance, in all material respects, with
         all Requirements of Law applicable to the Originator thereof and
         pursuant to a Credit Card Agreement which complies, in all material
         respects, with all Requirements of Law applicable to such Originator;

           (c) with respect to which all consents, licenses, approvals or
         authorizations of, or registrations or declarations with, any
         Governmental Authority required to be obtained, effected or given by
         such Originator in connection with the creation of such Receivable or
         the execution, delivery and performance by such Originator of the
         Credit Card Agreement pursuant to which such Receivable was created,
         have been duly obtained, effected or given and are in full force and
         effect as of such date of creation;

           (d) as to which, as of the Closing Date, or in the case of
         Receivables in Additional Accounts as of the relevant Addition Date,
         the Transferor had good title thereto, free and clear of all Liens
         arising under or through the Transferor or any of its Affiliates (other
         than Liens permitted pursuant to subsection 2.5(b));

           (e) which is the legal, valid and binding payment obligation of the
         Obligor thereon, enforceable against such Obligor in accordance with
         its terms, except as affected by bankruptcy, insolvency,
         reorganization, moratorium and other similar laws, now or hereafter in
         effect, relating to or affecting creditors' rights generally, general
         equitable principles (whether considered in a suit in equity or at law)
         and an implied covenant of good faith and fair dealing;

           (f) which constitutes an "account" or a "general intangible" under
         and as defined in Article 9 of the UCC as then in effect in the State
         of Arizona, in the case of Receivables originated by DNB, and in the
         State of Louisiana, in the case of Receivables originated by DNB-La;
         and

           (g) which, if such Receivable arose under an Eligible Account as to
         which, pursuant to the terms of such Eligible Account, a discount of
         the principal amount of the first Receivable generated thereunder on or
         after the date such Eligible Account was opened by the related Obligor
         was available

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         to such Obligor, such discount has been applied and the Principal
         Amount thereof is net of such discount.

           "Enhancement Invested Amount" shall have the meaning, with respect to
any Series, specified in the related Supplement.

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

           "Euroclear Operator" shall mean Morgan Guaranty Trust Company of New
York, Brussels, Belgium office, as operator of the Euroclear System.

           "Excess Funding Account" shall have the meaning specified in
subsection 4.2(d).

           "Excess Funding Amount" shall mean, as of any date of determination,
the principal amount on deposit in the Excess Funding Account.

           "Exchange" shall mean either of the procedures described under
Section 6.9.

           "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, or any successor legislation.

            "Exchange Date" shall have the meaning, with respect to any Series
issued pursuant to an Exchange, specified in Section 6.9.

            "Exchange Notice" shall have the meaning, with respect to any Series
issued pursuant to an Exchange, specified in Section 6.9.

            "Extended Trust Termination Date" shall have the meaning specified
in subsection 12.1(a).

            "FDIC" shall mean the Federal Deposit Insurance Corporation.

            "Fee Determination Date" shall have the meaning specified in Section
4.5(a).

            "Finance Charge Account" shall have the meaning specified in
subsection 4.2(b).

            "Finance Charge Receivables" shall mean Receivables created in
respect of the Periodic Finance Charges and Late Fees and similar fees and
charges, Annual Membership Fees and Special Fees to the extent such Special Fees
are categorized by the Servicer as Finance Charge Receivables. Finance Charge
Receivables with respect to any Monthly Period shall include the amount of
Recoveries (if any), Discount Option Receivables (if any), Insurance Proceeds
and investment earnings from any of the Trust Accounts, and other amounts
allocable to any Series

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of Certificates pursuant to any Supplement with respect to such Monthly Period
that are to be treated as Finance Charge Receivables but shall exclude charges
for credit insurance. For purposes of this Agreement, the amounts of Late Fees,
similar fees and charges, and Special Fees to be included in Finance Charge
Collections shall be determined in accordance with Sections 4.5 and 4.6 hereof.
If so provided in the related Supplement, Finance Charge Receivables for the
Series issued pursuant to such Supplement may be equal to, or may not be greater
than, a fixed percentage of the outstanding balance of some or all Receivables
in the applicable Trust.

            "Foreign Clearing Agency" shall mean Clearstream Banking
and the Euroclear Operator.

            "Funding Period" shall have the meaning specified in Section 4.4.

            "Global Certificate" shall have the meaning specified in Section
6.13.

            "Governmental Authority" shall mean the United States of America,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.

            "Group" shall mean, with respect to any Series, the group of Series
in which the related Supplement specifies that such Series shall be included.

            "Ineligible Receivable" shall have the meaning specified in
subsection 2.4(d)(iii).

            "Initial Closing Date" shall mean August 14, 1998.

            "Initial Investor Interest" shall mean, with respect to any Series
of Certificates, the amount stated in the related Supplement.

            "Insolvency Event" shall have the meaning specified in subsection
9.2(a).

            "Insurance Proceeds" shall mean any amounts recovered by the
Servicer pursuant to any credit insurance policies covering any Obligor with
respect to Receivables under such Obligor's Account.

            "Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.

            "Investment Company Act" shall mean the Investment Company Act of
1940, as amended from time to time.

            "Investor Account" shall mean each of the Finance Charge Account,
the Principal Account, the Excess Funding Account and the Distribution Account.

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            "Investor Certificate" shall mean any one of the certificates
(including, without limitation, the Bearer Certificates, the Registered
Certificates or the Global Certificates) issued by the Trust, executed by the
Transferor and authenticated by the Trustee substantially in the form (or forms
in the case of a Series with multiple Classes) of the investor certificate
attached to the related Supplement.

            "Investor Certificateholder" shall mean each holder of record of an
Investor Certificate.

            "Investor Charge-Off" shall have, with respect to each Series, the
meaning specified in the applicable Supplement.

            "Investor Default Amount" shall have, with respect to any Series of
Certificates, the meaning stated in the related Supplement.

            "Investor Exchange" shall have the meaning specified in subsection
6.9(b).

            "Investor Interest" shall have, with respect to any Series of
Certificates, the meaning stated in the related Supplement.

            "Investor Percentage" shall have, with respect to Principal
Receivables, Finance Charge Receivables and Receivables in Defaulted Accounts,
and any Series of Certificates, the meaning stated in the related Supplement.

            "Investor Servicing Fee" shall have, with respect to each Series,
the meaning specified in Section 3.2.

            "Late Fees" shall have the meaning specified in the Credit Card
Agreement applicable to each Account for late fees or similar terms.

            "Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever, including, without limitation, any
conditional sale or other title retention agreement; provided, however, that any
assignment pursuant to Section 7.2 shall not be deemed to constitute a Lien.

            "MCC" shall mean Mercantile Credit Corporation, a corporation
organized under the laws of Louisiana, or any successor thereto.

            "MFI" shall mean Mersco Factors, Inc., a corporation
organized under the laws of Delaware, or any successor thereto.

            "Mercantile" shall mean Mercantile Stores Company, Inc.,
a corporation organized under the laws of Delaware, or any successor
thereto.

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            "Minimum Aggregate Principal Receivables" shall mean, as of any date
of determination, the sum of the numerators used on such date to calculate the
Investor Percentage with respect to Principal Receivables for all Series
outstanding on such date, less the amount on deposit in the Excess Funding
Account as of such date of determination.

            "Minimum Transferor Interest" shall mean, with respect to any
Monthly Period, an amount equal to the product of the Minimum Transferor
Interest Percentage and the sum of (i) the Average Principal Receivables for
such Monthly Period, (ii) the Excess Funding Amount and (iii) any amounts on
deposit in any Principal Funding Account and any other Series Account (if so
specified in the applicable Supplement).

            "Minimum Transferor Interest Percentage" shall mean the highest
percentage specified as the "Minimum Transferor Interest Percentage" in any
Supplement; provided, however, that the Transferor may reduce the Minimum
Transferor Interest Percentage upon (w) 30 days' prior notice to the Trustee,
each Rating Agency and any Credit Enhancement Provider entitled to receive such
notice pursuant to the relevant Supplement, (x) written confirmation from each
Rating Agency that such action will satisfy the Rating Agency Condition, (y)
delivery to the Trustee and each such Credit Enhancement Provider of an
Officer's Certificate stating that the Transferor reasonably believes that such
reduction will not, based on the facts known to such officer at the time of such
certification, then or thereafter cause a Pay Out Event to occur with respect to
any Series and (z) delivery to the Trustee of a Tax Opinion; provided further
that the Minimum Transferor Interest Percentage shall not at any time be less
than 0%.

            "Monthly Period" shall mean, unless otherwise defined in any
Supplement, the period from and including the first day of a calendar month to
and including the last day of a calendar month.

            "Monthly Servicer's Certificate" shall mean with respect to a
Series, a certificate substantially in the form required by the related
Supplement, executed by a Servicing Officer and provided pursuant to Section 3.4
hereof.

            "Moody's" shall mean Moody's Investors Service, Inc., or
any successor thereto.

            "New Discount Option Receivables" shall mean, as of any date of
determination, the product of the Discount Percentage and the amount of
Principal Receivables (before subtracting out Finance Charge Receivables which
are Discount Option Receivables) arising on such date of determination.

            "Notice Date" shall have the meaning specified in subsection
2.6(c)(i).

            "Obligor" shall mean, with respect to any Account, the Person or
Persons obligated to make payments with respect to such Account, including any
guarantor thereof.

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            "Officer's Certificate" shall mean a certificate signed by any Vice
President or more senior officer of the Transferor or Servicer and delivered to
the Trustee.

            "Original Purchase Agreements" shall mean the Receivables Sale
Agreement, dated as of June 30, 1998, between DIC and DNB and the Receivables
Purchase Agreement, dated as of May 29, 1997, between MFI and DNB-La.

            "Originators" shall mean DNB and DNB-La.

            "Opinion of Counsel" shall mean a written opinion of counsel, who
may be counsel for or an employee of the Person providing the opinion, and who
shall be reasonably acceptable to the Trustee.

            "Participation" shall have the meaning specified in subsection
2.6(a)(ii).

            "Paying Agent" shall mean any paying agent appointed pursuant to
Section 6.6 and identified in the related Supplement.

            "Pay Out Commencement Date" shall mean, (a) with respect to each
Series, the date on which a Trust Pay Out Event is deemed to occur pursuant to
Section 9.1 or (b) with respect to any Series, a Series Pay Out Event is deemed
to occur pursuant to the Supplement for such Series.

            "Pay Out Event" shall mean, with respect to each Series, a Trust Pay
Out Event or a Series Pay Out Event.

            "Periodic Finance Charges" shall have the meaning specified in the
Credit Card Agreement applicable to each Account for finance charges (due to
periodic rate) or any similar term.

            "Permitted Investments" shall mean, unless otherwise provided in the
Supplement with respect to any Series:

            (a) book-entry securities or negotiable instruments or securities
         represented by instruments in bearer or registered form which evidence
         (i) obligations of or fully guaranteed by the United States of America;
         (ii) demand deposits, time deposits or certificates of deposit of any
         depositary institution or trust company incorporated under the laws of
         the United States of America or any state thereof (or domestic branches
         of foreign banks) and subject to supervision and examination by federal
         or state banking or depositary institution authorities; provided,
         however, that at the time of the Trust's investment or contractual
         commitment to invest therein, the certificates of deposit or short-term
         deposits of such depositary institution or trust company shall have a
         credit rating from Moody's and Standard & Poor's of "P-1" and "A-1+",
         respectively; (iii) commercial paper having, at the time of the Trust's
         investment or contractual commitment to invest therein,

                                      -14-

<PAGE>

         a rating from Moody's and Standard & Poor's of "P-1" and "A-l+",
         respectively and (iv) bankers' acceptances issued by any depository
         institution or trust company described in clause (a)(ii) above;

            (b)   demand deposits in the name of the Trust or the
         Trustee in any depositary institution or trust company referred
         to in clause (a)(ii) above;

            (c)   repurchase agreements transacted with either:

                          (i) an entity subject to the United States federal
                 bankruptcy code; provided that (A) the repurchase agreement
                 matures prior to the next Distribution Date or is due on
                 demand, (B) the Trustee or a third party acting solely as agent
                 for the Trustee has possession of the collateral, (C) the
                 Trustee on behalf of the Trust has a security interest in the
                 collateral, (D) the market value of the collateral is
                 maintained at the requisite collateral percentage of the
                 obligation in accordance with standards of the Rating Agencies,
                 (E) the failure to maintain the requisite collateral level will
                 obligate the Trustee to liquidate the collateral immediately,
                 (F) the securities subject to the repurchase agreement are
                 either obligations of, or fully guaranteed as to principal and
                 interest by, the United States of America or any
                 instrumentality or agency thereof, certificates of deposit or
                 bankers acceptances and (G) the securities subject to the
                 repurchase agreement are free and clear of any third party lien
                 or claim; or

                          (ii) a financial institution insured by the FDIC, or
                 any broker-dealer with "retail customers" that is under the
                 jurisdiction of the Securities Investors Protection Corp.
                 ("SIPC"); provided that (A) the market value of the collateral
                 is maintained at the requisite collateral percentage of the
                 obligation in accordance with the standards of the Rating
                 Agencies, (B) the Trustee or a third party (with a short-term
                 debt rating of P-1 or higher by Moody's) acting solely as agent
                 for the Trustee has possession of the collateral, (C) the
                 Trustee on behalf of the Trust has a security interest in the
                 collateral, (D) the collateral is free and clear of third party
                 liens and, in the case of an SIPC broker, was not acquired
                 pursuant to a repurchase or reverse repurchase agreement and
                 (E) the failure to maintain the requisite collateral percentage
                 will obligate the Trustee to liquidate the collateral;
                 provided, however, that at the time of the Trust's investment
                 or contractual commitment to invest in any repurchase
                 agreement, the short-term deposits or commercial paper rating
                 of such entity or institution in subsections (i)

                                      -15-

<PAGE>

                 and (ii) shall have a credit rating of "P-1" from
                 Moody's and "A-1+" from Standard & Poor's; and

                 (d) any other investment that by its terms converts to cash
         within a finite time period if the Rating Agency Condition is satisfied
         with respect thereto.

                 "Person" shall mean any legal person, including any individual,
corporation, limited liability company, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, governmental entity or
other entity of similar nature.

                 "Pool Factor" shall mean, except with respect to any Series
issued in more than one Class, a number carried out to seven decimals
representing the ratio of the applicable Investor Interest as of such Record
Date (determined after taking into account any reduction in the Investor
Interest which will occur on the following Distribution Date) to the applicable
Initial Investor Interest, and with respect to a Series having more than one
Class, as specified in the Supplement relating to such Series.

                 "Portfolio Yield" shall have the meaning, with respect to any
Series, specified in the related Supplement.

                 "Pre-Funding Account" shall have the meaning specified in
Section 4.4.

                 "Principal Account" shall have the meaning specified in
subsection 4.2(b).

                 "Principal Receivable" shall mean each Receivable other than
(i) Finance Charge Receivables, and (ii) Receivables in Defaulted Accounts. A
Receivable shall be deemed to have been created at the end of the day on the
Date of Processing of such Receivable. In calculating the aggregate amount of
Principal Receivables on any day, the amount of Principal Receivables shall be
reduced by the aggregate amount of credit balances in the Accounts on such day.
Any Receivables which the Transferor is unable to transfer as provided in
subsection 2.5(e) shall not be included in calculating the aggregate amount of
Principal Receivables.

                 "Principal Sharing Series" shall mean a Series, that, pursuant
to the related Supplement, is entitled to Shared Principal Collections.

                 "Principal Shortfalls" shall mean, with respect to a Transfer
Date, the aggregate amount for all outstanding Series that the related
Supplements specify are "Principal Shortfalls" for such Transfer Date.

                 "Principal Terms" shall have the meaning, with respect to any
Series issued pursuant to an Exchange, specified in subsection 6.9(c).

                                      -16-

<PAGE>

                 "Purchase Agreements" shall mean (i) the DIC Receivables
Purchase Agreement, dated as of August 14, 1998, between Dillard Investment
Company and the Transferor; (ii) the MFI Receivables Purchase Agreement, dated
as of August 14, 1998, between Mersco Factors, Inc. and the Transferor; (iii)
the DNB Receivables Purchase Agreement, dated as of August 14, 1998, between DNB
and the Transferor; and (iv) the MSNB Receivables Purchase Agreement, dated as
of August 14, 1998, between DNB- La. and the Transferor;

                 "Rating Agency" shall mean, with respect to each Series, the
rating agency or agencies, if any, specified in the related Supplement.

                 "Rating Agency Condition" shall mean, at any time with respect
to a Series, the written confirmation of the Rating Agency that a specified
event or modification of the terms of such Series will not result in the
withdrawal or downgrade of the rating of the Certificates of any Series then in
effect.

                 "Reassignment" shall have the meaning specified in subsection
2.7(b)(ii).

                 "Reassignment Date" shall have the meaning specified in
subsection 2.4(e).

                 "Receivable" shall mean any amount owing by any Obligor under
an Account including, without limitation, amounts owing for the payment of goods
and services, Annual Membership Fees, Periodic Finance Charges, Late Fees and
Special Fees, if any but excluding credit insurance premiums.

                 "Record Date" shall mean, with respect to any Distribution
Date, the last Business Day of the preceding Monthly Period.

                 "Recoveries" shall mean, (i) with respect to any Monthly Period
or any shorter period commencing on or after the Recovery Determination Date,
the product of (a) all amounts recorded as recoveries on the Credit Card
Portfolio by the Servicer during such Monthly Period or such shorter period, as
the case may be, and (b) the Trust Percentage; and (ii) with respect to any
Monthly Period or any shorter period ending prior to the Recovery Determination
Date, Recoveries shall include all amounts recorded as recoveries with respect
to the Accounts by the Servicer during such period.

                 "Recovery Determination Date" shall mean the date specified by
the Servicer in an Officer's Certificate delivered to the Trustee as the date
upon which the Servicer will begin to calculate Recoveries.

                 "Registered Certificates" shall have the meaning specified in
Section 6.1.

                                      -17-

<PAGE>

                 "Removal Date" shall mean the date on which Receivables in
certain designated Removed Accounts will be reassigned by the Trustee to the
Transferor.

                 "Removal Notice Date" shall mean the day no later than the
fifth Business Day prior to a Removal Date.

                 "Removed Accounts" shall have the meaning specified in
subsection 2.7(a).

                 "Requirements of Law" for any Person shall mean the certificate
of incorporation or articles of association and bylaws or other organizational
or governing documents of such Person, and any law, treaty, rule or regulation,
or determination of an arbitrator or Governmental Authority, in each case
applicable to or binding upon such Person or to which such Person is subject,
whether federal, state or local (including, without limitation, usury laws, the
Federal Truth in Lending Act and Regulation Z and Regulation B of the Board of
Governors of the Federal Reserve System).

                 "Responsible Officer" shall mean any officer within the
Corporate Trust Office (or any successor group of the Trustee), including any
Vice President, any Assistant Secretary or any other officer of the Trustee
customarily performing functions similar to those performed by any person who at
the time shall be an above designated officer, with direct responsibility for
the administration of this Agreement, and also, with any particular officer to
whom any corporate trust matter is referred because of such Officer's knowledge
of and familiarity with the particular subject.

                 "Revolving Period" shall have, with respect to each Series, the
meaning specified in the related Supplement.

                 "Securities Act" shall mean the Securities Act of 1933, as
amended.

                 "Semi-annual Account Additions" shall mean on any date of
determination, (i) the number of Accounts the Receivables of which have been
added to the Trust pursuant to subsection 2.6(b) and (d) from and including the
first day of the fifth Monthly Period preceding such date of determination; plus
(ii) the number of Accounts, if any, the Receivables of which have been
designated to be added to the Trust pursuant to subsection 2.6(a), from and
including the first day of the fifth Monthly Period preceding such date of
determination.

                 "Semi-annual Quotient" shall have the meaning specified in
subsection 2.6(c)(ii).

                 "Series" shall mean any Series of Investor Certificates, which
may include within any such Series a Class or Classes of Investor Certificates
subordinate to another such Class or Classes of Investor Certificates.

                                      -18-

<PAGE>

                 "Series Account" shall mean, with respect to any Series, any
account or accounts established pursuant to a Supplement for the benefit of such
Series.

                 "Series Pay Out Event" shall have, with respect to any Series,
the meaning specified pursuant to the Supplement for the related Series.

                 "Series Servicing Fee Percentage" shall mean, with respect to
any Series, the amount specified in the related Supplement.

                 "Series Termination Date" shall mean, with respect to any
Series of Certificates, the date stated in the related Supplement.

                 "Servicer" shall mean initially DNB, and its permitted
successors and assigns and thereafter any Person appointed as successor as
herein provided to service the Receivables.

                 "Servicer Default" shall have the meaning specified in Section
10.1.

                 "Servicing Fee" shall have the meaning specified in Section
3.2.

                 "Servicing Officer" shall mean any officer of the Servicer
involved in, or responsible for, the administration and servicing of the
Receivables whose name appears on a list of servicing officers furnished to the
Trustee by the Servicer, as such list may from time to time be amended.

                 "Shared Excess Finance Charge Collections" shall mean, with
respect to any Transfer Date, the aggregate amount for all outstanding Series
that the related supplements specify are to be treated as "Shared Excess Finance
Charge Collections" for such Transfer Date.

                 "Shared Principal Collections" shall mean, with respect to any
Transfer Date, the aggregate amount for all outstanding Series that the related
Supplements specify are to be treated as "Shared Principal Collections" for such
Transfer Date.

                 "Special Fees" shall mean any fees which are not now but from
time to time may be assessed on the Accounts. On or after the date on which any
of such Special Fees begin to be assessed on the Accounts, the Transferor may
designate in an Officer's Certificate whether such Special Fees shall be treated
as Principal Receivables or Finance Charge Receivables.

                 "Standard & Poor's" shall mean Standard & Poor's Ratings
Services, a Division of The McGraw-Hill Companies, Inc.

                 "Successor Servicer" shall have the meaning specified in
subsection 10.2(a).

                                      -19-

<PAGE>

                 "Supplement" or "Series Supplement" shall mean, with respect to
any Series, a supplement to this Agreement complying with the terms of Section
6.9 of this Agreement, executed in conjunction with any issuance of any Series
of Certificates (or, in the case of the issuance of Certificates on the Initial
Closing Date, the supplement executed in connection with the issuance of such
Certificates).

                 "Tax Opinion" shall mean with respect to any action, an Opinion
of Counsel delivered to the Trust and the Trustee to the effect that, for U.S.
federal income tax purposes, (a) such action will not adversely affect the tax
characterization as debt of Investor Certificates of any outstanding Series or
Class that were characterized as debt at the time of their issuance, (b)
following such action the Trust will not be deemed to be an association (or a
"publicly traded partnership" within the meaning of Section 7704(b) of the Code)
taxable as a corporation and (c) such action will not cause or constitute a
taxable event in which gain or loss would be recognized by any Investor
Certificateholder (other than DNB or any Certificateholder that is an Affiliate
of DNB) or the Trust.

                 "Termination Notice" shall have, with respect to any Series,
the meaning specified in subsection 10.1(d).

                 "Transfer Agent and Registrar" shall have the meaning specified
in Section 6.3 and shall initially be the Trustee.

                 "Transfer Date" shall mean, unless otherwise specified in the
related Supplement, with respect to any Series, the Business Day immediately
prior to each Distribution Date.

                 "Transferor" shall mean Dillard Asset Funding Company and its
successors in interest and permitted assigns.

                 "Transferor Certificate" shall mean the certificate executed by
the Transferor and authenticated by the Trustee, substantially in the form of
Exhibit A and exchangeable as provided in Section 6.9; provided, however, that
at any time there shall be only one Transferor Certificate.

                 "Transferor Exchange" shall have the meaning specified in
subsection 6.9(b).

                 "Transferor Interest" shall mean, on any date of determination,
the aggregate amount of Principal Receivables and the principal amounts on
deposit in the Excess Funding Account, any Principal Funding Account and any
other Series Account (if so provided in the applicable Supplement) at the end of
the day immediately prior to such date of determination, minus the Aggregate
Investor Interest at the end of such day, minus the aggregate Enhancement
Invested Amounts (if such amounts are not included in the Investor Interest in
the applicable Supplement), if any, for each Series outstanding at the end of
such day.

                                      -20-

<PAGE>

                 "Transferor Percentage" shall mean, on any date of
determination, when used with respect to Principal Receivables, Finance Charge
Receivables and Receivables in Defaulted Accounts, a percentage equal to 100%
minus the Aggregate Investor Percentage with respect to such categories of
Receivables.

                 "Transferor Servicing Fee" shall have the meaning specified in
Section 3.2.

                 "Transferred Account" shall mean (a) an Account with respect to
which a new credit account number has been issued by the Servicer or the
Transferor under circumstances resulting from a lost or stolen credit card or
from the transfer from one affinity group to another affinity group and not
requiring standard application and credit evaluation procedures under the Credit
Card Guidelines or (b) an Eligible Account resulting from the conversion of an
Account that was a standard account to a premium account or from a premium
account to a standard account, and which in either case can be traced or
identified by reference to or by way of the computer files or microfiche lists
delivered to the Trustee pursuant to Section 2.1 or 2.6 as an account into which
an Account has been transferred.

                 "Trust" shall mean the trust created by this Agreement, the
corpus of which shall consist of the Receivables now existing or hereafter
created and arising in connection with the Accounts, all monies due or to become
due with respect to the Receivables, all proceeds (as defined in Section 9-306
of the UCC) of the Receivables and Insurance Proceeds relating to the
Receivables, the right to receive certain amounts paid or payable as Recoveries,
such funds as from time to time are deposited in the Collection Account, the
Finance Charge Account, the Principal Account, the Distribution Account, the
Excess Funding Account and any Series Account and the rights to any Credit
Enhancement with respect to any Series. The name of such Trust shall be "Dillard
Credit Card Master Trust I" or any other name at the option of the Transferor;
provided, however, that at least 5 Business Days prior to any change in the name
of Trust, the Transferor shall give written notice of such change to the
Servicer, the Trustee, each Rating Agency, any Credit Enhancement Provider and
all Certificateholders.

                 "Trust Accounts" shall mean the Collection Account, the
Principal Account, the Finance Charge Account, the Distribution Account and the
Excess Funding Account.

                 "Trust Extension" shall have the meaning specified in
subsection 12.1(a).

                 "Trust Pay Out Event" shall have, with respect to each Series,
the meaning specified in Section 9.1.

                 "Trust Percentage" shall mean, with respect to any Monthly
Period, a fraction expressed as a percentage, the numerator of which is the
aggregate principal amount of Principal Receivables (prior to giving effect to
any reduction thereof for Finance Charge Receivables

                                      -21-

<PAGE>

which are Discount Option Receivables) as of the close of business on the last
day of the prior Monthly Period and the denominator of which is the aggregate
principal balance of the Credit Card Portfolio as of the close of business on
the last day of the prior Monthly Period.

                 "Trust Portfolio" shall mean the Receivables owned by the Trust
arising under the Accounts.

                 "Trust Termination Date" shall mean (i) if a Trust Extension
shall not have occurred, the earlier to occur of (a) the first Business Day
after the Distribution Date following the date on which funds shall have been
deposited in the Distribution Account or the applicable Series Account for the
payment of Investor Certificateholders of each Series then issued and
outstanding sufficient to pay in full such certificates, (b) the date specified
in subsection 9.2(b) and (c) July 15, 2021, and (ii) if a Trust Extension shall
have occurred, the Extended Trust Termination Date.

                 "Trustee" shall mean The Chase Manhattan Bank, a New York
banking corporation, and its successors and any corporation resulting from or
surviving any consolidation or merger to which it or its successors may be a
party and any successor trustee appointed as herein provided.

                 "UCC" shall mean the Uniform Commercial Code, as amended from
time to time, as in effect in the State of Arizona, Delaware, Louisiana or New
York, as applicable.

                 "Undivided Interest" shall mean the undivided interest in the
Trust evidenced by an Investor Certificate.

                 Section 1.2  Other Definitional Provisions.

                 (a) All terms defined in any Supplement or this Agreement shall
have the defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.

                 (b) As used herein and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
Section 1.1, and accounting terms partially defined in Section 1.1 to the extent
not defined, shall have the respective meanings given to them under generally
accepted accounting principles or regulatory accounting procedures applicable to
the Transferor, as applicable. To the extent that the definitions of accounting
terms herein are inconsistent with the meanings of such terms under generally
accepted accounting principles or such regulatory accounting procedures, the
definitions contained herein shall control.

                 (c) The agreements, representations and warranties of DNB in
this Agreement and in any Supplement in its capacity as Servicer shall be deemed
to be the agreements, representations and warranties of DNB solely in such
capacity for the time periods during

                                      -22-

<PAGE>

which DNB acts in such capacity under this Agreement and the agreements,
representations and warranties of Dillard Asset Funding Company in this
Agreement and in any Supplement in its capacity as Transferor shall be deemed to
be the agreements, representations and warranties of Dillard Asset Funding
Company solely in such capacity for the time periods and for so long as Dillard
Asset Funding Company acts in such capacity under this Agreement.

                 (d) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to any Supplement or this
Agreement as a whole and not to any particular provision of this Agreement or
any Supplement; and Section, subsection, Schedule and Exhibit references
contained in this Agreement or any Supplement are references to Sections,
subsections, Schedules and Exhibits in or to this Agreement or any Supplement
unless otherwise specified. The Monthly Servicer Certificate, the form of which
is attached as Exhibit C, shall be in substantially the form of Exhibit C, with
such changes as the Servicer may determine to be necessary or desirable;
provided, however, that no such change shall serve to exclude information
required by the Agreement or any Supplement. The Servicer shall, upon making
such determination, deliver to the Trustee and each Rating Agency an Officer's
Certificate to which shall be annexed the form of the related Exhibit, as so
changed. Upon the delivery of such Officer's Certificate to the Trustee, the
related Exhibit, as so changed, shall for all purposes of this Agreement
constitute such Exhibit. The Trustee may conclusively rely upon such Officer's
Certificate in determining whether the related Exhibit, as changed, conforms to
the requirements of this Agreement.

                                   ARTICLE II

                           CONVEYANCE OF RECEIVABLES;
                            ISSUANCE OF CERTIFICATES

                 Section 2.1 Conveyance of Receivables. The Transferor does
hereby transfer, assign, set over, and otherwise convey to the Trust for the
benefit of the Certificateholders, without recourse, all of its right, title and
interest in and to (i) the Receivables existing as of the Cut-Off Date and
thereafter created and arising in connection with the Accounts (other than
Additional Accounts), (ii) all monies due or to become due with respect to such
Receivables, (iii) all proceeds of such Receivables, (iv) Insurance Proceeds
relating to such Receivables and (v) Recoveries.

                 In connection with such transfer, assignment, set-over and
conveyance, the Transferor agrees to file, at its own expense, a financing
statement (including any continuation statements with respect to such financing
statement when applicable) with respect to the Receivables now existing and
hereafter created for the perfection of a security interest (as defined in the
UCC) in accounts and general intangibles (as defined in Section 9-106 of the
UCC) meeting the requirements of applicable state law in such manner and in such

                                      -23-

<PAGE>

jurisdictions as are necessary to perfect such security interest in favor of the
Trust, and to deliver a file-stamped copy of such financing statement or
continuation statement or other evidence of such filing (which may, for purposes
of this Section 2.1, consist of telephone confirmation of such filing) to the
Trustee as soon as practicable after the date of issuance of the Certificates,
and in the case of any continuation statements filed pursuant to this Section
2.1, as soon as practicable after receipt thereof by the Transferor. The
foregoing transfer, assignment, set-over and conveyance to the Trust shall be
made to the Trustee, on behalf of the Trust, and each reference in this
Agreement to such transfer, assignment, set-over and conveyance shall be
construed accordingly.

                 In connection with such transfer, the Transferor agrees, at its
own expense, within 10 Business Days of the Initial Closing Date to indicate in
its records that Receivables created in connection with the Accounts have been
transferred to the Trust. In addition, the Transferor agrees to cause each of
the Originators, within 10 Business Days of the Initial Closing Date to (a)
indicate in the computer files of the Originators that Receivables created in
connection with the Accounts as of the Initial Closing Date have been
transferred to the Trust pursuant to this Agreement for the benefit of the
Certificateholders and (b) to deliver to the Trustee a computer file or
microfiche list containing a true and complete list of all such Accounts,
identified by account number and setting forth the Receivable balance as of the
Cut-Off Date. Such file or list shall be marked as Schedule 1 to this Agreement,
delivered to the Trustee as confidential and proprietary, and is hereby
incorporated into and made a part of this Agreement. The Transferor further
agrees to cause each of the Originators not to remove such indication in the
file referenced in clause (i) of this paragraph with respect to any Account
during the term of this Agreement unless and until such Account becomes a
Removed Account or a Defaulted Account.

                 The Transferor hereby grants to the Trustee a security interest
in all of the Transferor's right, title and interest in, to and under the
Receivables existing as of the Cut-Off Date and thereafter created and arising
in connection with the Accounts (other than Additional Accounts), all moneys due
or to become due with respect to such Receivables, all proceeds of such
Receivables and all Insurance Proceeds relating to such Receivables and all
Recoveries and all proceeds thereof to secure a loan in an amount equal to the
unpaid principal amount of the Investor Certificates issued hereunder or to be
issued pursuant to this Agreement and the interest accrued at the related
Certificate Rate, and this Agreement shall constitute a security agreement under
applicable law.

                 Pursuant to the request of the Transferor, the Trustee shall
cause Certificates in authorized denominations evidencing the entire interest in
the Trust to be duly authenticated and delivered to or upon the order of the
Transferor pursuant to Section 6.2.

                                      -24-

<PAGE>

                       Section 2.2 Acceptance by Trustee.

                 (a) The Trustee hereby acknowledges its acceptance, on behalf
of the Trust, of all right, title and interest previously held by the Transferor
in and to the Receivables existing as of the Cut-Off Date and thereafter created
and arising in connection with the Accounts, all monies due or to become due
with respect thereto (including all Finance Charge Receivables), all proceeds of
such Receivables, Insurance Proceeds relating to such Receivables and all
Recoveries and the proceeds thereof, and declares that it shall maintain such
right, title and interest, upon the Trust herein set forth, for the benefit of
all Certificateholders. The Trustee further acknowledges that, prior to or
simultaneously with the execution and delivery of this Agreement, the Transferor
delivered or caused to be delivered to the Trustee the computer file or
microfiche list described in the third paragraph of Section 2.1.

                 (b) The Trustee hereby agrees not to disclose to any Person any
of the account numbers or other information contained in the computer files or
microfiche lists delivered to the Trustee by the Transferor pursuant to Sections
2.1, 2.6 and 2.7 ("Account Information") except as required in connection with
the performance of its duties hereunder or in enforcing the rights of the
Certificateholders or to a Successor Servicer appointed pursuant to Section
10.2, or as mandated pursuant to any Requirement of Law applicable to the
Trustee or as requested by any Person in connection with financing statements
filed with respect to the Trust. The Trustee agrees (i) to take such measures as
shall be reasonably requested by the Transferor or the Servicer to protect and
maintain the security and confidentiality of such information, and, in
connection therewith, shall allow the Transferor and the Servicer to inspect the
Trustee's security and confidentiality arrangements from time to time during
normal business hours and (ii) not to use any of the Account Information to
compete, directly or indirectly, with either Originator or the Servicer. In the
event that the Trustee is required by law to disclose any Account Information,
the Trustee shall provide the Transferor and the Servicer with prompt written
notice, unless such notice is prohibited by law, of any such request or
requirement so that the Transferor or the Servicer may request a protective
order or other appropriate remedy. The Trustee shall use its best efforts to
provide the Transferor and the Servicer with written notice no later than five
Business Days prior to any disclosure pursuant to this subsection 2.2(b).

                 (c) The Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement. Neither the Trust nor the Trustee accepts any
duty or obligation of the Transferor hereunder to any Person, including, but not
limited to, any duty or obligation to any Obligor.

                 Section 2.3 Representations and Warranties of the Transferor.
The Transferor hereby represents and warrants to the Trust as of the Initial
Closing Date:

                                      -25-

<PAGE>

                 (a) Organization and Good Standing. The Transferor is a
         business trust duly organized and validly existing in good standing
         under the laws of the jurisdiction of its organization and (i) has full
         power, authority and legal right to execute, deliver and perform its
         obligations under this Agreement and the Purchase Agreements and to
         execute and deliver to the Trustee the Certificates pursuant hereto,
         and (ii), in all material respects, to own its properties and conduct
         its business as such properties are presently owned and such business
         is presently conducted.

                 (b) Due Qualification. The Transferor is duly qualified to do
         business and is in good standing (or is exempt from such requirement)
         and has obtained all necessary licenses and approvals with respect to
         the Transferor in each jurisdiction in which failure to so qualify or
         to obtain such licenses and approvals would render any Credit Card
         Agreement relating to an Account or any Receivable unenforceable by the
         Transferor or the Trust or would have a material adverse effect on the
         Certificateholders; provided, however, that no representation or
         warranty is made with respect to any qualifications, licenses or
         approvals which the Trustee would have to obtain to do business in any
         state in which the Trustee seeks to enforce any Account or Receivable.

                 (c) Due Authorization. The execution and delivery of this
         Agreement and the execution and delivery to the Trustee of the
         Certificates by the Transferor and the consummation of the transactions
         provided for in this Agreement and the Purchase Agreements have or had,
         as the case may be, have been duly authorized by the Transferor by all
         necessary corporate action on its part and this Agreement will remain,
         from the time of its execution, an official record of the Transferor.

                 (d) No Conflict. The execution and delivery of this Agreement,
         the Purchase Agreements and the Certificates, the performance of the
         transactions contemplated by this Agreement and the Purchase Agreements
         and the fulfillment of the terms hereof will not conflict with, result
         in any breach of any of the material terms and provisions of, or
         constitute (with or without notice or lapse of time or both) a material
         default under, any indenture, contract, agreement, mortgage, deed of
         trust, or other instrument to which the Transferor is a party or by
         which it or any of its properties are bound, except to the extent that
         the same could not reasonably be expected to have a material adverse
         effect on the Certificateholders.

                 (e)      No Violation.  The execution and delivery of
         this Agreement, the Purchase Agreements, any Supplement and the
         Certificates, the performance of the transactions contemplated
         by this Agreement and the Purchase Agreements and the
         fulfillment of the terms hereof and thereof will not conflict
         with or violate any Requirements of Law applicable to the

                                      -26-

<PAGE>

         Transferor, except to the extent that the same could not reasonably be
         expected to have a material adverse effect on the Certificateholders.

                 (f) No Proceedings. There are no proceedings or investigations
         pending or, to the best knowledge of the Transferor, threatened against
         the Transferor before any court, regulatory body, administrative
         agency, or other tribunal or governmental instrumentality (i) asserting
         the invalidity of this Agreement or any Purchase Agreement or the
         Certificates, (ii) seeking to prevent the issuance of the Certificates
         or the consummation of any of the transactions contemplated by this
         Agreement, the Purchase Agreements or the Certificates, (iii) seeking
         any determination or ruling that, in the reasonable judgment of the
         Transferor, would materially and adversely affect the performance by
         the Transferor of its obligations under this Agreement or a Purchase
         Agreement, (iv) seeking any determination or ruling that would
         materially and adversely affect the validity or enforceability of this
         Agreement or any Purchase Agreement or the Certificates or (v) seeking
         to affect adversely the income tax attributes of the Trust.

                 (g) Eligibility of Accounts. As of the Cut-Off Date, each
         Account was an Eligible Account and no selection procedures adverse to
         the Investor Certificateholders have been employed by the Transferor in
         selecting the Accounts from among the Eligible Accounts in the Credit
         Card Portfolio.

                 (h) All Consents Required. All approvals, authorizations,
         consents, orders or other actions of any Person or of any governmental
         body or official required in connection with the execution and delivery
         of this Agreement and the Certificates, the performance of the
         transactions contemplated by this Agreement and the fulfillment of the
         terms hereof, have been obtained, except where the failure to obtain
         such approvals, authorizations, consents, orders or other actions could
         not reasonably be expected to have a material adverse effect on the
         Certificateholders.

                 For the purposes of the representations and warranties
contained in this Section 2.3 and made by the Transferor on the Initial Closing
Date, "Certificates" shall mean the Certificates issued on the Initial Closing
Date. The representations and warranties set forth in this Section 2.3 shall
survive the transfer and assignment of the respective Receivables to the Trust
and termination of the rights and obligations of the Servicer pursuant to
Section 10.1. The Transferor hereby represents and warrants to the Trust, with
respect to any Series of Certificates, as of its Closing Date, unless otherwise
stated in such Supplement, that the representations and warranties of the
Transferor set forth in Section 2.3 are true and correct as of such date (for
the purposes of such representations and warranties, "Certificates" shall mean
the Certificates issued on the related Closing Date). Upon discovery by the
Transferor, the Servicer or the Trustee of a breach of

                                      -27-

<PAGE>

any of the foregoing representations and warranties, the party discovering such
breach shall give prompt written notice to the others.

                 Section 2.4 Representations and Warranties of the Transferor
Relating to the Agreement and the Receivables.

                 (a)      Binding Obligation; Valid Transfer and
Assignment.  The Transferor
 hereby represents and warrants to the Trust that, as of the Initial
Closing Date:

                          (i) This Agreement constitutes a valid and legally
         binding obligation of the Transferor, enforceable against the
         Transferor in accordance with its terms, except (A) as may be limited
         by applicable bankruptcy, insolvency, fraudulent conveyance,
         reorganization, moratorium or other similar laws now or hereafter in
         effect relating to or affecting creditors' rights generally and the
         rights of creditors of business trusts organized under the laws of the
         state of its organization, and (B) as may be limited by general
         equitable principles (whether considered in a proceeding in equity or
         at law) and an implied covenant of good faith and fair dealing.

                          (ii) This Agreement constitutes either (A) a valid
         transfer, assignment, set over and conveyance to the Trust of all
         right, title and interest of the Transferor in and to the Receivables
         now existing and hereafter created and arising in connection with the
         Accounts (other than Receivables in Additional Accounts), all proceeds
         of such Receivables and Insurance Proceeds relating thereto, and such
         Receivables and all proceeds thereof and Insurance Proceeds relating
         thereto will be held by the Trust free and clear of any Lien of any
         Person claiming through or under the Transferor or any of its
         Affiliates except for (x) Liens permitted under subsection 2.5(b), (y)
         the interest of the Transferor as Holder of the Transferor Certificate
         and (z) the Transferor's right, if any, to interest accruing on, and
         investment earnings, if any, in respect of the Finance Charge Account,
         the Principal Account or any Series Account, as provided in this
         Agreement or the related Supplement, or (B) a grant of a security
         interest (as defined in the UCC) in such property to the Trust, which
         is enforceable with respect to the existing Receivables, the proceeds
         thereof and Insurance Proceeds relating thereto upon execution and
         delivery of this Agreement, and which will be enforceable with respect
         to such Receivables hereafter created, the proceeds thereof and
         Insurance Proceeds relating thereto, upon such creation. If this
         Agreement constitutes the grant of a security interest to the Trust in
         such property, upon the filing of the financing statement described in
         Section 2.1 and in the case of the Receivables hereafter created and
         proceeds thereof and Insurance Proceeds relating thereto, upon such
         creation, the Trust shall have a first priority perfected security
         interest in the Transferor's rights in such property (subject to
         Section 9-

                                      -28-

<PAGE>

         306 of the UCC), except for Liens permitted under subsection 2.5(b).
         Neither the Transferor nor any Person claiming through or under the
         Transferor shall have any claim to or interest in the Principal
         Account, the Finance Charge Account, the Distribution Account or any
         Series Account, except for the Transferor's rights to receive interest
         accruing on, and investment earnings in respect of, the Finance Charge
         Account and Principal Account as provided in this Agreement (or, if
         applicable, any Series Account as provided in any Supplement) and, if
         this Agreement constitutes the grant of a security interest in such
         property, except for the interest of the Transferor in such property as
         a debtor for purposes of the UCC.

                 (b)      Eligibility of Receivables.  The Transferor
hereby represents and warrants to the Trust as of the Initial Closing
Date and as of each Addition Date, as the case may be, that:

                          (i)     Each Receivable is an Eligible
         Receivable as of the Cut-Off Date or the Addition Date, as applicable.

                          (ii) Each Receivable then existing has been
         transferred to the Trust free and clear of any Lien of any Person
         claiming through or under the Transferor or any of its Affiliates
         (other than Liens permitted under subsection 2.5(b)) and in compliance,
         in all material respects, with all Requirements of Law applicable to
         the Transferor.

                          (iii) With respect to each Receivable then existing,
         all consents, licenses, approvals or authorizations of or registrations
         or declarations with any Governmental Authority required to be
         obtained, effected or given by the Transferor in connection with the
         conveyance of such Receivable to the Trust have been duly obtained,
         effected or given and are in full force and effect.

                          (iv) On each day on which any new Receivable is
         created, the Transferor shall be deemed to represent and warrant to the
         Trust that (A) each Receivable created on such day is an Eligible
         Receivable, (B) each Receivable created on such day has been conveyed
         to the Trust in compliance, in all material respects, with all
         Requirements of Law applicable to the Transferor, (C) with respect to
         each such Receivable, all consents, licenses, approvals or
         authorizations of or registrations or declarations with, any
         Governmental Authority required to be obtained, effected or given by
         the Transferor in connection with the conveyance of such Receivable to
         the Trust have been duly obtained, effected or given and are in full
         force and effect and (D) the representations and warranties set forth
         in subsection 2.4(a) are true and correct with respect to each
         Receivable created on such day as if made on such day.

                                      -29-

<PAGE>

                          (v) As of the Initial Closing Date, Schedule 1 to this
         Agreement, and as of the applicable Addition Date with respect to
         Additional Accounts designated pursuant to Sections 2.6(a) and (b), the
         related computer file or microfiche list referred to in Section 2.6, is
         an accurate and complete listing in all material respects of all the
         Accounts as of the Cut-Off Date, or with respect to Additional
         Accounts, as of the applicable Addition Date and the information
         contained therein with respect to the identity of such Accounts and the
         Receivables existing thereunder is true and correct in all material
         respects as of the Cut-Off Date or such applicable Addition Date.

                 (c) Notice of Breach. The representations and warranties set
forth in this Section 2.4 shall survive the transfer and assignment of the
respective Receivables to the Trust. Upon discovery by the Transferor, the
Servicer or the Trustee of a material breach of any of the representations and
warranties set forth in this Section 2.4, the party discovering such breach
shall give prompt written notice to the other parties mentioned above. The
Transferor agrees to cooperate with the Servicer and the Trustee in attempting
to cure any such breach.

                 (d)      Transfer of Ineligible Receivables.

                          (i)      Automatic Removal.  In the event of a
breach with respect to a Receivable of any representations and warranties set
forth in subsection 2.4(b)(ii), or in the event that a Receivable is not an
Eligible Receivable as a result of the failure to satisfy the conditions set
forth in clause (d) of the definition of Eligible Receivable, and any of the
following three conditions is met: (A) as a result of such breach or event such
Receivable is charged off as uncollectible or the Trust's rights in, to or under
such Receivable or its proceeds are impaired or the proceeds of such Receivable
are not available for any reason to the Trust free and clear of any Lien; (B) a
Lien upon the subject Receivable (1) arises in favor of the United States of
America or any State or any agency or instrumentality thereof and involves taxes
or liens arising under Title IV of ERISA or (2) has been consented to by the
Transferor, DNB or DNB-La.; or (C) the unsecured short-term debt rating of
Dillard's is not at least "P-1" by Moody's and "A-1" by Standard & Poor's and
the Lien upon the subject Receivable ranks prior to the Lien created pursuant to
this Agreement; then, upon the earlier to occur of the discovery of such breach
or event by the Transferor or the Servicer or receipt by the Transferor of
written notice of such breach or event given by the Trustee or the Servicer,
each such Receivable shall be automatically removed from the Trust on the terms
and conditions set forth in subsection 2.4(d)(iii).

                          (ii)    Removal After Cure Period.  In the
event of a breach of any of the representations and warranties set forth in
subsection 2.4(b) other than a breach or event as set forth in clause (d)(i)
above, and as a result of such breach the related Account becomes a Defaulted
Account or the Trust's rights in, to or under the Receivable or its proceeds are
impaired or the proceeds of such Receivable are not

                                      -30-

<PAGE>

available for any reason to the Trust free and clear of any Lien, then, upon the
expiration of 60 days (or such longer period as may be agreed to by the Trustee
in its sole discretion, but in no event later than 120 days) from the earlier to
occur of the discovery of any such event by either the Transferor or the
Servicer, or receipt by the Transferor of written notice of any such event given
by the Trustee or Servicer, each such Receivable shall be removed from the Trust
on the terms and conditions set forth in subsection 2.4(d)(iii); provided,
however, that no such removal shall be required to be made if, on any day within
such applicable period, such representations and warranties with respect to such
Receivable shall then be true and correct in all material respects as if such
Receivable had been created on such day.

                          (iii)   Procedures for Removal.  When the
provisions of subsection 2.4(d)(i) or (ii) above require removal of a
Receivable, the Transferor shall accept reassignment of such Receivable (an
"Ineligible Receivable") by directing the Servicer to deduct the principal
balance of each such Ineligible Receivable from the Principal Receivables in the
Trust and to decrease the Transferor Interest by such amount. On and after the
date of such removal, each Ineligible Receivable shall be deducted from the
aggregate amount of Principal Receivables used in the calculation of any
Investor Percentage, the Transferor Percentage or the Transferor Interest. In
the event that the exclusion of an Ineligible Receivable from the calculation of
the Transferor Interest would cause the Transferor Interest to be reduced below
the Minimum Transferor Interest, the Transferor shall promptly, but in no event
later than 10 Business Days after such event, make a deposit in the Excess
Funding Account in immediately available funds in an amount equal to the amount
by which the Transferor Interest would be reduced below the Minimum Transferor
Interest. The portion of such deposit allocated to the Investor Certificates of
each Series shall be distributed to the Investor Certificateholders of each
Series in the manner specified in Article IV, if applicable, on the Distribution
Date relating to the Monthly Period in which such deposit is made. Upon the
reassignment to the Transferor of an Ineligible Receivable, the Trust shall
automatically and without further action be deemed to transfer, assign, set-over
and otherwise convey to the Transferor, without recourse, representation or
warranty, all the right, title and interest of the Trust in and to such
Ineligible Receivable, all monies due or to become due with respect to such
Ineligible Receivable and all proceeds of such Ineligible Receivable and
Insurance Proceeds relating to such Ineligible Receivable allocated to such
Ineligible Receivable pursuant to any Supplement. Such reassigned Ineligible
Receivable shall be treated by the Trust as collected in full as of the date on
which it was transferred. The Trustee shall execute such documents and
instruments of transfer or assignment and take other actions as shall reasonably
be requested by the Transferor to evidence the conveyance of such Ineligible
Receivable pursuant to this subsection 2.4(d)(iii). The obligation of the
Transferor set forth in this subsection 2.4(d)(iii), or the automatic removal of
such Receivable from the Trust, as the case may be, shall constitute the sole
remedy respecting any breach of the representations and warranties set forth in
the above-referenced subsections with respect

                                      -31-

<PAGE>

to such Receivable available to Certificateholders or the Trustee on
behalf of Certificateholders.

                          (iv)    Proceeds Held by Servicer.  For the
purposes of subsections 2.4(d)(i) and (ii) above, proceeds of a Receivable shall
not be deemed to be impaired hereunder solely because such proceeds are held by
the Servicer (if the Servicer is DNB, DNB-La., Dillard's or a Sub-Servicer) for
more than the applicable period under Section 9-306(3) of the UCC.

                 (e) Reassignment of Trust Portfolio. In the event of a breach
of any of the representations and warranties set forth in subsection 2.4(a)
which has a material adverse effect on the Holders of the Investor Certificates,
either the Trustee or the Holders of Investor Certificates evidencing Undivided
Interests aggregating more than 50% of the Aggregate Investor Interest, by
notice then given in writing to the Transferor (and to the Trustee and the
Servicer, if given by the Investor Certificateholders), may direct the
Transferor to accept reassignment of an amount of Principal Receivables (as
specified below) within 60 days of such notice (or within such longer period as
may be specified in such notice), and the Transferor shall be obligated to
accept reassignment of such Principal Receivables on a Distribution Date
specified by the Transferor (such Distribution Date, the "Reassignment Date")
occurring within such applicable period on the terms and conditions set forth
below; provided, however, that no such reassignment shall be required to be made
if, at any time during such applicable period, the representations and
warranties contained in subsection 2.4(a) shall then be true and correct in all
material respects. The Transferor shall deposit on the Transfer Date (in New
York Clearing House, next day funds) preceding the Reassignment Date an amount
equal to the reassignment deposit amount for such Receivables in the
Distribution Account or Series Account, as provided in the related Supplement,
for distribution to the Investor Certificateholders pursuant to Article XII. The
reassignment deposit amount with respect to each Series for such reassignment,
unless otherwise stated in the related Supplement, shall be equal to (i) the
Investor Interest and Enhancement Invested Amount, if any, of such Series at the
end of the day on the last day of the Monthly Period preceding the Reassignment
Date, less the amount, if any, previously allocated for payment of principal to
such Certificateholders on the related Distribution Date in the Monthly Period
in which the Reassignment Date occurs, plus (ii) an amount equal to all interest
accrued but unpaid on the Investor Certificates of such Series at the applicable
Certificate Rate through the Reassignment Date, less the amount, if any,
previously allocated for payment of interest to the Certificateholders of such
Series on the related Distribution Date in the Monthly Period in which the
Reassignment Date occurs. Payment of the reassignment deposit amount with
respect to each Series, and all other amounts in the Distribution Account or the
applicable Series Account in respect of the preceding Monthly Period, shall be
considered a prepayment in full of the Receivables represented by the Investor
Certificates on the Distribution Date following the Transfer Date on which such
amount has been deposited in full into the Distribution Account or the
applicable Series Account, the Receivables and all monies due or to become due
with respect to such

                                      -32-

<PAGE>

Receivables and all proceeds of the Receivables and Insurance Proceeds relating
to such Receivables and Recoveries (if any) allocable to the Series shall be
released to the Transferor after payment of all amounts otherwise due hereunder
on or prior to such dates and the Trustee shall execute and deliver such
instruments of transfer or assignment, in each case without recourse,
representation or warranty, as shall be prepared by and as are reasonably
requested by the Transferor to vest in the Transferor, or its designee or
assignee, all right, title and interest of the Trust in and to the Receivables,
all monies due or to become due with respect to such Receivables and all
proceeds of the Receivables and Insurance Proceeds relating to such Receivables
and Recoveries (if any) allocable to the Series. If the Trustee or the Investor
Certificateholders give notice directing the Transferor to accept reassignment
as provided above, the obligation of the Transferor to accept reassignment of
the Receivables and pay the reassignment deposit amount pursuant to this
subsection 2.4(e) shall constitute the sole remedy respecting a breach of the
representations and warranties contained in subsection 2.4(a) available to the
Investor Certificateholders or the Trustee on behalf of the Investor
Certificateholders.

                 Section 2.5  Covenants of the Transferor.  The
Transferor hereby covenants that:

                 (a) Receivables to be Accounts or General Intangibles. Except
         in connection with the enforcement thereof, the Transferor will take no
         action to cause any Receivable to be evidenced by any instrument (as
         defined in the UCC). Each Receivable shall be payable pursuant to a
         contract which does not create a Lien on any goods purchased
         thereunder. The Transferor will take no action to cause any Receivable
         to be anything other than an "account" or "general intangible" (as
         defined in the UCC).

                 (b) Security Interests. Except for the conveyances hereunder,
         the Purchase Agreements and the Original Purchase Agreements, the
         Transferor will not sell, pledge, assign or transfer to any other
         Person, or grant, create, incur, assume or suffer to exist any Lien on
         any Receivable, whether now existing or hereafter created, or any
         interest therein; the Transferor will immediately notify the Trustee of
         the existence of any Lien on any Receivable, and the Transferor shall
         defend the right, title and interest of the Trust in, to and under the
         Receivables, whether now existing or hereafter created, against all
         claims of third parties claiming through or under the Transferor;
         provided, however, that nothing in this subsection 2.5(b) shall prevent
         or be deemed to prohibit the Transferor from suffering to exist upon
         any of the Receivables any Liens for municipal or other local taxes if
         such taxes shall not at the time be due and payable or if the
         Transferor shall currently be contesting the validity thereof in good
         faith by appropriate proceedings and shall have set aside on its books
         adequate reserves with respect thereto.

                                      -33-

<PAGE>

                 (c) Finance Charges and Other Fees. The Transferor, except as
         otherwise required by any Requirement of Law, or as is deemed by the
         Servicer to be necessary in order for an Originator to maintain its
         credit card business, based upon a good faith assessment by the
         Servicer, in its sole discretion, of the nature of the competition in
         the credit card business, shall not at any time reduce the Periodic
         Finance Charges assessed on any Receivable or other fees on any Account
         if, as a result of such reduction, the Servicer's reasonable
         expectation of the Portfolio Yield as of such date (after giving effect
         to any concurrent exercise of a discount option) would be less than the
         Base Rate.

                 (d) Credit Card Agreements and Account Guidelines. The
         Transferor shall cause the Originators to comply with and perform their
         respective obligations under the Credit Card Agreements relating to the
         Accounts and the Credit Card Guidelines except insofar as any failure
         to comply or perform would not materially and adversely affect the
         rights of the Trust or the Certificateholders hereunder or under the
         Certificates. The Transferor may permit an Originator to change the
         terms and provisions of its Credit Card Agreements or the Credit Card
         Guidelines in any respect (including, without limitation, the reduction
         of the required minimum monthly payment, the calculation of the amount,
         or the timing, of charge offs and the Periodic Finance Charges and
         other fees to be assessed thereon) only if such change (i) would not,
         in the reasonable belief of such Originator, cause a Pay Out Event to
         occur, and (ii) is made applicable to the comparable segment of the
         revolving credit card accounts owned by such Originator (if the
         Originator owns such a comparable segment) which have characteristics
         the same as, or substantially similar to, the Accounts that are the
         subject of such change, except as otherwise restricted by an
         endorsement, sponsorship, or other agreement between such Originator
         and an unrelated third party or by the terms of the Credit Card
         Agreements.

                 (e)      Account Allocations.

                          (i) In the event that the Transferor is unable for any
         reason to transfer Receivables to the Trust in accordance with the
         provisions of this Agreement (including, without limitation, by reason
         of the application of the provisions of Section 9.2 or an order by any
         federal governmental agency having regulatory authority over the
         Transferor or any court of competent jurisdiction that the Transferor
         not transfer any additional Principal Receivables to the Trust) then,
         in any such event, (A) the Transferor agrees to allocate and pay to the
         Trust, after the date of such inability, all Collections with respect
         to Principal Receivables, and all amounts which would have constituted
         Collections with respect to Principal Receivables but for the
         Transferor's inability to transfer such Receivables (up to an aggregate
         amount equal to

                                      -34-

<PAGE>

         the amount of Principal Receivables in the Trust on such date); (B) the
         Transferor agrees to have such amounts applied as Collections in
         accordance with Article IV; and (C) for only so long as all Collections
         and all amounts which would have constituted Collections are allocated
         and applied in accordance with clauses (A) and (B) above, Principal
         Receivables (and all amounts which would have constituted Principal
         Receivables but for the Transferor's inability to transfer Receivables
         to the Trust) that are written off as uncollectible in accordance with
         this Agreement shall continue to be allocated in accordance with
         Article IV, and all amounts that would have constituted Principal
         Receivables but for the Transferor's inability to transfer Receivables
         to the Trust shall be deemed to be Principal Receivables for the
         purpose of calculating (i) the applicable Investor Percentage with
         respect to any Series and (ii) the Aggregate Investor Percentage
         thereunder. If the Transferor is unable pursuant to any Requirement of
         Law to allocate Collections as described above, the Transferor agrees
         that it shall in any such event allocate, after the occurrence of such
         event, payments on each Account with respect to the principal balance
         of such Account first to the oldest principal balance of such Account
         and to have such payments applied as Collections in accordance with
         Article IV. The parties hereto agree that Finance Charge Receivables,
         whenever created, accrued in respect of Principal Receivables that have
         been conveyed to the Trust, or that would have been conveyed to the
         Trust but for the above described inability to transfer such
         Receivables, shall continue to be a part of the Trust notwithstanding
         any cessation of the transfer of additional Principal Receivables to
         the Trust and that Collections with respect thereto shall continue to
         be allocated and paid in accordance with Article IV.

                          (ii) In the event that, pursuant to subsection 2.4(d),
         the Transferor accepts reassignment of an Ineligible Receivable as a
         result of a breach of the representations and warranties in subsection
         2.4(b) relating to such Receivable, then, in any such event, the
         Transferor agrees to account for payments received with respect to such
         Ineligible Receivable separately from its accounting for Collections on
         Principal Receivables retained by the Trust. If payments received from
         or on behalf of an Obligor are not specifically applicable either to an
         Ineligible Receivable of such Obligor reassigned to the Transferor or
         to the Receivables of such Obligor retained in the Trust, then the
         Transferor agrees to allocate payments proportionately based on the
         total amount of Principal Receivables of such Obligor retained in the
         Trust and the total amount owing by such Obligor on any Ineligible
         Receivables reassigned to the Transferor, and the portion allocable to
         any Principal Receivables retained in the Trust shall be treated as
         Collections and deposited in accordance with the provisions of Article
         IV.

                                      -35-

<PAGE>

                 (f) Conveyance of Accounts. The Transferor shall permit the
         transfer of Accounts (i) directly to any Affiliate of an Originator
         that executes an agreement assuming with respect to such Accounts the
         obligations and duties of such Originator or indirectly to any
         Affiliate in one or more substantially simultaneous transactions among
         such Originator, such Affiliate and any other Affiliates of such
         Originator or (ii) to any other Person, provided that such other Person
         executes such an agreement and the Rating Agency Condition is
         satisfied; provided, however, that the Transferor shall not prohibit
         such Originator from conveying, assigning, exchanging or otherwise
         transferring the Accounts in connection with a transaction complying
         with the provisions of the DNB Purchase Agreement.

                        Section 2.6 Addition of Accounts.

                 (a) (i) If, (A) as of the end of any Monthly Period, the
Transferor Interest is less than the Minimum Transferor Interest for that period
the Transferor shall designate additional eligible accounts from the Originators
("Additional Accounts") to be included as Accounts in a sufficient amount such
that the Transferor Interest after giving effect to such addition will be at
least equal to the Minimum Transferor Interest, or (B) as of the end of any
Monthly Period, the sum of the aggregate amount of Principal Receivables is less
than the Minimum Aggregate Principal Receivables (as adjusted for any Series
having a Companion Series as described in the Supplement for such Series), the
Transferor shall designate Additional Accounts to be included as Accounts in a
sufficient amount such that the aggregate amount of Principal Receivables will
be equal to or greater than the Minimum Aggregate Principal Receivables.
Receivables from such Additional Accounts shall be transferred to the Trust on
or before the tenth Business Day following the end of such Monthly Period.

                          (ii)    In lieu of, or in addition to,
designating Additional Accounts pursuant to clause (i) above, the Transferor
may, subject to the conditions specified in paragraph (c) below, convey to the
Trust participations representing undivided interests in a pool of assets
primarily consisting of receivables arising under revolving credit card accounts
or other revolving credit accounts owned by the Transferor or any Affiliate of
any Transferor and collections thereon ("Participations"). The addition of
Participations in the Trust pursuant to this paragraph (a) or paragraph (b)
below shall be effected by an amendment hereto, dated the applicable Addition
Date, pursuant to subsection 13.1(a).

                 (b) In addition to its obligation under subsection 2.6(a), the
Transferor may, but shall not be obligated to, designate from time to time
Additional Accounts of the Transferor to be included as Accounts or
Participations to be included as Trust Assets, in either case as of the
applicable Addition Date.

                                      -36-

<PAGE>

                 (c) The Transferor agrees that any such transfer of Receivables
from Additional Accounts, under subsection 2.6(a) or (b) shall satisfy the
following conditions (to the extent provided below):

                          (i) On or before the fifth Business Day prior to the
         Addition Date with respect to additions pursuant to subsection 2.6(a)
         and on or before the tenth Business Day prior to the Addition Date with
         respect to additions pursuant to subsection 2.6(b) (the "Notice Date"),
         the Transferor shall give the Trustee, each Rating Agency and the
         Servicer written notice that such Additional Accounts or Participations
         will be included, which notice shall specify the approximate aggregate
         amount of the Receivables to be transferred.

                          (ii) The Transferor (A) shall transfer to the Trust
         Receivables only in Eligible Accounts, and (B) shall satisfy the
         applicable condition in accordance with subsection 2.6(e) if such
         designation of Additional Accounts is made pursuant to subsection
         2.6(b) or (d) and if the addition of such Additional Accounts

                 (1) would cause the quotient (the "Annual Quotient") of (x) the
                 sum of the Annual Account Additions after giving effect to such
                 addition plus the related Base Amount divided by (y) the
                 related Base Amount to exceed 20%, or

                 (2) would cause the quotient (the "Semi-annual Quotient") of
                 (x) the sum of the Semi-annual Account Additions after giving
                 effect to such addition plus the related Base Amount divided by
                 (y) the related Base Amount to exceed 15%;

         or if any such Additional Accounts were not originated in the
         ordinary course of an Originator's business.

                          (iii) On or before the Addition Date, the Transferor
         shall have delivered to the Trustee a written assignment (including an
         acceptance by the Trustee on behalf of the Trust for the benefit of the
         Investor Certificateholders) in substantially the form of Exhibit B
         (the "Assignment") and the Transferor shall have indicated in its
         computer files that the Receivables created in connection with the
         Additional Accounts have been transferred to the Trust and, within five
         Business Days thereafter, or as otherwise agreed upon between the
         Transferor and the Trustee, the Transferor shall have delivered to the
         Trustee a computer file or microfiche list containing a true and
         complete list of all Additional Accounts, adequately identified by
         billing cycle and/or account number and the aggregate amount of the
         Receivables in such Additional Accounts, as of the Addition Date, which
         computer file or microfiche list shall be as of the date of such
         Assignment incorporated into and made a part of such Assignment and
         this Agreement.

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<PAGE>

                          (iv) The Transferor shall represent and warrant that
         (x) each Additional Account is, as of the Addition Date, an Eligible
         Account, and each Receivable in such Additional Account is, as of the
         Addition Date, an Eligible Receivable, (y) no selection procedures
         believed by the Transferor to be materially adverse to the interests of
         the Investor Certificateholders were utilized in selecting the
         Additional Accounts from the available Eligible Accounts from the
         Credit Card Portfolio, and (z) as of the Addition Date, the Transferor
         is not insolvent.

                          (v) The Transferor shall represent and warrant that,
         as of the Addition Date, the Assignment constitutes either (x) a valid
         transfer and assignment to the Trust of all right, title and interest
         of the Transferor in and to the Receivables then existing and
         thereafter created in the Additional Accounts, and all proceeds (as
         defined in the UCC) of such Receivables and Insurance Proceeds relating
         thereto and such Receivables and all proceeds thereof and Insurance
         Proceeds relating thereto will be held by the Trust free and clear of
         any Lien of any Person claiming through or under the Transferor or any
         of its Affiliates, except for (i) Liens permitted under subsection
         2.5(b), (ii) the interest of the Transferor as Holder of the Transferor
         Certificate and (iii) the Transferor's right to receive interest
         accruing on, and investment earnings in respect of, the Finance Charge
         Account and the Principal Account, or any Series Account as provided in
         this Agreement and any related Supplement or (y) a grant of a security
         interest (as defined in the UCC), in such property to the Trust, which
         is enforceable with respect to then existing Receivables of the
         Additional Accounts, the proceeds (as defined in the UCC), thereof and
         Insurance Proceeds relating thereto upon the conveyance of such
         Receivables to the Trust, and which will be enforceable with respect to
         the Receivables thereafter created in respect of Additional Accounts
         conveyed on such Addition Date, the proceeds (as defined in the UCC),
         thereof and Insurance Proceeds relating thereto upon such creation; and
         (z) if the Assignment constitutes the grant of a security interest to
         the Trust in such property, upon the filing of a financing statement as
         described in Section 2.1 with respect to such Additional Accounts and
         in the case of the Receivables thereafter created in such Additional
         Accounts and the proceeds (as defined in the UCC), thereof, and
         Insurance Proceeds relating thereto, upon such creation, the Trust
         shall have a first priority perfected security interest in such
         property (subject to Section 9-306 of the UCC), except for Liens
         permitted under subsection 2.5(b). (v) The Transferor shall deliver an
         Officer's Certificate substantially in the form of Schedule 2 to
         Exhibit B to the Trustee confirming the items set forth in paragraph
         (iii) above.

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<PAGE>

                          (vi) The Transferor shall deliver an Opinion of
         Counsel with respect to the Receivables in the Additional Accounts to
         the Trustee substantially in the form of Exhibit E.

                          (vii) With respect to a Participation included as
         Trust Assets pursuant to subsection 2.6(b), the Transferor shall
         deliver a Tax Opinion.

                 (d) In addition to the occasional designation of Additional
Accounts as required or permitted pursuant to subsections 2.6(a) and (b) above,
the Transferor agrees that each new Account originated in the normal course of
an Originator's business and purchased by the Transferor pursuant to a Purchase
Agreement shall automatically be included as an Account (and the Receivables
arising thereunder automatically transferred to the Trust) effective on the
tenth Business Day following the end of the Monthly Period in which such account
is originated and purchased; provided, however, that such automatic inclusion
and transfer shall not occur with respect to any such account if: (i) such
account does not qualify as an Eligible Account, (ii) the inclusion in the Trust
of the Receivables in such Account, if such Accounts had been designated by the
Transferor pursuant to subsection 2.6(b), would have caused the limitations set
forth in subsection 2.6(c)(ii) to be exceeded (unless the Transferor shall have
satisfied any applicable condition to such addition), or (iii) the Transferor
otherwise designates such account as an account which is not to be included as
an Account pursuant to this subsection 2.6(d). On or before the fifth Business
Day of each month next succeeding a calendar month in which Accounts were
included pursuant to the preceding sentence, the Transferor shall (i) indicate
in its books and records, including the computer files of the receivables, that
the Receivables created in connection with such included Accounts have been
transferred to the Trust, and (ii) shall deliver to the Trustee a computer file
or microfiche list containing a true and complete list of all such included
Accounts identified by account number and by the Receivables balance as of the
end of such calendar month, which computer file or microfiche list shall be
delivered to the Trustee as confidential and proprietary and incorporated into
and made a part of this Agreement. The Transferor, at its option, may, by
providing written notice to the Trustee and the Servicer, terminate or suspend
the automatic inclusion of Additional Accounts at any time.

                 (e) (i) The Rating Agency Condition shall be applicable and
must be satisfied whenever the Semi-annual Quotient exceeds the amount set forth
in subsection 2.6(c)(ii)(B)(2) or whenever the Annual Quotient exceeds the
amount set forth in 2.6(c)(ii)(B)(1) or whenever Additional Accounts are added
that were not originated in the ordinary course of an Originator's business.

                 Section 2.7  Removal of Accounts.

                 (a) Subject to the conditions set forth below, the Transferor
may, but shall not be obligated to, designate Receivables from Accounts for
deletion and removal ("Removed Accounts") from the Trust;

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<PAGE>

provided, however, that the Transferor shall not make more than one such
designation in any Monthly Period. On or before the fifth Business Day (the
"Removal Notice Date") prior to the date on which the designated Removed
Accounts will be reassigned by the Trustee to the Transferor (the "Removal
Date"), the Transferor shall give the Trustee and the Servicer written notice
that the Receivables from such Removed Accounts are to be reassigned to the
Transferor.

                 (b) The Transferor shall be permitted to designate and require
reassignment to it of the Receivables from Removed Accounts only upon
satisfaction of the following conditions:

                          (i) The removal of any Receivables of any Removed
         Accounts on any Removal Date shall not, in the reasonable belief of the
         Transferor, (a) cause a Pay Out Event to occur; provided, however, that
         for the purposes of this subsection 2.7(b)(i), the Receivables of each
         Removed Account shall be considered to have been removed as of the
         Removal Date, (b) cause the Transferor Interest to be less than the
         Minimum Transferor Interest on such Removal Date, (c) cause the sum of
         the aggregate amount of Principal Receivables and the Excess Funding
         Amount to be less than the Minimum Aggregate Principal Receivables, or
         (d) result in the failure to make any payment specified in the related
         Supplement with respect to any Series.

                          (ii) On or prior to the Removal Date, the Transferor
         shall have delivered to the Trustee for execution a written assignment
         in substantially the form of Exhibit G (the "Reassignment") and, within
         five Business Days thereafter, or as otherwise agreed upon between the
         Transferor and the Trustee, the Transferor shall have delivered to the
         Trustee a computer file or microfiche list containing a true and
         complete list of all Removed Accounts identified by account number and
         the aggregate amount of the Receivables in such Removed Accounts as of
         the Removal Date, which computer file or microfiche list shall as of
         the Removal Date modify and amend and be made a part of this Agreement.

                          (iii) The Transferor shall represent and warrant that
         no selection procedures believed by the Transferor to be materially
         adverse to the interests of the Certificateholders were utilized in
         selecting the Removed Accounts to be removed from the Trust.

                          (iv)    Such other conditions as set forth in
         the related Supplement.

                          (v) On or before the tenth Business Day prior to the
         Removal Date, each Rating Agency shall have received notice of such
         proposed removal of the Receivables of such Accounts and the Transferor
         shall have received written confirmation from each Rating Agency that
         such removal will satisfy the Rating Agency Condition; and

                                      -40-

<PAGE>

                          (vi) The Transferor shall have delivered to the
         Trustee an Officer's Certificate confirming the items set forth in
         clauses (i) through (v) above. The Trustee may conclusively rely on
         such Officer's Certificate, shall have no duty to make inquiries with
         regard to the matters set forth therein and shall incur no liability in
         so relying.

                 Upon satisfaction of the above conditions, the Trustee shall
execute and deliver the Reassignment to the Transferor, and the Receivables from
the Removed Accounts shall no longer constitute a part of the Trust.

                 Section 2.8 Discount Option. The Transferor shall have the
option to designate at any time a fixed or floating percentage (the "Discount
Percentage"), of the amount of Receivables arising in the Accounts on or after
the date such designation becomes effective that would otherwise constitute
Principal Receivables (prior to subtracting from Principal Receivables, Finance
Charge Receivables that are Discount Option Receivables) to be treated as
Finance Charge Receivables. The Transferor may from time to time increase
(subject to the limitations described below), reduce or eliminate the Discount
Percentage for Discount Option Receivables arising in the Accounts on and after
the date of such change. The Transferor must provide 30 days' prior written
notice to the Servicer, the Trustee, each Credit Enhancement Provider and each
Rating Agency of any such exercise of the discount option or increase, reduction
or elimination of the Discount Percentage, and such exercise of the discount
option or increase, reduction or elimination of the Discount Percentage shall
become effective on the date specified therein only if (i) the Transferor has
delivered to the Trustee an Officer's Certificate to the effect that, based on
the facts known to such officer at the time, the Transferor reasonably believes
that such increase, reduction or elimination shall not at the time of its
occurrence cause a Pay Out Event, or an event which with notice or the lapse of
time would constitute a Pay Out Event, to occur with respect to any Series and
(ii) the Transferor, the Servicer and the Trustee shall have received written
confirmation from each Rating Agency that the Rating Agency Condition is
satisfied.

                 On each Date of Processing after the date on which the
Transferor's exercise of its discount option takes effect, the Transferor shall
treat Discount Option Receivables Collections as Collections of Finance Charge
Receivables.

                                   ARTICLE III

                               ADMINISTRATION AND
                            SERVICING OF RECEIVABLES

                 Section 3.1  Acceptance of Appointment and Other Matters
Relating to the Servicer.

                                      -41-

<PAGE>

                 (a) DNB agrees to act as the Servicer under this Agreement. The
Investor Certificateholders of each Series by their acceptance of the related
Certificates consent to DNB acting as Servicer.

                 (b) The Servicer shall service and administer the Receivables
and shall collect payments due under the Receivables in accordance with its
customary and usual servicing procedures for servicing credit card receivables
comparable to the Receivables and in accordance with the Credit Card Guidelines
and shall have full power and authority, acting alone or through any party
properly designated by it hereunder, to do any and all things in connection with
such servicing and administration which it may deem necessary or desirable.
Without limiting the generality of the foregoing, the Servicer is hereby
authorized and empowered (i) to make withdrawals from the Collection Account as
set forth in this Agreement, (ii) unless such power and authority is revoked by
the Trustee on account of the occurrence of a Servicer Default pursuant to
Section 10.1, to instruct the Trustee to make withdrawals and payments, from the
Finance Charge Account, the Principal Account, the Excess Funding Account and
any Series Account, in accordance with such instructions as set forth in this
Agreement, (iii) unless such power and authority is revoked by the Trustee on
account of the occurrence of a Servicer Default pursuant to Section 10.1, to
instruct the Trustee in writing, as set forth in this Agreement, (iv) to execute
and deliver, on behalf of the Trust for the benefit of the Certificateholders,
any and all instruments of satisfaction or cancellation, or of partial or full
release or discharge, and all other comparable instruments, with respect to the
Receivables and, after the delinquency of any Receivable and to the extent
permitted under and in compliance with applicable law and regulations, to
commence enforcement proceedings with respect to such Receivables and (v) to
make any filings, reports, notices, applications, registrations with, and to
seek any consents or authorizations from the Securities and Exchange Commission
and any state securities authority on behalf of the Trust as may be necessary or
advisable to comply with any federal or state securities or reporting
requirements. The Trustee agrees that it shall promptly follow the instructions
of the Servicer to withdraw funds from the Principal Account, the Finance Charge
Account, the Excess Funding Account, or any Series Account and to take any
action required under any Credit Enhancement at such time as required under this
Agreement. The Trustee shall execute at the Servicer's written request such
documents prepared by the Transferor and acceptable to the Trustee as may be
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder.

                 (c) In the event that the Transferor is unable for any reason
to transfer Receivables to the Trust in accordance with the provisions of this
Agreement (including, without limitation, by reason of the application of the
provisions of Section 9.2 or the order of any federal governmental agency having
regulatory authority over the Transferor or any court of competent jurisdiction
that the Transferor not transfer any additional Principal Receivables to the
Trust) then, in any such event, (A) the Servicer agrees to allocate, after such
date, all

                                      -42-

<PAGE>

collections with respect to Principal Receivables, and all amounts which would
have constituted Collections with respect to Principal Receivables but for the
Transferor's inability to transfer such Receivables (up to an aggregate amount
equal to the aggregate amount of Principal Receivables in the Trust as of such
date) in accordance with subsection 2.5(e); (B) the Servicer agrees to apply
such amounts as Collections in accordance with Article IV, and (C) for only so
long as all Collections and all amounts which would have constituted Collections
are allocated and applied in accordance with clauses (A) and (B) above,
Principal Receivables and all amounts which would have constituted Principal
Receivables but for the Transferor's inability to transfer Receivables to the
Trust that are written off as uncollectible in accordance with this Agreement
shall continue to be allocated in accordance with Article IV and all amounts
which would have constituted Principal Receivables but for the Transferor's
inability to transfer Receivables to the Trust shall be deemed to be Principal
Receivables for the purpose of calculating the applicable Investor Percentage
thereunder. If the Servicer is unable pursuant to any Requirement of Law to
allocate payments on the Accounts as described above, the Servicer agrees that
it shall in any such event allocate, after the occurrence of such event,
payments on each Account with respect to the principal balance of such Account
first to the oldest principal balance of such Account and to have such payments
applied as Collections in accordance with Article IV. The parties hereto agree
that Finance Charge Receivables, whenever created, accrued in respect of
Principal Receivables which have been conveyed to the Trust, or which would have
been conveyed to the Trust but for the above described inability to transfer
such Receivables, shall continue to be a part of the Trust notwithstanding any
cessation of the transfer of additional Principal Receivables to the Trust and
that Collections with respect thereto shall continue to be allocated and paid in
accordance with Article IV.

                 (d) In the event that pursuant to subsection 2.4(d), the
Transferor accepts reassignment of an Ineligible Receivable as a result of a
breach of the representations and warranties in subsection 2.4(b) relating to
such Receivable, then, in any such event, the Servicer agrees to account for
payments received with respect to such Ineligible Receivable separately from its
accounting for Collections on Principal Receivables retained by the Trust. If
payments received from or on behalf of an Obligor are not specifically
applicable either to an Ineligible Receivable of such Obligor reassigned to the
Transferor or to Receivables of such Obligor retained in the Trust, then the
Servicer agrees to allocate payments proportionately based on the total amount
of Principal Receivables of such Obligor retained in the Trust and the total
amount owing by such Obligor on any Ineligible Receivables purchased by the
Transferor, and the portion allocable to any Principal Receivables retained in
the Trust shall be treated as Collections and deposited in accordance with the
provisions of Article IV.

                 (e) The Servicer shall not be obligated to use
separate servicing procedures, offices, employees or accounts for
servicing the Receivables from the procedures, offices, employees and

                                      -43-

<PAGE>

accounts used by the Servicer in connection with servicing other credit card
receivables.

                 Section 3.2 Servicing Compensation. As compensation for its
servicing activities hereunder and reimbursement for its expenses as set forth
in the immediately following paragraph, the Servicer shall be entitled to
receive a servicing fee prior to the termination of the Trust pursuant to
Section 12.1. The Servicing Fee shall be payable, with respect to each Series,
at the times and in the amounts set forth in the related Supplement. The
Servicing Fee shall be allocated between the Investor Certificates (the
"Investor Servicing Fee") and the Holder of the Transferor Certificate (the
"Transferor Servicing Fee").

                 The Servicer's expenses include the amounts due to the Trustee
pursuant to Section 11.5 and the reasonable fees and disbursements of
independent public accountants and all other expenses incurred by the Servicer
in connection with its activities hereunder; provided, however that the Servicer
shall not be liable for any liabilities, costs or expenses of the Trust, the
Investor Certificateholders or the Certificate Owners arising under any tax law,
including without limitation any federal, state or local income or franchise
taxes or any other tax imposed on or measured by income (or any interest or
penalties with respect thereto or arising from a failure to comply therewith).
The Servicer shall be required to pay such expenses for its own account and
shall not be entitled to any payment therefor other than the servicing fee
specified herein.

                 Section 3.3 Representations and Warranties of the Servicer.
DNB, as initial Servicer, hereby makes, and any successor Servicer by its
appointment hereunder shall make, the following representations and warranties
on which the Trustee has relied in accepting the Receivables in Trust and in
authenticating the Certificates issued on the Initial Closing Date:

                 (a) Organization and Good Standing. The Servicer is duly
         organized, validly existing and in good standing under the laws of the
         jurisdiction in which it is organized and has full corporate power,
         authority and legal right to own its properties and conduct its credit
         card business as such properties are presently owned and as such
         business is presently conducted, and to execute, deliver and perform
         its obligations under this Agreement.

                 (b) Due Qualification. The Servicer is duly qualified to do
         business and is in good standing (or is exempt from such requirement)
         and has obtained all necessary licenses and approvals, except to the
         extent that the failure so to qualify or register would not have a
         material adverse effect on the Servicer's ability to perform its
         obligations hereunder.

                                      -44-

<PAGE>

                  (c) Due Authorization. The execution, delivery, and
         performance of this Agreement have been duly authorized by the Servicer
         by all necessary corporate action on the part of the Servicer.

                 (d) Binding Obligation. This Agreement constitutes a legal,
         valid and binding obligation of the Servicer, enforceable in accordance
         with its terms, except as enforceability may be limited by applicable
         bankruptcy, insolvency, reorganization, moratorium or other similar
         laws now or hereinafter in effect, affecting the enforcement of
         creditors' rights in general or the rights of creditors of national
         banking associations.

                 (e) No Violation. The execution and delivery of this Agreement
         by the Servicer, and the performance of the transactions contemplated
         by this Agreement and the fulfillment of the terms hereof applicable to
         the Servicer, will not conflict with, violate, result in any breach of
         any of the material terms and provisions of, or constitute (with or
         without notice or lapse of time or both) a default under, any
         Requirement of Law applicable to the Servicer or any indenture,
         contract, agreement, mortgage, deed of trust or other instrument to
         which the Servicer is a party or by which it is bound except to the
         extent that the same could not reasonably be expected to have a
         material adverse effect on the Certificateholders or any Credit
         Enhancement Provider.

                 (f) No Proceedings. There are no proceedings or investigations
         pending or, to the best knowledge of the Servicer, threatened against
         the Servicer before any court, regulatory body, administrative agency
         or other tribunal or governmental instrumentality seeking to prevent
         the issuance of the Certificates or the consummation of any of the
         transactions contemplated by this Agreement, seeking any determination
         or ruling that, in the reasonable judgment of the Servicer, would
         materially and adversely affect the performance by the Servicer of its
         obligations under this Agreement, or seeking any determination or
         ruling that would materially and adversely affect the validity or
         enforceability of this Agreement.

                 (g) Compliance with Requirements of Law. The Servicer shall
         duly satisfy all obligations on its part to be fulfilled under or in
         connection with each Receivable and the related Account, will maintain
         in effect all qualifications required under Requirements of Law in
         order to service properly each Receivable and the related Account and
         will comply in all material respects with all other Requirements of Law
         in connection with servicing each Receivable and the related Account
         the failure to comply with which would have a material adverse effect
         on the Certificateholders or any Credit Enhancement Provider.

                                      -45-

<PAGE>

                 Section 3.4 Reports and Records for the Trustee.

                 (a) Daily Reports. On each Business Day during any period
during which the Servicer is required to make daily deposits to the Collection
Account pursuant to Section 4.3(a), the Servicer shall prepare and make
available at the office of the Servicer for inspection by the Trustee a record
setting forth (i) the aggregate amount of Collections processed by the Servicer
on the preceding Business Day and (ii) the aggregate amount of Receivables as of
the close of business on the preceding Business Day.

                 (b) Monthly Servicer's Certificate. Unless otherwise stated in
the related Supplement with respect to any Series, on each Determination Date
the Servicer shall forward, as provided in Section 13.5, to the Trustee, the
Paying Agent, any Credit Enhancement Provider and each Rating Agency, a
certificate of a Servicing Officer in the form of Exhibit C (which includes the
Schedule thereto specified as such in each Supplement) setting forth (i) the
aggregate amount of Collections processed during the preceding Monthly Period,
(ii) the aggregate amount of the applicable Investor Percentage of Collections
of Principal Receivables processed by the Servicer pursuant to Article IV during
the preceding Monthly Period with respect to each Series then outstanding, (iii)
the aggregate amount of the applicable Investor Percentage of Collections of
Finance Charge Receivables processed by the Servicer pursuant to Article IV
during the preceding Monthly Period with respect to each Series then
outstanding, (iv) the aggregate amount of Receivables processed as of the end of
the last day of the preceding Monthly Period, (v) the balance on deposit in the
Finance Charge Account, the Principal Account or any Series Account applicable
to any Series then outstanding on such Determination Date with respect to
Collections processed by the Servicer during the preceding Monthly Period, (vi)
the aggregate amount, if any, of withdrawals, drawings or payments under any
Credit Enhancement, if any, for each Series then outstanding required to be made
with respect to the previous Monthly Period in the manner provided in the
related Supplement, (vii) the sum of all amounts payable to the Investor
Certificateholders of each Series (or for a Series of more than one Class, each
such Class) on the succeeding Distribution Date in respect of Certificate
Principal and Certificate Interest with respect to such preceding monthly Period
and (viii) such other matters as are set forth in Exhibit C.

                 Section 3.5  Annual Servicer's Certificate.  On or
before March 31 of each calendar year, beginning with March 31, 2001, the
Servicer will deliver, as provided in Section 13.5, to the Trustee, any
Credit Enhancement Provider and each Rating Agency, an Officer's
Certificate substantially in the form of Exhibit D stating that (a) a
review of the activities of the Servicer during the twelve month period
ending on December 31 of the preceding calendar year, or for the initial
period, from the Closing Date until December 31, 2000, and of its
performance under this Agreement was made under the supervision of the
officer signing such certificate and (b) to the best of such Officer's
knowledge, based on such review, the Servicer has fully performed all its
obligations under this Agreement throughout such period, or, if there has
been a default in the performance of any such obligation, specifying each
such default known to such officer and the nature and status thereof.  A

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<PAGE>

copy of such certificate may be obtained by any Investor Certificateholder by a
request in writing to the Trustee addressed to the Corporate Trust Office.

                 Section 3.6  Annual Independent Accountants' Servicing
Report.

                 (a) On or before March 31 of each calendar year, beginning with
March 31, 2001, the Servicer shall cause a firm of nationally recognized
independent certified public accountants (who may also render other services to
the Servicer, DNB, DNB-La., Dillard's or the Transferor) to furnish, as provided
in Section 13.5, a report addressed to the Trustee, any Credit Enhancement
Provider and the Transferor, to the effect that such firm has examined
management's assertion that, as of the date of such report, the system of
internal control over servicing of securitized credit card receivables met the
criteria for effective internal control described in the report entitled
"Internal Control - Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO") and that in their opinion,
management's assertion is fairly stated, in all material respects. A copy of
such report shall be distributed by the Servicer to each Rating Agency and will
be available for distribution to Certificateholders upon written request
therefor addressed to the Trustee at the Corporate Trust Office.

                 (b) On or before March 31 of each calendar year, beginning with
March 31, 2001, the Servicer shall cause a firm of nationally recognized
independent certified public accountants (who may also render other services to
the Servicer, DNB, DNB-La., Dillard's or the Transferor) to furnish, as provided
in Section 13.5, a report, prepared using generally accepted attestation
standards, addressed to the Trustee, any Credit Enhancement Provider and the
Transferor, to the effect that they have compared the amounts set forth in the
monthly certificates forwarded by the Servicer pursuant to subsection 3.4(c)
during the period covered by such report (which shall be the twelve-month period
ending on December 31 of the preceding calendar year, or for the initial period,
from the Closing Date until December 31, 2000 with the Servicer's computer
reports which were the source of such amounts and found them to be in agreement
or shall disclose any exceptions noted. Additionally, such firm shall
recalculate the mathematical accuracy of amounts derived in the monthly
certificates. A copy of such report shall be distributed by the Servicer to each
Rating Agency and will be available for distribution to Certificateholders upon
written request therefor addressed to the Trustee at the Corporate Trust Office.

                 Section 3.7 Tax Treatment. The Transferor has structured this
Agreement and the Investor Certificates with the intention that the Investor
Certificates will qualify under applicable federal, state, local and foreign tax
law as indebtedness. The Transferor, the Servicer, the Holder of the Transferor
Certificate, each Investor Certificateholder, and each Certificate Owner, agree
to treat and to take no action inconsistent with the treatment of the Investor
Certificates (or beneficial interest therein) as indebtedness for

                                      -47-

<PAGE>

purposes of federal, state, local and foreign income or franchise taxes and any
other tax imposed on or measured by income. Each Investor Certificateholder and
the Holder of the Transferor Certificate, by acceptance of its Certificate and
each Certificate Owner, by acquisition of a beneficial interest in a
Certificate, agree to be bound by the provisions of this Section 3.7. Each
Certificateholder agrees that it will cause any Certificate Owner acquiring an
interest in a Certificate through it to comply with this Agreement as to
treatment as indebtedness under applicable tax law, as described in this Section
3.7.

                 Section 3.8 Notices to the Transferor. In the event that DNB is
no longer acting as Servicer, any Successor Servicer appointed pursuant to
Section 10.2 shall deliver or make available to the Transferor each certificate
and report required to be prepared, forwarded or delivered thereafter pursuant
to Sections 3.4, 3.5 and 3.6.

                 Section 3.9 Sub-Servicing. The Servicer may appoint any
Affiliate as a sub-servicer (each, a "Sub-Servicer") hereunder, provided,
however, that such appointment shall not relieve the Servicer of its duties
hereunder. Each duly appointed Sub-Servicer is hereby authorized to take any
action which is authorized to be taken by the Servicer hereunder. The Servicer
hereby appoints each of DNB-La. and MCC as a Sub-Servicer hereunder.

                 Any amounts received by a Sub-Servicer in respect of a
Receivable shall be deemed to have been received by the Servicer whether or not
actually received by it. The Servicer shall supervise, monitor and oversee the
servicing of the Receivables by the Sub-Servicers and the performance by the
Sub-Servicers of all services, duties, responsibilities and obligations that are
to be observed or performed by the Sub-Servicers. Upon the termination or
resignation of the Servicer in accordance with the terms hereof, the services,
duties, responsibilities and obligations of the Sub-Servicers hereunder shall be
terminated. As compensation for the performance of its obligations as a
Sub-Servicer under this Agreement, each Sub-Servicer shall be entitled to
receive a fee from the Servicer in such amounts as shall be separately agreed
between the Servicer and such Sub-Servicer.

                                   ARTICLE IV

                        RIGHTS OF CERTIFICATEHOLDERS AND
                ALLOCATION AND APPLICATION OF COLLECTIONS

                 Section 4.1 Rights of Certificateholders. Each Series of
Investor Certificates shall represent Undivided Interests in the Trust,
including the benefits of any Credit Enhancement issued with respect to such
Series and the right to receive the Collections and other amounts at the times
and in the amounts specified in this Article IV to be deposited in the Investor
Accounts and any other Series Account (if so specified in the related
Supplement) or to be paid to the Investor Certificateholders of such Series;
provided, however, that the aggregate interest represented by such Certificates
at any time in the Principal

                                      -48-

<PAGE>

Receivables shall not exceed an amount equal to the Investor Interest at such
time. The Transferor Certificate shall represent the remaining undivided
interest in the Trust, including the right to receive the Collections and other
amounts at the times and in the amounts specified in this Article IV to be paid
to the Holder of the Transferor Certificate; provided, however, that the
aggregate interest represented by such Transferor Certificate at any time in the
Principal Receivables shall not exceed the Transferor Interest at such time and
such Certificate shall not represent any interest in the Investor Accounts,
except as provided in this Agreement, or the benefits of any Credit Enhancement
issued with respect to any Series.

                 Section 4.2  Establishment of Accounts.

                 (a) The Collection Account. The Servicer, for the benefit of
the Certificateholders, shall establish and maintain in the name of the Trustee,
on behalf of the Trust, an Eligible Deposit Account bearing a designation
clearly indicating that the funds deposited therein are held in trust for the
benefit of the Certificateholders (the "Collection Account"). Pursuant to
authority granted to it pursuant to subsection 3.1(b), the Servicer shall have
the revocable power to instruct the Trustee to withdraw funds from the
Collection Account for the purposes of carrying out its duties hereunder.

                 (b) The Finance Charge and Principal Accounts. The Trustee, for
the benefit of the Investor Certificateholders, shall establish and maintain in
the State of New York with the Paying Agent in the name of the Trust two
Eligible Deposit Accounts (the "Finance Charge Account" and the "Principal
Account", respectively), bearing a designation clearly indicating that the funds
therein are held for the benefit of the Investor Certificateholders; provided,
however, that each of such accounts may be established as sub-accounts of the
Collection Account. The Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Finance Charge Account and the
Principal Account and in all proceeds thereof. The Finance Charge Account and
the Principal Account shall be under the sole dominion and control of the
Trustee for the benefit of the Investor Certificateholders. Pursuant to
authority granted to it hereunder, the Servicer shall have the revocable power
to instruct the Trustee to withdraw funds from the Finance Charge Account and
Principal Account for the purpose of carrying out the Servicer's duties
hereunder. The Trustee at all times shall maintain accurate records reflecting
each transaction in the Principal Account and the Finance Charge Account and
that funds held therein shall at all times be held in trust for the benefit of
the Investor Certificateholders.

                 (c) The Distribution Account. The Trustee, for the benefit of
the Investor Certificateholders, shall cause to be established and maintained in
the name of the Trust, an Eligible Deposit Account bearing a designation clearly
indicating that the funds deposited therein are held in trust for the benefit of
the Investor Certificateholders (the "Distribution Account"). The Trustee shall
possess all right, title and interest in all funds on deposit from time to time
in the Distribution

                                      -49-

<PAGE>

Account and in all proceeds thereof. The Distribution Account shall be under the
sole dominion and control of the Trustee for the benefit of the Investor
Certificateholders.

                 (d) The Excess Funding Account. The Trustee, for the benefit of
the Investor Certificateholders, shall establish and maintain an Eligible
Deposit Account bearing a designation clearly indicating that the funds therein
are held for the benefit of the Investor Certificateholders (the "Excess Funding
Account"). The Trustee shall possess all right, title and interest in all funds
on deposit from time to time in the Excess Funding Account and in all proceeds
thereof. The Excess Funding Account shall be under the sole dominion and control
of the Trustee for the benefit of the Investor Certificateholders. If, at any
time, the Excess Funding Account ceases to be an Eligible Deposit Account, the
Trustee shall notify the Rating Agency and within 10 Business Days establish a
new Eligible Deposit Account which shall be designated as the new Excess Funding
Account and shall transfer any cash or any investments to such new Excess
Funding Account. From the date such new Excess Funding Account is established,
it shall be the "Excess Funding Account." Pursuant to authority granted to it
hereunder, the Servicer shall have the revocable power to instruct the Trustee
to withdraw funds from the Excess Funding Account for the purpose of carrying
out the Servicer's duties hereunder. The Trustee at all times shall maintain
accurate records reflecting each transaction in the Excess Funding Account and
that funds held therein shall at all times be held in trust for the benefit of
the Investor Certificateholders.

                 (e) Series Accounts. If so provided in the related Supplement,
the Trustee, for the benefit of the Investor Certificateholders, shall cause to
be established and maintained in the name of the Trust, one or more Series
Accounts. Each such Series Account shall bear a designation clearly indicating
that the funds deposited therein are held for the benefit of the Investor
Certificateholders of such Series. Each such Series Account will be an Eligible
Deposit Account, if so provided in the related Supplement and will have the
other features and be applied as set forth in the related Supplement.

                 (f) Administration of the Finance Charge, Principal Accounts
and Excess Funding Account. Funds on deposit in the Principal Account, the
Finance Charge Account and the Excess Funding Account shall, at the written
direction of the Servicer, be invested in Permitted Investments. Any such
investment shall mature and such funds shall be available for withdrawal on or
prior to the Transfer Date related to the Monthly Period in which such funds
were processed for collection, or if so specified in the related Supplement,
immediately preceding a Distribution Date. The Trustee shall maintain for the
benefit of the Investor Certificateholders possession of the negotiable
instruments or securities evidencing the Permitted Investments described in
clause (a) of the definition thereof from the time of purchase thereof until the
time of sale or maturity; provided, however, that no such investment shall be
disposed of prior to its maturity date. All interest and earnings (net of losses
and investment expenses) on funds on deposit in the Principal Account and the
Finance Charge Account shall be turned over

                                      -50-

<PAGE>

by the Trustee to the Transferor not less frequently than monthly, and all
interest and earnings (net of losses and investment expenses) on funds on
deposit in the Excess Funding Account shall be deposited by the Trustee not less
frequently than monthly in the Finance Charge Account for application as
Collections of Finance Charge Receivables. Subject to the restrictions set forth
above, the Servicer, or a Person designated in writing by the Servicer, of which
the Trustee shall have received written notification thereof, shall instruct the
Trustee with respect to the investment of funds on deposit in the Principal
Account and the Finance Charge Account. For purposes of determining the
availability of funds or the balances in the Finance Charge Account, the
Principal Account and, except as provided in the second preceding sentence, the
Excess Funding Account, for any reason under this Agreement, all investment
earnings on such funds shall be deemed not to be available or on deposit.

                 Section 4.3  Collections and Allocations.

                 (a) Collections. Except as provided below, the Servicer shall
deposit all Collections in the Collection Account as promptly as possible after
the Date of Processing of such Collections, but in no event later than the
second Business Day following such Date of Processing. In the event of the
insolvency of the Servicer, then, immediately upon the occurrence of such event
and thereafter, the Servicer shall deposit all Collections into the Collection
Account, and in no such event shall the Servicer deposit any Collections
thereafter into any account established, held or maintained with the Servicer.

                 The Servicer shall allocate such amounts to each Series of
Investor Certificates and to the Holder of the Transferor Certificate in
accordance with this Article IV and shall cause the withdrawal by the Trustee of
the required amounts from the Collection Account or pay such amounts to the
Holder of the Transferor Certificate in accordance with this Article IV, in both
cases as modified by any Supplement. The Servicer shall make such deposits or
payments on the date indicated therein in immediately available funds or as
otherwise provided in the Supplement for any Series of Certificates with respect
to such Series.

                 Notwithstanding anything in this Agreement to the contrary, for
so long as, and only so long as, DNB shall remain the Servicer hereunder, and
(a)(i) the Servicer provides to the Trustee a letter of credit covering risk
collection of the Servicer acceptable to each Rating Agency, and (ii) the
Transferor shall not have received a notice from any Rating Agency that such
letter of credit would result in the lowering of such Rating Agency's
then-existing rating of the Investor Certificates, (b) Dillard's (so long as the
Servicer is wholly-owned by Dillard's) shall have and maintain a long-term
unsecured debt rating in one of the four highest categories assigned by Moody's
and shall have and maintain a short-term debt rating of A-1+ from Standard &
Poor's or (c) such other arrangement is made by the Servicer which is approved
in writing by the Rating Agencies, the Servicer need not deposit Collections
into the Collection Account, the Principal Account, the Finance Charge Account,
the Excess Funding Account or any Series Account, as provided in any Supplement,
or make payments to the Holder of the Transferor

                                      -51-

<PAGE>

Certificate as provided in Article IV, but may make such deposits, payments and
withdrawals on each Transfer Date in an amount equal to the net amount of such
deposits, payments and withdrawals which would have been made but for the
provisions of this paragraph.

                 Notwithstanding anything else in this Agreement to the
contrary, with respect to any Monthly Period, whether the Servicer is required
to make monthly or daily deposits from the Collection Account into the Finance
Charge Account, the Principal Account, the Excess Funding Account or any Series
Account, as provided in any Supplement, (i) the Servicer will only be required
to deposit Collections from the Collection Account into the Finance Charge
Account, the Principal Account, the Excess Funding Account or any Series Account
in an amount equal to the lesser of (x) the amount required to be deposited into
any such deposit account pursuant to the terms of this Agreement or any
Supplement and (y) the amount required to be distributed on or prior to the
related Distribution Date to Investor Certificateholders or to any Credit
Enhancement Provider pursuant to the terms of any Supplement or agreement
relating to such Credit Enhancement and (ii) if at any time prior to such
Distribution Date the amount of Collections deposited in the Collection Account
exceeds the amount required to be deposited pursuant to clause (i) above, the
Servicer will be permitted to withdraw the excess from the Collection Account.

                 (b) Allocations for the Transferor Certificate. Throughout the
existence of the Trust, unless otherwise stated in any Supplement, the Servicer
shall allocate to the Holder of the Transferor Certificate an amount equal to
the product of (A) the Transferor Percentage and (B) the aggregate amount of the
Collections allocated to Principal Receivables and Finance Charge Receivables,
respectively, in respect of each Monthly Period. Notwithstanding anything in
this Agreement to the contrary, unless otherwise stated in any Supplement, the
Servicer need not deposit this amount or any other amounts so allocated to the
Transferor Certificate pursuant to any Supplement into the Collection Account
and shall pay, or be deemed to pay, such amounts as collected to the Holder of
the Transferor Certificate.

                 (c) Adjustments for Miscellaneous Credits and Fraudulent
Charges. The Servicer shall be obligated to reduce on a net basis in each
Monthly Period the aggregate amount of Principal Receivables used to calculate
the Transferor Interest as provided in this subsection 4.3(c) (a "Credit
Adjustment") with respect to any Principal Receivable (i) which was created in
respect of merchandise refused or returned by the Obligor thereunder or as to
which the Obligor thereunder has asserted a counterclaim or defense, (ii) which
is reduced by the Servicer or related Originator by any rebate, refund,
charge-back or adjustment (including Servicer errors) or (iii) which was created
as a result of a fraudulent or counterfeit charge.

                 In the event that the inclusion of the amount of a Credit
Adjustment in the calculation of the Transferor Interest would cause the
Transferor Interest to be an amount less than the Minimum Transferor Interest,
the Transferor shall make a deposit, no later than

                                      -52-

<PAGE>

the Business Day following the Date of Processing of such Credit Adjustment, in
the Excess Funding Account in immediately available funds in an amount equal to
the amount by which such Credit Adjustment would cause the Transferor Interest
to be less than the Minimum Transferor Interest on such Date of Processing.

                 (d) Transfer of Defaulted Accounts. Unless otherwise provided
in any Supplement, on the date on which an Account becomes a Defaulted Account,
the Trust shall automatically and without further action or consideration be
deemed to transfer, set over, and otherwise convey to the Transferor, without
recourse, representation or warranty, all the right, title and interest of the
Trust in and to Receivables in such Defaulted Account, all monies due or to
become due with respect to such Receivables, all proceeds of such Receivables
and Insurance Proceeds relating to such Receivables allocable to the Trust with
respect to such Receivables. Notwithstanding any such transfer of accounts,
amounts recovered with respect to such defaulted accounts may still be allocated
to the Trust to the extent provided for in the definition of Recoveries.

                 (e) Operation of Excess Funding Account. On each Determination
Date on which one or more Series is in its Amortization Period or Accumulation
Period, the Servicer shall determine the aggregate amount of Principal
Shortfalls, if any, with respect to each such Series that is a Principal Sharing
Series, and the Servicer shall instruct the Trustee, in writing, to withdraw
such amount (up to the Excess Funding Amount) from the Excess Funding Account on
the next succeeding Transfer Date and deposit such amount in the Distribution
Account for allocation among each such Series as Shared Principal Collections as
specified in each related Supplement. On any Business Day on which the
Transferor Interest exceeds the Minimum Transferor Interest, the Servicer shall
instruct the Trustee, in writing, to withdraw the amount of such excess (up to
the Excess Funding Amount) from the Excess Funding Account on such day and pay
such amount to the Holder of the Transferor Certificate.

                 Section 4.4 Allocations During Funding Period. To the extent
that the Servicer establishes an Eligible Deposit Account as a pre-funding
account (the "Pre-Funding Account") with respect to any Series, bearing a
designation indicating that the funds deposited therein are for the benefit of
such Series, during the period (the "Funding Period"), as set forth in the
related Supplement, that the Pre-Funding Account maintains a balance, the date
upon which an increase in the Invested Amount of such Series in accordance with
the terms of such related Supplement occurs shall be treated as an Addition Date
solely for the purpose of calculating the applicable Investor Percentages. Such
Addition Date shall be deemed to occur on the date of each such increase and the
applicable Investor Percentages shall be calculated accordingly.

                                      -53-

<PAGE>

                 Section 4.5  Certain Fees.

                 (a) On or prior to each Determination Date following a Monthly
Period all of the days of which follow the Fee Determination Date, the
Transferor shall notify the Servicer of the amounts of Late Fees and similar
fees and charges and Special Fees to be included as Collections of Finance
Charge Receivables arising from the Accounts with respect to the preceding
Monthly Period. Until the date specified by the Servicer in an Officer's
Certificate delivered to the Trustee as a date after which the Servicer can
compute the actual amount of Collections of such fees and charges (the "Fee
Determination Date"), such amounts shall be deemed to be equal to the product of
(x) the amount of Late Fees and similar fees and charges and Special Fees, as
the case may be, billed with respect to such Monthly Period and (y) a fraction,
the numerator of which is the amount of Collections of Periodic Finance Charges
and Annual Membership Fees arising from the Accounts with respect to such
Monthly Period, and the denominator of which is the amount of Periodic Finance
Charges and Annual Membership Fees arising from the Accounts billed with respect
to such Monthly Period.

                 (b) On and after the Fee Determination Date, the amounts of
Late Fees and similar fees and charges and Special Fees to be included as
Collections of Finance Charge Receivables shall be the actual amounts of such
fees and charges, as computed by the Servicer. On each Transfer Date prior to
the first Monthly Period all of the days of which follow the Fee Determination
Date, the Transferor shall pay to the Servicer and the Servicer shall deposit
into the Collection Account, for allocation as Collections of Finance Charge
Receivables in the manner provided in Article IV (in immediately available
funds) the amounts of Late Fees and similar fees and charges and Special Fees
arising from the Accounts to be so included as Collections of Finance Charge
Receivables with respect to the preceding Monthly Period, as calculated pursuant
to this Section 4.5.

         [THE REMAINDER OF ARTICLE IV IS RESERVED AND SHALL BE SPECIFIED
         IN ANY SUPPLEMENT WITH RESPECT TO ANY SERIES]

                                    ARTICLE V

              [ARTICLE V IS RESERVED AND SHALL BE SPECIFIED
              IN ANY SUPPLEMENT WITH RESPECT TO ANY SERIES]

                                   ARTICLE VI

                                THE CERTIFICATES

                 Section 6.1 The Certificates. Subject to Sections 6.10 and
6.13, the Investor Certificates of each Series and any Class thereof may be
issued in bearer form (the "Bearer Certificates") with attached interest coupons
and a special coupon (collectively, the "Coupons") or in fully registered form
(the "Registered Certificates"), and shall be substantially in the form of the
exhibits with respect thereto attached

                                      -54-

<PAGE>

to the related Supplement. The Transferor Certificate shall be substantially in
the form of Exhibit A. The Investor Certificates and the Transferor Certificate
shall, upon issue pursuant hereto or to Section 6.9 or Section 6.10, be executed
and delivered by the Transferor to the Trustee for authentication and redelivery
as provided in Sections 2.1 and 6.2. Any Investor Certificate shall be issuable
in a minimum denomination of $1,000 Undivided Interest and integral multiples
thereof, unless otherwise specified in any Supplement. The Transferor
Certificate shall be issued as a single certificate. Each Certificate shall be
executed by manual or facsimile signature on behalf of the Transferor by an
authorized signatory thereof. Certificates bearing the manual or facsimile
signature of the individual who was, at the time when such signature was
affixed, authorized to sign on behalf of the Transferor or the Trustee shall not
be rendered invalid, notwithstanding that such individual has ceased to be so
authorized prior to the authentication and delivery of such Certificates or does
not hold such office at the date of such Certificates. No Certificate shall be
entitled to any benefit under this Agreement, or be valid for any purpose,
unless there appears on such Certificate a certificate of authentication
substantially in the form provided for herein, executed by or on behalf of the
Trustee by the manual signature of a duly authorized signatory, and such
certificate upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication
except Bearer Certificates which shall be dated the applicable Issuance Date as
provided in the related Supplement.

                 Section 6.2 Authentication of Certificates. Contemporaneously
with the initial assignment and transfer of the Receivables, whether now
existing or hereafter created (other than Receivables in Additional Accounts)
and the other components to the Trust, the Trustee shall authenticate and
deliver the initial Series of Investor Certificates, upon the written order of
the Transferor against payment to the Transferor of the Initial Investor
Interest (net of any purchase or underwriting discount). Upon the receipt of
such payment and the issuance of the Investor Certificates, such Investor
Certificates shall be fully paid and non-assessable. The Trustee shall
authenticate and deliver the Transferor Certificate to the Transferor
simultaneously with its delivery of the initial Series of Investor Certificates.
Upon an Exchange as provided in Section 6.9 and the satisfaction of certain
other conditions specified therein, the Trustee shall authenticate and deliver
the Investor Certificates of additional Series (with the designation provided in
the related Supplement), upon the order of the Transferor, to the Persons
designated in such Supplement. Upon the order of the Transferor, the
Certificates of any Series shall be duly authenticated by or on behalf of the
Trustee, in authorized denominations. If specified in the related Supplement for
any Series, the Trustee shall authenticate and deliver outside the United States
the Global Certificate that is issued upon original issuance thereof, upon the
written order of the Transferor, to the Depository against payment of the
purchase price therefor. If specified in the related Supplement for any Series,
the Trustee shall authenticate Book-Entry Certificates that are issued upon
original issuance thereof, upon the written order of the

                                      -55-

<PAGE>

Transferor, to a Clearing Agency or its nominee as provided in Section 6.10
against payment of the purchase price thereof.

                 Section 6.3  Registration of Transfer and Exchange of
Certificates.

                 (a) The Trustee shall cause to be kept at the office or agency
to be maintained by a transfer agent and registrar (the "Transfer Agent and
Registrar"), in accordance with the provisions of Section 11.16, a register (the
"Certificate Register") in which, subject to such reasonable regulations as it
may prescribe, the Transfer Agent and Registrar shall provide for the
registration of the Investor Certificates of each Series (unless otherwise
provided in the related Supplement) and of transfers and exchanges of the
Investor Certificates as herein provided. The Trustee is hereby initially
appointed Transfer Agent and Registrar for the purposes of registering the
Investor Certificates and transfers and exchanges of the Investor Certificates
as herein provided. If any form of Investor Certificate is issued as a Global
Certificate, the Transferor may, or if and so long as any Series of Investor
Certificates are listed on the Luxembourg Stock Exchange and such exchange shall
so require, the Transferor shall appoint a co- transfer agent and co-registrar
in Luxembourg or another European city. Any reference in this Agreement to the
Transfer Agent and Registrar shall include any co-transfer agent and co-
registrar unless the context otherwise requires. The Trustee shall be permitted
to resign as Transfer Agent and Registrar upon 30 days' written notice to the
Servicer. In the event that the Trustee shall no longer be the Transfer Agent
and Registrar, the Transferor shall appoint a successor Transfer Agent and
Registrar.

                 Upon surrender for registration of transfer of any Certificate
at any office or agency of the Transfer Agent and Registrar, the Transferor
shall execute, subject to the provisions of subsection 6.3(c), and the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates in authorized denominations of like
aggregate Undivided Interests; provided, however that the provisions of this
paragraph shall not apply to Bearer Certificates.

                 At the option of an Investor Certificateholder, Investor
Certificates may be exchanged for other Investor Certificates of the same Series
in authorized denominations of like aggregate Undivided Interests, upon
surrender of the Investor Certificates to be exchanged at any such office or
agency. At the option of any Holder of Registered Certificates, Registered
Certificates may be exchanged for other Registered Certificates of the same
Series in authorized denominations of like aggregate Undivided Interests in the
Trust, upon surrender of the Registered Certificates to be exchanged at any
office or agency of the Transfer Agent and Registrar maintained for such
purpose. At the option of a Bearer Certificateholder, subject to applicable laws
and regulations (including without limitation, the Bearer Rules), Bearer
Certificates may be exchanged for other Bearer Certificates or Registered
Certificates of the same Series in authorized denominations of like aggregate
Undivided

                                      -56-

<PAGE>

Interests in the Trust, in the manner specified in the Supplement for such
Series, upon surrender of the Bearer Certificates to be exchanged at an office
or agency of the Transfer Agent and Registrar located outside the United States.
Each Bearer Certificate surrendered pursuant to this Section 6.3 shall have
attached thereto (or be accompanied by) all unmatured Coupons, provided that any
Bearer Certificate so surrendered after the close of business on the Record Date
preceding the relevant Distribution Date after the related Series Termination
Date need not have attached the Coupons relating to such Distribution Date.

                 Whenever any Investor Certificates of any Series are so
surrendered for exchange, the Transferor shall execute, and the Trustee shall
authenticate and (unless the Transfer Agent and Registrar is different than the
Trustee, in which case the Transfer Agent and Registrar shall) deliver, the
Investor Certificates of such Series which the Certificateholder making the
exchange is entitled to receive. Every Investor Certificate presented or
surrendered for registration of transfer or exchange shall be accompanied by a
written instrument of transfer in a form satisfactory to the Trustee and the
Transfer Agent and Registrar duly executed by the Certificateholder thereof or
his attorney- in-fact duly authorized in writing.

                 The preceding provisions of this Section 6.3 notwithstanding,
the Trustee or the Transfer Agent and Registrar, as the case may be, shall not
be required to register the transfer of or exchange any Investor Certificate of
any Series for a period of 15 days preceding the due date for any payment with
respect to the Investor Certificates of such Series.

                 Unless otherwise provided in the related Supplement, no service
charge shall be made for any registration of transfer or exchange of
Certificates, but the Transfer Agent and Registrar may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.

                 All Investor Certificates (together with any Coupons attached
to Bearer Certificates) surrendered for registration of transfer and exchange
shall be canceled by the Transfer Agent and Registrar and disposed of in its
customary manner. The Trustee shall cancel and destroy any Global Certificates
upon its exchange in full for Definitive Certificates and shall deliver a
certificate of destruction to the Transferor. Such certificate shall also state
that a certificate or certificates of each Foreign Clearing Agency to the effect
referred to in Section 6.13 was received with respect to each portion of such
Global Certificate exchanged for Definitive Certificates.

                 The Transferor shall execute and deliver to the Trustee or the
Transfer Agent and Registrar, as applicable, Bearer Certificates and Registered
Certificates in such amounts and at such times as are necessary to enable the
Trustee to fulfill its responsibilities under this Agreement and the
Certificates.

                                      -57-

<PAGE>

                 (b) Except as provided in Section 6.9 or 7.2 or in any
Supplement, in no event shall the Transferor Certificate or any interest therein
be transferred hereunder, in whole or in part, unless the Transferor shall have
consented in writing to such transfer and unless the Trustee shall have received
(1) written confirmation from each Rating Agency that such transfer will satisfy
the Rating Agency Condition and (2) a Tax Opinion with respect to such transfer.

                 (c) Unless otherwise provided in the related Supplement,
registration of transfer of Registered Certificates containing a legend relating
to the restrictions on transfer of such Registered Certificates (which legend
shall be set forth in the Supplement relating to such Investor Certificates)
shall be effected only if the conditions set forth in such related Supplement
are satisfied.

                 Whenever a Registered Certificate containing the legend sat
forth in the related Supplement is presented to the Transfer Agent and Registrar
for registration of transfer, the Transfer Agent and Registrar shall promptly
seek instructions from the Servicer regarding such transfer. The Transfer Agent
and Registrar and the Trustee shall be entitled to receive written instructions
signed by a Servicing Officer prior to registering any such transfer or
authenticating new Registered Certificates, as the case may be. The Servicer
hereby agrees to indemnify the Transfer Agent and Registrar and the Trustee and
to hold each of them harmless against any loss, liability or expense incurred
without negligence or bad faith on their part arising out of or in connection
with actions taken or omitted by them in reliance on any such written
instructions furnished pursuant to this subsection 6.3(c).

                 (d) The Transfer Agent and Registrar will maintain at its
expense in the Borough of Manhattan, the City of New York (and subject to this
Section 6.3, if specified in the related Supplement for any Series, any other
city designated in such Supplement) an office or offices or an agency or
agencies where Investor Certificates of such Series may be surrendered for
registration of transfer or exchange.

                 Section 6.4 Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificate (together, in the case of Bearer Certificates,
with all unmatured Coupons, if any, appertaining thereto) is surrendered to the
Transfer Agent and Registrar, or the Transfer Agent and Registrar receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate and (b) there is delivered to the Transfer Agent and Registrar and
the Trustee such security or indemnity as may be reasonably required by them to
save each of them and the Transferor harmless, then, in the absence of notice to
the Trustee that such Certificate has been acquired by a bona fide purchaser,
the Transferor shall execute and the Trustee shall authenticate and (unless the
Transfer Agent and Registrar is different from the Trustee, in which case the
Transfer Agent and Registrar shall) deliver (in compliance with applicable law),
in exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like tenor and aggregate Undivided Interest.
In connection with the issuance of any new Certificate under this Section 6.4,
the Trustee or the Transfer Agent

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<PAGE>

and Registrar may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee and the Transfer Agent
and Registrar) connected therewith. Any duplicate Certificate issued pursuant to
this Section 6.4 shall constitute complete and indefeasible evidence of
ownership in the Trust, as if originally issued, whether or not the lost, stolen
or destroyed Certificate shall be found at any time.

                 Section 6.5 Persons Deemed Owners. Prior to due presentation of
a Certificate for registration of transfer, the Trustee, the Paying Agent, the
Transfer Agent and Registrar and any agent of any of them may treat the Person
in whose name any Certificate is registered as the owner of such Certificate for
the purpose of receiving distributions pursuant to Article V (as described in
any Supplement) and for all other purposes whatsoever, and neither the Trustee,
the Paying Agent, the Transfer Agent and Registrar nor any agent of any of them
shall be affected by any notice to the contrary; provided, however, that in
determining whether the holders of Investor Certificates evidencing the
requisite Undivided Interests have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, unless otherwise expressly
specified herein or in the related Supplement, Investor Certificates owned by
the Transferor, the Servicer or any Affiliate thereof shall be disregarded and
deemed not to be outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Investor Certificates which a
Responsible Officer in the Corporate Trust Office of the Trustee knows to be so
owned shall be so disregarded. Investor Certificates so owned that have been
pledged in good faith shall not be disregarded as outstanding, if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Investor Certificates and that the pledgee is not the
Transferor, the Servicer or an Affiliate thereof.

                 In the case of a Bearer Certificate, the Trustee, the Paying
Agent, the Transfer Agent and Registrar and any agent of any of them may treat
the holder of a Bearer Certificate or Coupon as the owner of such Bearer
Certificate or Coupon for the purpose of receiving distributions pursuant to
Article IV and Article XII and for all other purposes whatsoever, and neither
the Trustee, the Paying Agent, the Transfer Agent and Registrar nor any agent of
any of them shall be affected by any notice to the contrary. Certificates so
owned which have been pledged in good faith shall not be disregarded and may be
regarded as outstanding, if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Investor Certificates
and that the pledgee is not the Transferor, the Servicer or an Affiliate
thereof.

                 Section 6.6  Appointment of Paying Agent.

                 (a) The Paying Agent shall make distributions to Investor
Certificateholders from the appropriate account or accounts maintained for the
benefit of Certificateholders as specified in this

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<PAGE>

Agreement or the related Supplement for any Series pursuant to Articles IV and V
hereof. Any Paying Agent shall have the revocable power to withdraw funds from
such appropriate account or accounts for the purpose of making distributions
referred to above. The Trustee (or the Servicer if the Trustee is the Paying
Agent) may revoke such power and remove the Paying Agent, if the Trustee (or the
Servicer if the Trustee is the Paying Agent) determines in its sole discretion
that the Paying Agent shall have failed to perform its obligations under this
Agreement in any material respect or for other good cause. The Trustee (or the
Servicer if the Trustee is the Paying Agent) shall notify the Rating Agencies of
the removal of any Paying Agent. If any form of Investor Certificate is issued
as a Global Certificate, or if and so long as any Series of Investor
Certificates are listed on the Luxembourg Stock Exchange and such exchange shall
so require, the Transferor shall appoint a co-paying agent in Luxembourg or
another European city. The Paying Agent shall be permitted to resign as Paying
Agent upon 30 days' written notice to the Servicer. In the event that any Paying
Agent shall no longer be the Paying Agent, the Transferor shall appoint a
successor to act as Paying Agent (which shall be a bank or trust company). The
provisions of Sections 11.1, 11.2 and 11.3 shall apply to the Trustee also in
the capacity of Paying Agent, for so long as the Trustee shall act as Paying
Agent. Any reference in this Agreement to the Paying Agent shall include any
co-paying agent unless the context requires otherwise.

                 If specified in the related Supplement for any Series, so long
as the Investor Certificates of such Series are outstanding, the Transferor
shall maintain a co-paying agent in New York City (for Registered Certificates
only) or any other city designated in such Supplement which, if and so long as
any Series of Investor Certificates is listed on the Luxembourg Stock Exchange
or other stock exchange and such exchange so requires, shall be in Luxembourg or
the location required by such other stock exchange.

                 (b) The Transferor shall cause the Paying Agent (other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee that such Paying Agent will hold all
sums, if any, held by it for payment to the Certificateholders in trust for the
benefit of the Certificateholders entitled thereto until such sums shall be paid
to such Certificateholders and shall agree, and if the Trustee is the Paying
Agent it hereby agrees, that it shall comply with all requirements of the
Internal Revenue Code regarding the withholding by the Trustee of payments in
respect of federal income taxes due from Certificateholders.

                 Section 6.7 Access to List of Certificateholders' Names and
Addresses. The Trustee will furnish or cause to be furnished by the Transfer
Agent and Registrar to the Servicer or the Paying Agent, within five Business
Days after receipt by the Trustee of a request therefor from the Servicer or the
Paying Agent, respectively, in writing, a list in such form as the Servicer or
the Paying Agent may reasonably require, of the names and addresses of the
Investor Certificateholders as of the most recent Record Date for payment of
distributions to Investor Certificateholders. Unless otherwise provided in the
related Supplement,

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<PAGE>

Holders of Investor Certificates evidencing Undivided Interests aggregating not
less than 10% of the Investor Interest of the Investor Certificates of any
Series (the "Applicants") may apply in writing to the Trustee, and if such
application states that the Applicants desire to communicate with other Investor
Certificateholders of any Series with respect to their rights under this
Agreement or under the Investor Certificates and is accompanied by a copy of the
communication which such Applicants propose to transmit, then the Trustee, after
having been adequately indemnified by such Applicants for its costs and
expenses, shall afford or shall cause the Transfer Agent and Registrar to afford
such Applicants access during normal business hours to the most recent list of
Certificateholders held by the Trustee and shall give the Servicer notice that
such request has been made, within five Business Days after the receipt of such
application. Such list shall be as of a date no more than 45 days prior to the
date of receipt of such Applicants' request. Every Certificateholder, by
receiving and holding a Certificate, agrees with the Transferor, the Servicer
and the Trustee that none of the Transferor, Servicer, Trustee, Transfer Agent
or Registrar, nor any of their respective agents shall be held accountable by
reason of the disclosure of any such information as to the names and addresses
of the Certificateholders hereunder, regardless of the source from which such
information was obtained.

                        Section 6.8 Authenticating Agent.

                 (a) The Trustee may appoint one or more authenticating agents
with respect to the Certificates which shall be authorized to act on behalf of
the Trustee in authenticating the Certificates in connection with the issuance,
delivery, registration of transfer, exchange or repayment of the Certificates.
Whenever reference is made in this Agreement to the authentication of
Certificates by the Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication on behalf of the Trustee by
an authenticating agent and a certificate of authentication executed on behalf
of the Trustee by an authenticating agent. Each authenticating agent must be
acceptable to the Transferor.

                 (b) Any institution succeeding to the corporate agency business
of an authenticating agent shall continue to be an authenticating agent without
the execution or filing of any paper or any further act on the part of the
Trustee or such authenticating agent.

                 (c) An authenticating agent may at any time resign by giving
written notice of resignation to the Trustee and to the Transferor. The Trustee
may at any time terminate the agency of an authenticating agent by giving notice
of termination to such authenticating agent and to the Transferor. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time an authenticating agent shall cease to be acceptable to the Trustee or
the Transferor, the Trustee promptly may appoint a successor authenticating
agent. Any successor authenticating agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like affect as if originally

                                      -61-

<PAGE>

named as an authenticating agent.  No successor authenticating agent
shall be appointed unless acceptable to the Trustee and the Transferor.

                 (d) The Servicer agrees to pay each authenticating agent from
time to time reasonable compensation for its services under this Section 6.8.

                 (e) The provisions of Sections 11.1, 11.2 and 11.3
shall be applicable to any authenticating agent.

                 (f) Pursuant to an appointment made under this Section 6.8, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:

                 This is one of the certificates described in the Pooling and
Servicing Agreement.

                                  ------------------------------
                                  as Authenticating Agent
                                     for the Trustee,

                                  By:
                                     ---------------------------
                                       Authorized signatory

                 Section 6.9  Tender of Transferor Certificate.

                 (a) Upon any Exchange, the Trustee shall issue to the Holder of
the Transferor Certificate under Section 6.1, for execution and redelivery to
the Trustee for authentication under Section 6.2, one or more new Series of
Investor Certificates. Any such Series of Investor Certificates shall be
substantially in the form specified in the related Supplement and shall bear,
upon its face, the designation for such Series to which it belongs, as selected
by the Transferor. Except as specified in any Supplement for a related Series,
all Investor Certificates of any Series shall rank pari passu and be equally and
ratably entitled as provided herein to the benefits hereof (except that the
Credit Enhancement provided for any Series shall not be available for any other
Series) without preference, priority or distinction on account of the actual
time or times of authentication and delivery, all in accordance with the terms
and provisions of this Agreement and the related Supplement.

                 (b) The Holder of the Transferor Certificate may tender the
Transferor Certificate to the Trustee in exchange for (i) one or more newly
issued Series of Investor Certificates or in connection with a Companion Series,
interests in such Series and (ii) a reissued Transferor Certificate (any such
tender, a "Transferor Exchange"). In addition, to the extent permitted for any
Series of Investor Certificates as specified in the related Supplement, the
Investor Certificateholders of such Series may tender their Investor
Certificates and the Holder of

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<PAGE>

the Transferor Certificate may tender the Transferor Certificate to the Trustee
pursuant to the terms and conditions set forth in such Supplement in exchange
for (i) one or more newly issued Series of Investor Certificates and (ii) a
reissued Transferor Certificate (an "Investor Exchange"). The Transferor
Exchange and Investor Exchange are referred to collectively herein as an
"Exchange." The Holder of the Transferor Certificate may perform an Exchange by
notifying the Trustee, in writing at least three days in advance (an "Exchange
Notice") of the date upon which the Exchange is to occur (an "Exchange Date").
Any Exchange Notice shall state the designation of any Series (and Class
thereof, if applicable) to be issued on the Exchange Date and, with respect to
each such Series: (a) its Initial Investor Interest (or the method for
calculating such Initial Investor Interest) (b) its Certificate Rate (or the
method for allocating interest payments or other cash flows to such Series), if
any, and (c) the Credit Enhancement Provider, if any, with respect to such
Series. On the Exchange Date, the Trustee shall authenticate and deliver any
such Series of Investor Certificates only upon delivery to it of the following:
(a) a Supplement satisfying the criteria set forth in subsection 6.9(c) executed
by the Transferor and specifying the Principal Terms of such Series, (b) the
applicable Credit Enhancement, if any, (c) the agreement, if any, pursuant to
which the Credit Enhancement Provider agrees to provide the Credit Enhancement,
if any, (d) an Opinion of Counsel to the effect that, unless otherwise stated in
the related Supplement, the newly issued Series or Class of Investor
Certificates will be treated as debt secured by the Receivables for United
States federal income and Delaware and New York state income and corporate
franchise tax purposes, (e) a Tax Opinion, (f) written confirmation from each
Rating Agency that the Exchange will satisfy the Rating Agency Condition, (g) an
Officer's Certificate signed by an authorized signatory of the Transferor, that
on the Exchange Date (i) the Transferor, after giving effect to the Exchange,
would not be required to add Additional Accounts pursuant to subsection 2.6(a),
and (ii) after giving effect to such Exchange, the Transferor Interest would be
at least equal to the Minimum Transferor Interest and (h) the existing
Transferor Certificate or applicable Investor Certificates, as the case may be.
Upon satisfaction of such conditions, the Trustee shall cancel the existing
Transferor Certificate or applicable Investor Certificates, as the case may be,
and issue, as provided above, such Series of Investor Certificates and a new
Transferor Certificate, dated the Exchange Date. There is no limit to the number
of Exchanges that may be performed under this Agreement.

                 (c) In conjunction with an Exchange, the parties hereto shall
execute a Supplement, which shall specify the relevant terms with respect to any
newly issued Series of Investor Certificates, which may include without
limitation: (i) its name or designation, (ii) an Initial Investor Interest or
the method of calculating the Initial Investor Interest, (iii) the method of
determining any adjusted Investor Interest, if applicable, (iv) the Certificate
Rate (or formula for the determination thereof), (v) the Closing Date, (vi) each
Rating Agency rating such Series, (vi) the name of the Clearing Agency, if any,
(vii) the rights of the Holder of the Transferor Certificate that have been
transferred to the Holders of such Series pursuant to such Exchange

                                      -63-

<PAGE>

(including any rights to allocations of Collections of Finance Charge
Receivables and Principal Receivables), (ix) the interest payment date or dates
and the date or dates from which interest shall accrue, (x) the periods during
which or dates on which principal will be paid or accrued, (xi) the method of
allocating Collections with respect to Principal Receivables for such Series
and, if applicable, with respect to other Series and the method by which the
principal amount of Investor Certificates of such Series shall amortize or
accrete and the method for allocating Collections with respect to Finance Charge
Receivables and Receivables in Defaulted Accounts, (xii) any other Collections
with respect to Receivables or other amounts available to be paid with respect
to such Series, (xii) the names of any accounts to be used by such Series and
the terms governing the operation of any such accounts and use of moneys
therein, (xiv) the Series Servicing Fee and the Series Servicing Fee Percentage,
(xv) the Minimum Transferor Interest and the Series Termination Date, (xvi) the
terms of any Credit Enhancement with respect to such Series, and the Credit
Enhancement Provider, if applicable, (xvii) the base rate applicable to such
Series, (xviii) the terms on which the Certificates of such Series may be
repurchased or remarketed to other investors, (xix) any deposit into any account
provided for such Series, (xx) the number of Classes of such Series, and if more
than one Class, the rights and priorities of each such Class, (xxi) the priority
of any Series with respect to any other Series, (xxii) the rights, if any, of
the Holder of the Transferor Certificate that have been transferred to the
Holders of such Series, (xxiii) the Pool Factor, (xxiv) the Minimum Aggregate
Principal Receivables, (xxv) whether such Series will be part of a Group, (xxvi)
whether such Series will or may be a Companion Series and the Series with which
it will be paired, if applicable and (xxvii) any other relevant terms of such
Series (including whether or not such Series will be pledged as collateral for
an issuance of any other securities, including commercial paper) (all such
terms, the "Principal Terms" of such Series). The terms of such Supplement may
modify or amend the terms of this Agreement solely as applied to such new
Series. If on the date of the issuance of such Series there is issued and
outstanding one or more Series of Investor Certificates and no Series of
Investor Certificates is currently rated by a Rating Agency, then as a condition
to such Exchange a nationally recognized investment banking firm or commercial
bank shall also deliver to the Trustee a certificate stating, in substance, that
the Exchange will not have an adverse effect on the timing or distribution of
payments to such other Series of Investor Certificates then issued and
outstanding.

                 Section 6.10 Book-Entry Certificates. Unless otherwise provided
in any related Supplement, the Investor Certificates, upon original issuance,
shall be issued in the form of typewritten Certificates representing the
Book-Entry Certificates, to be delivered to the depository specified in such
Supplement (the "Depository") which shall be the Clearing Agency or Foreign
Clearing Agency, by or on behalf of such Series. The Investor Certificates of
each Series shall, unless otherwise provided in the related Supplement,
initially be registered on the Certificate Register in the name of the nominee
of the Clearing Agency or Foreign Clearing Agency. No Certificate Owner will
receive a definitive certificate representing such Certificate Owner's interest
in

                                      -64-

<PAGE>

the related Series of Investor Certificates, except as provided in Section 6.12.
Unless and until definitive, fully registered Investor Certificates of any
Series ("Definitive Certificates") have been issued to Certificate Owners
pursuant to Section 6.12:

                          (i) the provisions of this Section 6.10
         shall be in full force and effect with respect to each such
         Series;

                          (ii) the Transferor, the Servicer, the Paying Agent,
         the Transfer Agent and Registrar and the Trustee may deal with the
         Clearing Agency and the Clearing Agency Participants for all purposes
         (including the making of distributions on the Investor Certificates of
         each such Series) as the authorized representatives of the Certificate
         Owners;

                          (iii) to the extent that the provisions of this
         Section 6.10 conflict with any other provisions of this Agreement, the
         provisions of this Section 6.10 shall control with respect to each such
         Series; and

                          (iv) the rights of Certificate Owners of each such
         Series shall be exercised only through the Clearing Agency or Foreign
         Clearing Agency and the applicable Clearing Agency Participants and
         shall be limited to those established by law and agreements between
         such Certificate Owners and the Clearing Agency or Foreign Clearing
         Agency and/or the Clearing Agency Participants. Pursuant to the
         Depository Agreement applicable to a Series, unless and until
         Definitive Certificates of such Series are issued pursuant to Section
         6.12, the initial Clearing Agency will make book-entry transfers among
         the Clearing Agency Participants and receive and transmit distributions
         of principal and interest on the Investor Certificates to such Clearing
         Agency Participants.

                 Section 6.11 Notices to Clearing Agency. Whenever notice or
other communication to the Certificateholders is required under this Agreement,
unless and until Definitive Certificates shall have been issued to Certificate
Owners pursuant to Section 6.12, the Trustee shall give all such notices and
communications specified herein to be given to Holders of the Investor
Certificates to the Clearing Agency or Foreign Clearing Agency for distribution
to Holders of Investor Certificates.

                 Section 6.12 Definitive Certificates. If (i) (A) the Transferor
advises the Trustee in writing that the Clearing Agency or Foreign Clearing
Agency is no longer willing or able to discharge properly its responsibilities
under the applicable Depository Agreement, and (B) the Trustee or the Transferor
is unable to locate a qualified successor, (ii) the Transferor, at its option,
advises the Trustee in writing that it elects to terminate the book-entry system
through the Clearing Agency or Foreign Clearing Agency with respect to any
Series of Certificates or (iii) after the occurrence of a Servicer Default,
Certificate Owners of a Series representing beneficial interests

                                      -65-

<PAGE>

aggregating not less than 50% of the Investor Interest of such Series advise the
Trustee and the applicable Clearing Agency or Foreign Clearing Agency through
the applicable Clearing Agency Participants in writing that the continuation of
a book-entry system through the applicable Clearing Agency or Foreign Clearing
Agency is no longer in the best interests of the Certificate Owners, the Trustee
shall notify all Certificate Owners of such Series, through the applicable
Clearing Agency Participants, of the occurrence of any such event and of the
availability of Definitive Certificates to Certificate Owners of such Series
requesting the same. Upon surrender to the Trustee of the Investor Certificates
of such Series by the applicable Clearing Agency or Foreign Clearing Agency,
accompanied by registration instructions from the applicable Clearing Agency or
Foreign Clearing Agency for registration, the Trustee shall issue the Definitive
Certificates of such Series. Neither the Transferor nor the Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of Definitive Certificates of such Series all references herein to obligations
imposed upon or to be performed by the applicable Clearing Agency or Foreign
Clearing Agency shall be deemed to be imposed upon and performed by the Trustee,
to the extent applicable with respect to such Definitive Certificates, and the
Trustee shall recognize the Holders of the Definitive Certificates of such
Series as Certificateholders of such Series hereunder.

                 Section 6.13 Global Certificate. If specified in the related
Supplement for any Series, the Investor Certificates may be initially issued in
the form of a single temporary Global Certificate (the "Global Certificate") in
bearer form, without interest coupons, in the denomination of the Initial
Investor Interest and substantially in the form attached to the related
Supplement. Unless otherwise specified in the related Supplement, the provisions
of this Section 6.13 shall apply to such Global Certificate. The Global
Certificate will be authenticated by the Trustee upon the same conditions, in
substantially the same manner and with the same effect as the Definitive
Certificates. The Global Certificate may be exchanged in the manner described in
the related Supplement for Registered or Bearer Certificates in definitive form.

                 Section 6.14 Meetings of Certificateholders. To the extent
provided by the Supplement for any Series issued in whole or in part in Bearer
Certificates, the Transferor, the Servicer or the Trustee may at any time call a
meeting of the Certificateholders of such Series, to be held at such time and at
such place as Transferor, the Servicer or the Trustee, as the case may be, shall
determine, for the purpose of approving a modification of or amendment to, or
obtaining a waiver of, any covenant or condition set forth in this Agreement
with respect to such Series or in the Certificates of such Series, subject to
Section 13.1.

                                      -66-

<PAGE>

                                   ARTICLE VII

                 OTHER MATTERS RELATING TO THE TRANSFEROR

                 Section 7.1 Liability of the Transferor. The Transferor shall
be liable in accordance herewith to the extent of the obligations specifically
undertaken by the Transferor.

                 Section 7.2  Merger or Consolidation of, or Assumption
of the Obligations of, the Transferor.

                 (a) The Transferor shall not consolidate with or merge into any
other Person or convey or transfer its properties and assets substantially as an
entirety to any Person, unless:

                          (i) (A) the Transferor is the surviving entity or (B)
         if the Transferor is not the surviving entity, the Person formed by
         such consolidation or into which the Transferor is merged or the Person
         which acquires by conveyance or transfer the properties and assets of
         the Transferor substantially as an entirety shall be organized and
         existing under the laws of the United States of America or any State or
         the District of Columbia and shall expressly assume, by an agreement
         supplemental hereto, executed and delivered to the Trustee, in form
         satisfactory to the Trustee, the performance of every covenant and
         obligation of the Transferor, as applicable hereunder and shall benefit
         from all the rights granted to the Transferor, as applicable hereunder.
         To the extent that any right, covenant or obligation of the Transferor,
         as applicable hereunder, is inapplicable to the successor entity, such
         successor entity shall be subject to such covenant or obligation, or
         benefit from such right, as would apply, to the extent practicable, to
         such successor entity. In furtherance hereof, in applying this Section
         7.2 to a successor entity, Section 9.2 hereof shall be applied by
         reference to events of involuntary liquidation, receivership or
         conservatorship applicable to such successor entity as shall be set
         forth in the Officer's Certificate described in subsection 7.2(a)(ii);

                          (ii) the Transferor shall have delivered to the
         Trustee an Officer's Certificate certifying that such consolidation,
         merger, conveyance or transfer and such supplemental agreement comply
         with this Section 7.2 and that all conditions precedent herein provided
         for relating to such transaction have been complied with and an Opinion
         of Counsel that such supplemental agreement is legal, valid and
         binding; and (iii) the Transferor shall have delivered notice to the
         Rating Agency of such consolidation, merger, conveyance or transfer.

                 (b) The obligations of the Transferor hereunder
shall not be assignable nor shall any Person succeed to the obligations
of the Transferor hereunder (i) except for mergers, consolidations,

                                      -67-

<PAGE>

assumptions or transfers in accordance with the provisions of the foregoing
paragraph or (ii) unless the assignee with respect to such obligations shall be
organized and existing under the laws of the United States of America or any
State or the District of Columbia and shall expressly assume, by an agreement
supplemental hereto, executed and delivered to the Trustee, in form satisfactory
to the Trustee, the performance of every covenant and obligation of the
Transferor, as applicable hereunder and shall benefit from all the rights
granted to the Transferor, as applicable hereunder. To the extent that any
right, covenant or obligation of the Transferor, as applicable hereunder, is
inapplicable to the assignee, such assignee shall be subject to such covenant or
obligation, or benefit from such right, as would apply, to the extent
practicable, to such assignee.

                 Section 7.3 Limitation of Liability. The owner trustee,
administrators, directors, officers, employees or agents of the Transferor shall
not be under any liability to the Trust, the Trustee, the Certificateholders,
any Credit Enhancement Provider or any other Person hereunder or pursuant to any
document delivered hereunder, it being expressly understood that all such
liability is expressly waived and released as a condition of, and as
consideration for, the execution of this Agreement and any Supplement and the
issuance of the Certificates; provided, however, that this provision shall not
protect the officers, directors, employees, or agents of the Transferor against
any liability which would otherwise be imposed by reason of willful misfeasance
or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. Except as provided in Section
7.4, the Transferor shall not be under any liability to the Trust, the Trustee,
the Certificateholders, any Credit Enhancement Provider or any other Person for
any action taken or for refraining from the taking of any action in its capacity
as Transferor pursuant to this Agreement or any Supplement whether arising from
express or implied duties under this Agreement or any Supplement; provided,
however, that this provision shall not protect the Transferor against any
liability which would otherwise be imposed by reason of willful misfeasance or
gross negligence in the performance of duties or by reason of reckless disregard
of obligations and duties hereunder. The Transferor and any director, officer,
employee or agent may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder.

                                  ARTICLE VIII

                  OTHER MATTERS RELATING TO THE SERVICER

                 Section 8.1 Liability of the Servicer. The Servicer shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer in such capacity herein.

                                      -68-

<PAGE>

                 Section 8.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer. The Servicer shall not consolidate with or merge
into any other Person or convey or transfer its properties and assets
substantially as an entirety to any Person, unless:

                          (i) (A) the Servicer is the surviving entity or (B) if
         the Servicer is not the surviving entity, the Person formed by such
         consolidation or into which the Servicer is merged or the Person which
         acquires by conveyance or transfer the properties and assets of the
         Servicer substantially as an entirety shall be a corporation organized
         and existing under the laws of the United States of America or any
         State or the District of Columbia, and shall be a state or national
         banking association or other entity which is not subject to the
         bankruptcy laws of the United States of America and shall expressly
         assume, by an agreement supplemental hereto, executed and delivered to
         the Trustee in form satisfactory to the Trustee, the performance of
         every covenant and obligation of the Servicer hereunder (to the extent
         that any right, covenant or obligation of the Servicer, as applicable
         hereunder, is inapplicable to the successor entity, such successor
         entity shall be subject to such covenant or obligation, or benefit from
         such right, as would apply, to the extent practicable, to such
         successor entity);

                          (ii) the Servicer shall have delivered to the Trustee
         an Officer's Certificate that such consolidation, merger, conveyance or
         transfer and such supplemental agreement comply with this Section 8.2
         and that all conditions precedent herein provided for relating to such
         transaction have been complied with and an Opinion of Counsel that such
         supplemental agreement is legal, valid and binding with respect to the
         Servicer; and

                          (iii) the Servicer shall have delivered notice to the
         Rating Agency of such consolidation, merger, conveyance or transfer.

                 Section 8.3 Limitation of Liability of the Servicer and Others.
The directors, officers, employees or agents of the Servicer shall not be under
any liability to the Trust, the Trustee, the Certificateholders, any Credit
Enhancement Provider or any other Person hereunder or pursuant to any document
delivered hereunder, it being expressly understood that all such liability is
expressly waived and released as a condition of, and as consideration for, the
execution of this Agreement and any Supplement and the issuance of the
Certificates; provided, however, that this provision shall not protect the
directors, officers, employees and agents of the Servicer against any liability
which would otherwise be imposed by reason of willful misfeasance or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder. Except as provided in Section 8.4 with respect
to the Trust and the Trustee, its officers, directors, employees and agents, the
Servicer shall not be under any liability to the Trust, the Trustee, its
officers, directors, employees and agents, the Certificateholders or any other
Person for any action

                                      -69-

<PAGE>

taken or for refraining from the taking of any action in its capacity as
Servicer pursuant to this Agreement or any Supplement; provided, however, that
this provision shall not protect the Servicer against any liability which would
otherwise be imposed by reason of willful misfeasance or gross negligence in the
performance of duties or by reason of its reckless disregard of its obligations
and duties hereunder or under any Supplement. The Servicer may rely in good
faith on any document of any kind prima facie properly executed and submitted by
any Person respecting any matters arising hereunder. Neither the Servicer nor
any Sub-Servicer shall be under any obligation to appear in, prosecute or defend
any legal action which is not incidental to its duties to service the
Receivables in accordance with this Agreement which in its reasonable opinion
may cause it to incur any expense or liability.

                 Section 8.4 Servicer Indemnification of the Trust and the
Trustee. The Servicer shall indemnify and hold harmless the Trust and the
Trustee, its officers, directors, employees and agents, from and against any
reasonable loss, liability, expense, damage or injury suffered or sustained by
reason of any acts or omissions or alleged acts or omissions of the Servicer
with respect to activities of the Trust or the Trustee pursuant to this
Agreement or any Supplement, including, but not limited to any judgment, award,
settlement, reasonable attorneys' fees and other costs or expenses incurred in
connection with the defense of any actual or threatened action, proceeding or
claim; provided, however, that the Servicer shall not indemnify the Trustee if
such acts, omissions or alleged acts or omissions constitute or are caused by
fraud, negligence, bad faith or willful misconduct by the Trustee; provided,
further, that the Servicer shall not indemnify the Trust, the Investor
Certificateholders or the Certificate Owners for any liabilities, costs or
expenses of the Trust with respect to any action taken by the Trustee at the
request of the Investor Certificateholders; provided, further, that the Servicer
shall not indemnify the Trust, the Investor Certificateholders or the
Certificate owners as to any losses, claims or damages incurred by any of them
in their capacities as investors, including without limitation losses incurred
as a result of Defaulted Accounts or Receivables which are written off as
uncollectible; and provided, further, that the Servicer shall not indemnify the
Trust, the Investor Certificateholders or the Certificate Owners for any
liabilities, costs or expenses of the Trust, the Investor Certificateholders or
the Certificate Owners arising under any tax law, including without limitation,
any federal, state, local or foreign income or franchise taxes or any other tax
imposed on or measured by income (or any interest or penalties with respect
thereto or arising from a failure to comply therewith) required to be paid by
the Trust, the Investor Certificateholders or the Certificate Owners in
connection herewith to any taxing authority. Any such indemnification shall not
be payable from the assets of the Trust. The provisions of this indemnity shall
run directly to and be enforceable by an injured party subject to the
limitations hereof. The provisions of this Section 8.4 shall survive termination
of this Agreement and the resignation or removal of the Trustee.

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<PAGE>

                 Section 8.5 The Servicer Not to Resign. The Servicer shall not
resign from the obligations and duties hereby imposed on it except upon
determination that (i) the performance of its duties hereunder is no longer
permissible under applicable law and (ii) there is no reasonable action which
the Servicer could take to make the performance of its duties hereunder
permissible under applicable law. Any such determination permitting the
resignation of the Servicer shall be evidenced as to clause (i) above by an
Opinion of Counsel to such effect delivered to the Trustee. No such resignation
shall become effective until the Trustee or a Successor Servicer shall have
assumed the responsibilities and obligations of the Servicer in accordance with
Section 10.2 hereof. If the Trustee is unable within 120 days of the date of
such determination to appoint a Successor Servicer, the Trustee shall serve as
Successor Servicer hereunder, until such time as a Successor Servicer shall have
been appointed and assumed the obligations of the Servicer in accordance with
Section 10.2.

                 Section 8.6 Access to Certain Documentation and Information
Regarding the Receivables. The Servicer shall provide to the Trustee access to
the documentation regarding the Accounts and the Receivables in such cases where
the Trustee is required in connection with the enforcement of the rights of the
Investor Certificateholders, or by applicable statutes or regulations to review
such documentation, such access being afforded without charge but only (i) upon
reasonable request, (ii) during normal business hours, (iii) subject to the
Servicer's normal security and confidentiality procedures and (iv) at offices
designated by the Servicer. Nothing in this Section 8.6 shall derogate from the
obligation of the Transferor, the Trustee or the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors and
the failure of the Servicer to provide access as provided in this Section 8.6 as
a result of such obligations shall not constitute a breach of this Section 8.6.

                 Section 8.7 Delegation of Duties. It is understood and agreed
by the parties hereto that the Servicer may delegate certain of its duties
hereunder to any Affiliate which is wholly owned by the Servicer or Dillard's.
In the ordinary course of business, the Servicer may at any time delegate any
duties hereunder to any Person who agrees to conduct such duties in accordance
with the Credit Card Guidelines. Any such delegations shall not relieve the
Servicer of its liability and responsibility with respect to such duties, and
shall not constitute a resignation within the meaning of Section 8.5 hereof. If
any such delegation is to a party other than DNB-La or MCC, notification thereof
shall be given to each Rating Agency.

                 Section 8.8 Examination of Records. The Servicer shall clearly
and unambiguously identify each Account (including any Additional Account
designated pursuant to Section 2.6) in its computer or other records to reflect
that the Receivables arising in such Account have been conveyed to the Trust
pursuant to this Agreement. The Servicer shall, prior to the sale or transfer to
a third party of any receivable held in its custody, examine its computer and
other records to determine that such receivable is not a Receivable.

                                      -71-

<PAGE>

                 Section 8.9 Securities Act Filings. The Servicer is hereby
authorized and agrees to (i) execute and file on behalf of the Trust, if
necessary, a registration statement filed on Form S-3, including any amendments
thereto and such other statements or documents, prepared by or on behalf of the
Transferor or the Trust and required to be executed and filed by the Trust
pursuant to the Securities Act, Exchange Act, or the implementing rules and
regulations thereof; and (ii) execute, if necessary, any and all other documents
reasonably determined by the Trust, the Servicer, Dillard's or an Affiliate
thereof to be necessary in order to (x) qualify or register all or part of the
Investor Certificates in any state or foreign jurisdiction in which such
Investor Certificates may be sold or (y) establish any of the Investor
Certificates on any national or international stock exchange for listing or
quotation.

                                   ARTICLE IX

                                 PAY OUT EVENTS

                 Section 9.1  Pay Out Events.  If any one of the
following events (each, a "Trust Pay Out Event") shall occur:

                 (a) (i) a court having jurisdiction in the premises shall enter
         a decree or order for relief in respect of the Transferor or Dillard's
         in an involuntary case under the Bankruptcy Code or any applicable
         bankruptcy, insolvency or other similar law now or hereafter in effect,
         which decree or order is not stayed, or any other similar relief shall
         be granted under any applicable federal or state law, (ii) an
         involuntary case is commenced against the Transferor or Dillard's under
         any applicable bankruptcy, insolvency or other similar law now or
         hereafter in effect which remains undismissed, undischarged or unbonded
         for a period of 60 days or (iii) the Transferor or Dillard's shall have
         a decree or an order for relief entered with respect to it or commence
         a voluntary case under the Bankruptcy Code or any applicable
         bankruptcy, insolvency or other similar law now or hereafter in effect;

                 (b) the Transferor, DNB, DNB-La., or Dillard's shall consent to
         the appointment of a conservator or receiver or liquidator in any
         insolvency, readjustment of debt, marshaling of assets and liabilities
         or similar proceedings of or relating to all or substantially all of
         its property, or a decree or order of a court or agency or supervisory
         authority having jurisdiction in the premises for the appointment of a
         conservator or receiver or liquidator in any insolvency, readjustment
         of debt, marshaling of assets and liabilities or similar proceedings,
         or for the winding-up or liquidation of its

                                      -72-

<PAGE>

         affairs, shall have been entered against the Transferor, DNB, DNB-La.,
         or Dillard's and such decree or order shall have remained in full force
         and is changed or unstayed for a period of 60 days; or the Transferor,
         DNB, DNB-La., or Dillard's shall admit in writing its inability to pay
         its debts generally as they become due, file a petition to take
         advantage of any applicable insolvency or reorganization statute, make
         an assignment for the benefit of its creditors or voluntarily suspend
         payment of its obligations; or the Transferor shall become unable for
         any reason to transfer Receivables to the Trust in accordance with the
         provisions of this Agreement;

                 (c) DNB or DNB-La. becomes unable for any reason to
         transfer Receivables to the Transferor or the Transferor becomes
         unable for any reason to transfer Receivables to the Trust in
         accordance with the provisions of this Agreement; or

                 (d) the Trust shall become subject to regulation by
         the Securities and Exchange Commission as an "investment
         company" within the meaning of the Investment Company Act;

then a Pay Out Event with respect to all Series of Certificates shall occur
without any notice or other action on the part of the Trustee or the Investor
Certificateholders immediately upon the occurrence of such event.

                 Section 9.2  Additional Rights Upon the Occurrence of
Certain Events.

                 (a) If any event set forth in Section 9.1(a) or (b) shall occur
(any such event, an "Insolvency Event"), the Transferor shall on the day of such
Insolvency Event (the "Appointment Day") immediately cease to transfer Principal
Receivables to the Trust and shall promptly give notice to the Trustee of such
Insolvency Event and the arrangement among the parties created hereby shall be
deemed to have been dissolved, subject to the liquidation and winding up
procedures described below. Notwithstanding any cessation of the transfer to the
Trust of additional Principal Receivables, Finance Charge Receivables, whenever
created, accrued in respect of Principal Receivables which have been transferred
to the Trust shall continue to be a part of the Trust, and Collections with
respect thereto shall continue to be allocated and paid in accordance with
Article IV. Within 15 days of the Appointment Day, the Trustee shall (i) publish
a notice in an Authorized Newspaper that an Insolvency Event has occurred and
that the Trustee intends to sell, dispose of or otherwise liquidate the
Receivables in a commercially reasonable manner and (ii) send written notice to
the Investor Certificateholders describing the provisions of this Section 9.2
and requesting instructions from such Holders. Unless within 75 days from the
day notice pursuant to clause (i) above is first published, the Trustee shall
have received written instructions of Holders of Investor Certificates
evidencing more than 50% of the Investor Interest of each Series issued and
outstanding (or, if any such Series has two or more Classes, each Class) to the
effect that such Certificateholders

                                      -73-

<PAGE>

disapprove of the liquidation of the Receivables the Trustee shall use its best
efforts to sell, dispose of or otherwise liquidate the Receivables in a
commercially reasonable manner and on commercially reasonable terms, which shall
include the solicitation of competitive bids. The Trustee may obtain a prior
determination from any such conservator, receiver or liquidator that the terms
and manner of any proposed sale, disposition or liquidation are commercially
reasonable. The provisions of Sections 9.1 and 9.2 shall not be deemed to be
mutually exclusive.

                 (b) The proceeds from the sale, disposition or liquidation of
the Receivables pursuant to subsection (a) above shall be treated as Collections
on the Receivables and shall be allocated and deposited in accordance with the
provisions of Article IV; provided, that the Trustee shall determine
conclusively in its sole discretion the amount of such proceeds which are
allocable to Finance Charge Receivables and the amount of such proceeds which
are allocable to Principal Receivables. On the day following the last
Distribution Date in the Monthly Period during which such proceeds are
distributed to the Investor Certificateholders of each Series, the Trust shall
terminate.

                 (c) The Trustee may appoint an agent or agents to assist with
its responsibilities pursuant to this Article IX with respect to competitive
bids.

                                    ARTICLE X

                                SERVICER DEFAULTS

                 Section 10.1  Servicer Defaults.  If any one of the
following events (a "Servicer Default") shall occur and be continuing:

                 (a) any failure by the Servicer to make any payment, transfer
         or deposit or to give instructions or notice to the Trustee pursuant to
         Article IV or to instruct the Trustee to make any required drawing,
         withdrawal, or payment under any Credit Enhancement on or before the
         date occurring ten Business Days after the date such payment, transfer,
         deposit withdrawal or drawing or such instruction or notice is required
         to be made or given, as the case may be, under the terms of this
         Agreement;

                 (b) failure on the part of the Servicer duly to observe or
         perform in any respect any other covenants or agreements of the
         Servicer set forth in this Agreement, which has a material adverse
         effect on the Investor Certificateholders of any Series and which
         continues unremedied for a period of 60 days after the date on which
         written notice of such failure, requiring the same to be remedied,
         shall have been given to the Servicer by the Trustee, or to the
         Servicer and the Trustee by the Holders of Investor Certificates
         evidencing Undivided Interests aggregating not less than 50% of the
         Investor Interest

                                      -74-

<PAGE>

         of any Series adversely affected thereby and continues to materially
         adversely affect such Investor Certificateholders for such period; or
         the Servicer shall delegate its duties under this Agreement, except as
         permitted by Section 8.7;

                 (c) any representation, warranty or certification made by the
         Servicer in this Agreement or in any certificate delivered pursuant to
         this Agreement shall prove to have been incorrect when made, which has
         a material adverse effect on the Investor Certificateholders of any
         Series and which continues to be incorrect in any material respect for
         a period of 60 days after the date on which written notice of such
         failure, requiring the same to be remedied, shall have been given to
         the Servicer by the Trustee, or to the Servicer and the Trustee by the
         Holders of Investor Certificates evidencing Undivided Interests
         aggregating not less than 50% of the Investor Interest of any Series
         adversely affected thereby and continues to materially adversely affect
         such Investor Certificateholders for such period; or

                 (d) the Servicer shall consent to the appointment of a
         conservator or receiver or liquidator in any insolvency, readjustment
         of debt, marshaling of assets and liabilities or similar proceedings of
         or relating to the Servicer or of or relating to all or substantially
         all of its property, or a decree or order of a court or agency or
         supervisory authority having jurisdiction in the premises for the
         appointment of a conservator or receiver or liquidator in any
         insolvency, readjustment of debt, marshaling of assets and liabilities
         or similar proceedings, or for the winding-up or liquidation of its
         affairs, shall have been entered against the Servicer, and such decree
         or order shall have remained in force undischarged or unstayed for a
         period of 60 days; or the Servicer shall admit in writing its inability
         to pay its debts generally as they become due, file a petition to take
         advantage of any applicable insolvency or reorganization statute, make
         any assignment for the benefit of its creditors or voluntarily suspend
         payment of its obligations;

then, so long as such Servicer Default shall not have been remedied or waived,
either the Trustee, or the Holders of Investor Certificates evidencing Undivided
Interests aggregating more than 50% of the Aggregate Investor Interest, by
notice then given in writing to the Servicer (and to the Trustee if given by the
Investor Certificateholders) (a "Termination Notice"), may terminate all of the
rights and obligations of the Servicer as Servicer under this Agreement. After
receipt by the Servicer of such Termination Notice, and on the date that a
Successor Servicer shall have been appointed by the Trustee pursuant to Section
10.2, all authority and power of the Servicer under this Agreement shall pass to
and be vested in a Successor Servicer; and, without limitation, the Trustee is
hereby authorized and empowered (upon the failure of the Servicer to cooperate)
to execute and deliver, on behalf of the Servicer, as attorney-in-fact or
otherwise, all documents and other instruments

                                      -75-

<PAGE>

upon the failure of the Servicer to execute or deliver such documents or
instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of such transfer of servicing rights and
obligations. The Servicer agrees to cooperate with the Trustee and such
Successor Servicer in effecting the termination of the responsibilities and
rights of the Servicer to conduct servicing hereunder including, without
limitation, the transfer to such Successor Servicer of all authority of the
Servicer to service the Receivables provided for under this Agreement,
including, without limitation, all authority over all Collections which shall on
the date of transfer be held by the Servicer for deposit, or which have been
deposited or caused to be deposited by the Servicer, in the Collection Account,
the Finance Charge Account, the Principal Account, the Excess Funding Account
and any Series Account, or which shall thereafter be received with respect to
the Receivables, and in assisting the Successor Servicer and in enforcing all
rights to Insurance Proceeds applicable to the Trust. The Servicer shall
promptly transfer its electronic records or electronic copies thereof relating
to the Receivables to the Successor Servicer in such electronic form as the
Successor Servicer may reasonably request and shall promptly transfer to the
Successor Servicer all other records, correspondence and documents necessary for
the continued servicing of the Receivables in the manner and at such times as
the Successor Servicer shall reasonably request. To the extent that compliance
with this Section 10.1 shall require the Servicer to disclose to the Successor
Servicer information of any kind which the Servicer reasonably deems to be
confidential, the Successor Servicer shall be required to enter into each
customary licensing and confidentiality agreements as the Servicer shall deem
necessary to protect its interests. The Servicer shall, on the date of any
servicing transfer, transfer all of its rights and obligations under the Credit
Enhancement with respect to any Series to the Successor Servicer. The Servicer
being terminated shall bear all costs of such transfer, including but not
limited to those of the Trustee reasonably allocable to specific employees and
overhead, legal fees and expenses, accounting and financial consulting fees and
expenses, and costs of amending the Agreement, if any.

                 Notwithstanding the foregoing, a delay in or failure of
performance referred to in subsection 10.1(a) for a period of 10 Business Days
or in subsection 10.1(b) or (c) for a period of 60 Business Days, shall not
constitute a Servicer Default if such delay or failure could not be prevented by
the exercise of reasonable diligence by the Servicer and such delay or failure
was caused by an act of God or the public enemy, acts of declared or undeclared
war, public disorder, rebellion, riot or sabotage, epidemics, landslides,
lightning, fire, hurricanes, tornadoes, earthquakes, nuclear disasters or
meltdowns, floods, power outages or similar causes. The preceding sentence shall
not relieve the Servicer from using its best efforts to perform its obligations
in a timely manner in accordance with the terms of this Agreement and the
Servicer shall provide the Trustee, any Credit Enhancement Provider, the
Transferor and the Holders of Investor Certificates with an Officer's
Certificate giving prompt notice of such failure or delay by it, together with a
description of the cause of such failure or delay and its efforts so to perform
its obligations.

                                      -76-

<PAGE>

                 Section 10.2  Trustee to Act; Appointment of Successor.

                 (a) On and after the receipt by the Servicer of a Termination
Notice pursuant to Section 10.1, the Servicer shall continue to perform all
servicing functions under this Agreement until the date specified in the
Termination Notice or otherwise specified by the Trustee in writing or, if no
such date is specified in such Termination Notice, or otherwise specified by the
Trustee, until a date mutually agreed upon by the Servicer and Trustee. The
Trustee shall notify each Rating Agency of such removal of the Servicer. The
Trustee shall, as promptly as possible after the giving of a Termination Notice,
appoint a successor Servicer (the "Successor Servicer"), and such Successor
Servicer shall accept its appointment by a written assumption in a form
acceptable to the Trustee. The Trustee may obtain bids from any potential
successor Servicer. If the Trustee is unable to obtain any bids from any
potential successor Servicer and the Servicer delivers an Officer's Certificate
to the effect that the Servicer cannot in good faith cure the Servicer Default
which gave rise to a transfer of servicing, and if the Trustee is legally unable
to act as Successor Servicer, then the Trustee shall notify each Credit
Enhancement Provider of the proposed sale of the Receivables and shall provide
each such Credit Enhancement Provider an opportunity to bid on the Receivables
and shall offer the Transferor the right of first refusal to purchase the
Receivables on terms equivalent to the best purchase offer as determined by the
Trustee, but in no event less than an amount equal to the Aggregate Investor
Interest on the date of such purchase plus all interest accrued but unpaid on
all of the outstanding Investor Certificates at the applicable Certificate Rate
through the date of such purchase. The proceeds of such sale shall be deposited
in the Distribution Account or any Series Account, as provided in the related
Supplement, for distribution to the Investor Certificateholders of each
outstanding Series pursuant to Section 12.3. In the event that a Successor
Servicer has not been appointed and has not accepted its appointment at the time
when the Servicer ceases to act as Servicer, the Trustee without further action
shall automatically be appointed the Successor Servicer. Notwithstanding the
above, the Trustee shall, if it is legally unable so to act, petition a court of
competent jurisdiction to appoint any established financial institution having,
in the case of an entity that is subject to risk-based capital adequacy
requirements, risk-based capital of at least $50,000,000 or, in the case of an
entity that is not subject to risk-based capital requirements, having a net
worth of not less than $50,000,000 and whose regular business includes the
servicing of revolving credit card receivables as the Successor Servicer
hereunder. The Servicer shall provide the Trustee access to the documentation
and any software relating to the Receivables and the Collections and to any
personnel having knowledge of such documentation or software when the Trustee is
obligated to serve as Successor Servicer.

                 (b) Upon its appointment, the Successor Servicer shall be the
successor in all respects to the Servicer with respect to servicing functions
under this Agreement and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this

                                      -77-

<PAGE>

Agreement to the Servicer shall be deemed to refer to the Successor Servicer.
Any Successor Servicer, by its acceptance of its appointment, will automatically
agree to be bound by the terms and provisions of each Credit Enhancement.
Notwithstanding the above, or anything in this Section 10.2 to the contrary, the
Trustee, if it becomes Servicer pursuant to this Section, shall have no
responsibility or obligation (i) to repurchase or substitute any Account or
Receivable, (ii) for any representation or warranty of the Servicer hereunder
and (iii) for any act or omission of either a predecessor or successor Servicer
other than the Trustee. The Trustee may conduct any activity required of it as
Servicer hereunder through an Affiliate or through an agent. Neither the Trustee
nor any other successor Servicer shall be deemed to be in default hereunder due
to any act or omission of a predecessor Servicer, including but not limited to
failure to timely deliver to the Trustee any Monthly Servicer's Certificate or
any funds required to be deposited to the Trust, or any breach of its duty to
cooperate with a transfer of servicing as required by Section 10.1.

                 (c) In connection with such appointment and assumption, the
Trustee shall be entitled to such compensation (including transition costs and
expenses), or may make such arrangements for the compensation of the Successor
Servicer out of Collections, as it and such Successor Servicer shall agree;
provided, however, that no such compensation shall be in excess of the Servicing
Fee permitted to be paid to the Servicer pursuant to Section 3.2. The Transferor
agrees that if the Servicer is terminated hereunder, it will agree to deposit a
portion of the Collections in respect of Finance Charge Receivables that it is
entitled to receive pursuant to Article IV to pay its share of the compensation
of the Successor Servicer.

                 (d) All authority and power granted to the Successor Servicer
under this Agreement shall automatically cease and terminate upon termination of
the Trust pursuant to Section 12.1 and shall pass to and be vested in the
Transferor and, without limitation, the Transferor is hereby authorized and
empowered to execute and deliver, on behalf of the Successor Servicer, as
attorney-in-fact or otherwise, all documents and other instruments, and to do
and accomplish all other acts or things necessary or appropriate to effect the
purposes of such transfer of servicing rights. The Successor Servicer agrees to
cooperate with the Transferor in effecting the termination of the
responsibilities and rights of the Successor Servicer to conduct servicing on
the Receivables. The Successor Servicer shall transfer its electronic records
relating to the Receivables to the Transferor in such electronic form as the
Transferor may reasonably request and shall transfer all other records,
correspondence and documents to the Transferor in the manner and at such times
as the Transferor shall reasonably request. To the extent that compliance with
this Section 10.2 shall require the Successor Servicer to disclose to the
Transferor information of any kind which the Successor Servicer deems to be
confidential, the Transferor shall be required to enter into such customary
licensing and confidentiality agreements as the Successor Servicer shall deem
necessary to protect its interests.

                                      -78-

<PAGE>

                 Section 10.3 Notification to Certificateholders. Within two
Business Days after the Servicer becomes aware of any Servicer Default, the
Servicer shall give written notice thereof to the Transferor, the Trustee, the
Rating Agencies and any Credit Enhancement Provider and the Trustee shall give
notice to the Investor Certificateholders at their respective addresses
appearing in the Certificate Register. Upon any termination or appointment of a
Successor Servicer pursuant to this Article X, the Trustee shall give prompt
written notice thereof to Investor Certificateholders at their respective
addresses appearing in the Certificate Register.

                 Section 10.4 Waiver of Past Defaults. The Holders of Investor
Certificates evidencing Undivided Interests aggregating not less than 66-2/3% of
the Investor Interest of each Series adversely affected by any default by the
Servicer or Transferor may, on behalf of all Certificateholders of such Series,
waive any default by the Servicer or Transferor in the performance of its
obligations hereunder and its consequences, except a default in the failure to
make any required deposits or payments of interest or principal relating to such
Series pursuant to Article IV which default does not result from the failure of
the Paying Agent to perform its obligations to make any required deposits or
payments of interest and principal in accordance with Article IV. The Servicer
shall give written notice of any such waiver to the Rating Agencies. Upon any
such waiver of a past default, such default shall cease to exist, and any
default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereon except to the extent
expressly so waived.

                                   ARTICLE XI

                                   THE TRUSTEE

                 Section 11.1  Duties of Trustee.

                 (a) The Trustee, prior to the occurrence of any Servicer
Default and after the curing of all Servicer Defaults which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement. If a Responsible Officer has received written notice
that a Servicer Default has occurred (which has not been cured or waived), the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in its exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.

                 (b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
substantially conform on their face to the requirements of this Agreement, but
shall not be required to verify the

                                      -79-

<PAGE>

accuracy of the contents thereof or to verify any calculations contained
therein.

                 (c) Subject to subsection 11.1(a), no provision of this
Agreement shall be construed to relieve the Trustee from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct; provided, however, that:

                          (i) the Trustee shall not be personally liable for an
         error of judgment made in good faith by a Responsible Officer or
         Responsible Officers of the Trustee, unless it shall be proved that the
         Trustee was negligent in ascertaining the pertinent facts;

                          (ii) the Trustee shall not be personally liable with
         respect to any action taken, suffered or omitted to be taken by it in
         good faith in accordance with the direction of the Holders of Investor
         Certificates evidencing Undivided Interests aggregating more than 50%
         of the Investor Interest of any Series relating to the time, method and
         place of conducting any proceeding for any remedy available to the
         Trustee, or exercising any trust or power conferred upon the Trustee in
         relation to such Series, under this Agreement; and

                          (iii) the Trustee shall not be charged with knowledge
         of any failure by the Servicer referred to in clauses (a) and (b) of
         Section 10.1 unless a Responsible Officer of the Trustee obtains actual
         knowledge of such failure or the Trustee receives written notice of
         such failure from the Servicer or any Holders of Investor Certificates
         evidencing Undivided Interests aggregating not less than 10% of the
         Investor Interest of any Series adversely affected thereby.

                 (d) The Trustee shall not be required to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Servicer under this Agreement except during such time,
if any, as the Trustee shall be the successor to, and be vested with the rights,
duties, powers and privileges of, the Servicer in accordance with the terms of
this Agreement.

                 (e) Except for actions expressly authorized by this Agreement,
the Trustee shall take no action reasonably likely to impair the interests of
the Trust in any Receivable now existing or hereafter created or to impair the
value of any Receivable now existing or hereafter created.

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                 (f) Except as provided in this subsection 11.1(f), the Trustee
shall have no power to vary the corpus of the Trust including, without
limitation, the power to (i) accept any substitute obligation for a Receivable
initially assigned to the Trust under Section 2.1 or 2.6 hereof, (ii) add any
other investment, obligation or security to the Trust, except for an addition
permitted under Section 2.6 or (iii) withdraw from the Trust any Receivables,
except for a withdrawal permitted under Sections 2.7, 9.2, 10.2, 12.1 or 12.2 or
subsections 2.4(d), 2.4(e) or Article IV.

                 (g) In the event that the Paying Agent or the Transfer Agent
and Registrar shall fail to perform any obligation, duty or agreement in the
manner or on the day required to be performed by the Paying Agent or the
Transfer Agent and Registrar, as the case may be, under this Agreement, the
Trustee shall be obligated promptly to perform such obligation, duty or
agreement in the manner so required, but shall not be obligated to expend its
own funds in so performing.

                 (h) If the Transferor has agreed to transfer any of its credit
card receivables (other than the Receivables) to another Person, upon the
written request of the Transferor, the Trustee will enter into such
intercreditor agreements with the transferee of such receivables as are
customary and necessary to identify separately the rights, if any, of the Trust
and such other Person in the Transferor's credit card receivables; provided,
however, that the Trustee shall not be required to enter into any intercreditor
agreement which could adversely affect the interests of the Certificateholders
and, upon the request of the Trustee, the Transferor will deliver an Opinion of
Counsel on any matters relating to such intercreditor agreement, reasonably
requested by the Trustee.

                 Section 11.2  Certain Matters Affecting the Trustee.
Except as otherwise provided in Section 11.1:

                 (a) the Trustee may rely on and shall be protected in acting
         on, or in refraining from acting in accord with, any assignment of
         Receivables in Additional Accounts, the initial report, the Monthly
         Servicer's Certificate, the annual Servicer's certificate, the monthly
         payment instructions and notification to the Trustee, the monthly
         Certificateholder's statement, any resolution, Officer's Certificate,
         certificate of auditors or any other certificate, statement,
         instrument, opinion, report, notice, request, consent, order,
         appraisal, bond or other paper or document reasonably believed by it to
         be genuine and to have been signed or presented to it pursuant to this
         Agreement by the proper party or parties;

                 (b) the Trustee may consult with counsel of its selection, and
         any Opinion of Counsel shall be full and complete authorization and
         protection in respect of any action taken or suffered or omitted by it
         hereunder in good faith and in accordance with such Opinion of Counsel;

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                 (c) the Trustee shall be under no obligation to exercise any of
         the rights or powers vested in it by this Agreement or any Credit
         Enhancement, or to institute, conduct or defend any litigation
         hereunder or in relation hereto, at the request, order or direction of
         any of the Certificateholders or any Credit Enhancement Provider,
         pursuant to the provisions of this Agreement, unless such
         Certificateholders or Credit Enhancement Provider shall have offered to
         the Trustee reasonable security or indemnity against the costs,
         expenses and liabilities which may be incurred therein or thereby;
         nothing contained herein shall, however, relieve the Trustee of the
         obligations, upon the occurrence of any Servicer Default (which has not
         been cured or waived), to exercise such of the rights and powers vested
         in it by this Agreement and any Credit Enhancement, and to use the same
         degree of care and skill in its exercise as a prudent person would
         exercise or use under the circumstances in the conduct of his own
         affairs;

                 (d) the Trustee shall not be personally liable for any action
         taken, suffered or omitted by it in good faith and believed by it to be
         authorized or within the discretion or rights or powers conferred upon
         it by this Agreement except to the extent of the Trustee's negligence;

                 (e) the Trustee shall not be bound to make any investigation
         into the facts of matters stated or computations contained in any
         assignment of Receivables in Additional Accounts, the initial report,
         the Monthly Servicer's Certificate, the annual Servicer's certificate,
         the monthly payment instructions and notification to the Trustee, the
         monthly Certificateholder's statement, any resolution, certificate,
         statement, instrument, opinion, report, notice, request, consent,
         order, approval, bond or other paper or document, unless requested in
         writing so to do by Holders of Investor Certificates evidencing
         Undivided Interests aggregating more than 50% of the Investor Interest
         of any Series which could be adversely affected if the Trustee does not
         perform such acts;

                 (f) the Trustee may execute any of the trusts or powers
         hereunder or perform any duties hereunder either directly or by or
         through agents or attorneys or a custodian, and the Trustee shall not
         be responsible for any misconduct or negligence on the part of any such
         agent, attorney or custodian appointed by it with due care and in
         accordance with the terms of this Agreement; and

                 (g) except as may be required by subsection 11.1(a), or
         otherwise expressly required herein or in any Supplement, the Trustee
         shall not be required to make any initial or periodic examination of
         any documents or records related to the Receivables or the Accounts for
         the purpose of establishing the presence or absence of defects, the
         compliance

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<PAGE>

         by the Transferor with its representations and warranties or for
         any other purpose.

                 Section 11.3 Trustee Not Liable for Recitals in Certificates.
The Trustee assumes no responsibility for the correctness of the recitals
contained herein and in the Certificates (other than the certificate of
authentication on the Certificates). Except as set forth in Section 11.15, the
Trustee makes no representations as to the validity or sufficiency of this
Agreement or of the Certificates (other than the certificate of authentication
on the Certificates) or of any Receivable or related document. The Trustee shall
not be accountable for the use or application by the Transferor of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Transferor in respect of the Receivables or
deposited in or withdrawn from the Collection Account, the Principal Account or
the Finance Charge Account, or any Series Account by the Servicer.

                 Section 11.4 Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of Investor
Certificates, and the Trustee may transact banking business with the Transferor,
any Obligor and the Servicer, in each case with the same rights as it would have
if it were not the Trustee.

                 Section 11.5 The Servicer to Pay Trustee's Fees and Expenses.
The Servicer covenants and agrees to pay to the Trustee from time to time, and
the Trustee shall be entitled to receive such reasonable compensation as shall
be agreed upon from time to time between the Servicer and the Trustee (which
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) for all services rendered by it in the execution of
the Trust hereby created and in the exercise and performance of any of the
powers and duties hereunder of the Trustee, and, subject to Section 8.4, the
Servicer will pay or reimburse the Trustee (without reimbursement from any
Investor Account, any Series Account or otherwise) upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any of the provisions of this Agreement except any such
expense, disbursement or advance as may arise from its own negligence, bad faith
or wilful misconduct and except as provided in the following sentence. If the
Trustee is appointed Successor Servicer pursuant to Section 10.2, the provisions
of this Section 11.5 shall not apply to expenses, disbursements and advances
made or incurred by the Trustee in its capacity as Successor Servicer.

                 The obligations of the Servicer under this Section 11.5 shall
survive the termination of the Trust and the resignation or removal of the
Trustee.

                 Section 11.6 Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a corporation organized and doing business under
the laws of the United States of America or any state thereof authorized under
such laws to exercise corporate trust powers, having a long-term unsecured debt
rating of at least "Baa3" by Moody's and "BBB-" by Standard & Poor's having, in
the case of an entity that is

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<PAGE>

subject to risk-based capital adequacy requirements, risk-based capital of at
least $50,000,000 or, in the case of an entity that is not subject to risk-based
capital adequacy requirements, having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal or state
authority. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section 11.6, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in the most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 11.6, the Trustee shall resign immediately in the
manner and with the effect specified in Section 11.7.

                 Section 11.7  Resignation or Removal of Trustee.

                 (a) The Trustee may at any time resign and be discharged from
the Trust hereby created by giving written notice thereof to the Servicer and
the Transferor. Upon receiving such notice of resignation, the Servicer shall
promptly appoint a successor trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee. If no successor trustee shall have been so
appointed and have accepted within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.

                 (b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 11.6 hereof and shall fail to resign
after written request therefor by the Transferor, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or
a receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Transferor may, but shall not be required to, remove the Trustee and promptly
appoint a successor trustee by written instrument, in duplicate, one copy of
which instrument shall be delivered to the Trustee so removed and one copy to
the successor trustee.

                 (c) Any resignation or removal of the Trustee and appointment
of a successor trustee pursuant to any of the provisions of this Section 11.7
shall not become effective until acceptance of appointment by the successor
trustee as provided in Section 11.8 hereof and any liability of the Trustee
arising hereunder shall survive such appointment of a successor trustee. The
Transferor shall give written notice of any resignation or removal of the
Trustee to the Rating Agencies.

                 Section 11.8  Successor Trustee.

                 (a) Any successor trustee appointed as provided in
Section 11.7 hereof shall execute, acknowledge and deliver to the

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Transferor, the Servicer and to its predecessor Trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with the
like effect as if originally named as Trustee herein. The predecessor Trustee
shall deliver to the successor trustee all documents and statements held by it
hereunder, and the Transferor and the predecessor Trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for fully and certainly vesting and confirming in the successor trustee all such
rights, powers, duties and obligations.

                 (b) No successor trustee shall accept appointment as provided
in this Section 11.8 unless at the time of such acceptance such successor
trustee shall be eligible under the provisions of Section 11.6 hereof.

                 (c) Upon acceptance of appointment by a successor trustee as
provided in this Section 11.8, such successor trustee shall mail notice of such
succession hereunder to all Certificateholders at their addresses as shown in
the Certificate Register.

                 Section 11.9 Merger or Consolidation of Trustee. Any Person
into which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
all or substantially all of the corporate trust business of the Trustee, shall
be the successor of the Trustee hereunder, provided such corporation shall be
eligible under the provisions of Section 11.6 hereof, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding. The Trustee shall give written
notice of any such merger or consolidation to the Rating Agencies.

                 Section 11.10  Appointment of Co-Trustee or Separate
Trustee.

                 (a) Notwithstanding any other provisions of this Agreement, at
any time, for the purpose of meeting any legal requirements of any jurisdiction
in which any part of the Trust may at the time be located, the Trustee shall
have the power and may execute and deliver all instruments to appoint one or
more Persons to act as a co-trustee or co- trustees, or separate trustee or
separate trustees, of all or any part of the Trust, and to vest in such Person
or Persons, in such capacity and for the benefit of the Certificateholders, such
title to the trust, or any part thereof, and, subject to the other provisions of
this Section 11.10, such powers, duties, obligations, rights and trusts as the
Trustee may consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 11.6 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 11.8 hereof.

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<PAGE>

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

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

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

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

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

                 (d) Any separate trustee or co-trustee may at any time
constitute the Trustee as its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect to this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.

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<PAGE>

                 Section 11.11 Tax Returns. In the event the Trust shall be
required to file tax returns, the Transferor, as soon as practicable after it is
made aware of such requirement, shall prepare or cause to be prepared any tax
returns required to be filed by the Trust and, to the extent possible, shall
file such returns at least five days before such returns are due to be filed.
The Trustee is hereby authorized to sign any such return on behalf of the Trust,
in the event that the Trustee is determined to be the person required by law to
sign such return. The Servicer shall prepare or shall cause to be prepared all
tax information required by law to be distributed to Certificateholders and
shall deliver such information to the Trustee at least five days prior to the
date it is required by law to be distributed to Certificateholders. The
Servicer, upon request, will furnish the Transferor with all such information
known to the Servicer as may be reasonably required in connection with the
preparation of all tax returns of the Trust. In no event shall the Trustee or
the Servicer be liable for any liabilities, costs or expenses of the Trust, the
Investor Certificateholders or the Certificate Owners arising under any tax law,
including without limitation federal, state, local or foreign income or excise
taxes or any other tax imposed on or measured by income (or any interest or
penalty with respect thereto or arising from a failure to comply therewith).

                 Section 11.12 Trustee may Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or any Series
of Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee. Any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders any Series of Certificates, as their interests
may appear, in respect of which such judgment has been obtained.

                 Section 11.13 Suits for Enforcement. If a Servicer Default
shall occur and be continuing, the Trustee, in its discretion may, subject to
the provisions of Section 10.1, proceed to protect and enforce its rights and
the rights of the Holders of any Series of Certificates under this Agreement by
a suit, action or proceeding in equity or at law or otherwise, whether for the
specific performance of any covenant or agreement contained in this Agreement or
in aid of the execution of any power granted in this Agreement or for the
enforcement of any other legal, equitable or other remedy as the Trustee, being
advised by counsel, shall deem most effectual to protect and enforce any of the
rights of the Trustee or the Holders of any Series of Certificates.

                 Section 11.14 Rights of Certificateholders to Direct Trustee.
Holders of Investor Certificates evidencing Undivided Interests aggregating more
than 50% of the Aggregate Investor Interest (or, with respect to any remedy,
trust or power that does not relate to all Series, 50% of the Aggregate Investor
Interest of the Investor Certificates of

                                      -87-

<PAGE>

all Series to which such remedy, trust or power relates) shall have the right to
direct the time, method, and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee; provided, however, that, subject to Section 11.1, the Trustee shall
have the right to decline to follow any such direction if the Trustee being
advised by counsel determines that the action so directed may not lawfully be
taken, or if the Trustee in good faith shall, by a Responsible Officer or
Responsible Officers of the Trustee, determine that the proceedings so directed
would be illegal or subject it to personal liability or be unduly prejudicial to
the rights of Certificateholders not parties to such direction; and provided
further that nothing in this Agreement shall impair the right of the Trustee to
take any action deemed proper by the Trustee and which is not inconsistent with
such direction of such Holders of Investor Certificates.

                 Section 11.15  Representations and Warranties of
Trustee.  The Trustee represents and warrants that:

                          (i) the Trustee is a banking corporation
         organized, existing and authorized to engage in the business of
         banking under the laws of the State of New York;

                          (ii) the Trustee has full power, authority and right
         to execute, deliver and perform this Agreement, and has taken all
         necessary action to authorize the execution, delivery and performance
         by it of this Agreement; and

                          (iii) this Agreement has been duly executed
         and delivered by the Trustee.

                 Section 11.16 Maintenance of Office or Agency. The Trustee will
maintain at its expense in the Borough of Manhattan, the City of New York an
office or offices, or agency or agencies, where notices and demands to or upon
the Trustee in respect of the Certificates and this Agreement may be served. The
Trustee initially designates its Corporate Trust Office as its office for such
purposes in New York. The Trustee will give prompt written notice to the
Servicer and to Certificateholders (or in the case of Holders of Bearer
Certificates, in the manner provided for in the related Supplement) of any
change in the location of the Certificate Register or any such office or agency.

                                   ARTICLE XII

                                   TERMINATION

                       Section 12.1 Termination of Trust.

                 (a) The respective obligations and responsibilities of the
Transferor, the Servicer and the Trustee created hereby (other than the
obligation of the Trustee to make payments to Certificateholders as hereinafter
set forth) shall terminate, except with respect to the

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<PAGE>

duties described in Sections 8.4 and 11.5 and subsections 2.4(c) and 12.3(b), on
the Trust Termination Date; provided, however, that the Trust shall not
terminate on the date specified in clause (i) of the definition of "Trust
Termination Date" if each of the Servicer and the Holder of the Transferor
Certificate notify the Trustee in writing, not later than five Business Days
preceding such date, that they desire that the Trust not terminate on such date,
which notice (such notice, a "Trust Extension") shall specify the date on which
the Trust shall terminate (such date, the "Extended Trust Termination Date").
The Servicer and the Holder of the Transferor Certificate may, on any date
following the Trust Extension, so long as no Series of Certificates is
outstanding, deliver a notice in writing to the Trustee changing the Extended
Trust Termination Date.

                 (b) All principal or interest with respect to any Series of
Investor Certificates shall be due and payable no later than the Series
Termination Date with respect to such Series. Unless otherwise provided in a
Supplement, in the event that the Investor Interest of any Series of
Certificates is greater than zero on its Series Termination Date (after giving
effect to all transfers, withdrawals, deposits and drawings to occur on such
date and the payment of principal to be made on such Series on such date), the
Trustee will sell or cause to be sold, and pay the proceeds first, to all
Certificateholders of such Series pro rata in final payment of all principal of
and accrued interest on such Series of Certificates, and second, as provided in
the related Supplement, an amount of Principal Receivables and the related
Finance Charge Receivables (or interests therein) up to 110% of the sum of the
Investor Interest of such Series plus the Enhancement Invested Amount or the
Collateral Interest (if not included in the Investor Interest) of such Series,
if any, at the close of business on such date (but not more than an amount of
Principal Receivables and the related Finance Charge Receivables equal to the
sum of (1) the product of (A) the Transferor Percentage, (B) the aggregate
amount of Principal Receivables in the Trust and (C) a fraction the numerator of
which is the applicable Investor Percentage with respect to Finance Charge
Receivables and the denominator of which is the sum of all Investor Percentages
with respect to Finance Charge Receivables of all Series and (2) the Investor
Interest of such Series plus the Enhancement Invested Amount or the Collateral
Interest (if not included in the Investor Interest) of such Series). The Trustee
shall notify each Credit Enhancement Provider of the proposed sale of such
Receivables and shall provide each Credit Enhancement Provider an opportunity to
bid on such Receivables. The Transferor shall be permitted to purchase such
Receivables in such case and shall have a right of first refusal with respect
thereto. Any proceeds of such sale in excess of such principal and interest paid
shall be paid to the Holder of the Transferor Certificate. Upon such Series
Termination Date with respect to the applicable Series of Certificates, final
payment of all amounts allocable to any Investor Certificates of such Series
shall be made in the manner provided in Section 12.3.

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<PAGE>

                 Section 12.2  Optional Purchase.

                 (a) If so provided in any Supplement, the Transferor may, but
shall not be obligated to, cause a final distribution to be made in respect of
the related Series of Certificates on a Distribution Date specified in such
Supplement by depositing into the Distribution Account or the applicable Series
Account, not later than the Transfer Date preceding such Distribution Date, for
application in accordance with Section 12.3, the amount specified in such
Supplement.

                 (b) The amount deposited pursuant to subsection 12.2(a) shall
be paid to the Investor Certificateholders of the related Series pursuant to
Section 12.3 on the related Distribution Date following the date of such
deposit. All Certificates of a Series which are purchased by the Transferor
pursuant to subsection 12.2(a) shall be delivered by the Transferor upon such
purchase to, and be canceled by, the Transfer Agent and Registrar and be
disposed of in a manner satisfactory to the Trustee and the Transferor. The
Investor Interest of each Series which is purchased by the Transferor pursuant
to subsection 12.2(a) shall, for the purposes of the definition of "Transferor
Interest," be deemed to be equal to zero on the Distribution Date following the
making of the deposit, and the Transferor Interest shall thereupon be deemed to
have been increased by the Investor Interest of such Series.

                 Section 12.3  Final Payment with Respect to any Series.

                 (a) Written notice of any termination, specifying the
Distribution Date upon which the Investor Certificateholders of any Series may
surrender their Certificates for payment of the final distribution with respect
to such Series and cancellation, shall be given by the Trustee to Investor
Certificateholders of such Series mailed not later than the fifth day of the
month of such final distribution (subject to at least two Business Days' prior
notice from the Servicer to the Trustee) (or in the manner provided by the
Supplement relating to such Series) specifying (i) the Distribution Date (which
shall be the Distribution Date in the month (x) in which the deposit is made
pursuant to subsection 2.4(e), 9.2(a), 10.2(a) or 12.2(a) of this Agreement or
such other section as may be specified in the related Supplement, or (y) in
which the related Series Termination Date occurs) upon which final payment of
such Investor Certificates will be made upon presentation and surrender of such
Investor Certificates at the office or offices therein designated (which, in the
case of Bearer Certificates, shall be outside the United States), (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Investor Certificates at the office or
offices therein specified. The Servicer's notice to the Trustee in accordance
with the preceding sentence shall be accompanied by an Officers' Certificate
setting forth the information specified in Article V of this Agreement covering
the period during the then current calendar year through the date of such notice
and setting forth the date of such final distribution. The Trustee shall give
such notice to the Transfer Agent and Registrar and the Paying Agent and the
Rating Agencies at the time such notice is given to such Investor
Certificateholders.

                                      -90-

<PAGE>

                 (b) Notwithstanding the termination of the Trust pursuant to
subsection 12.1(a) or the occurrence of the Series Termination Date with respect
to any Series, all funds then on deposit in the Finance Charge Account, the
Principal Account, the Excess Funding Account, the Distribution Account or any
Series Account applicable to the related Series shall continue to be held in
trust for the benefit of the Certificateholders of the related Series and the
Paying Agent or the Trustee shall pay such funds to the Certificateholders of
the related Series upon surrender of their Certificates (which surrenders and
payments, in the case of Bearer Certificates, shall be made only outside the
United States). In the event that all of the Investor Certificateholders of any
Series shall not surrender their Certificates for cancellation within six months
after the date specified in the above- mentioned written notice, the Trustee
shall give a second written notice (or, in the case of Bearer Certificates,
publication notice) to the remaining Investor Certificateholders of such Series
upon receipt of the appropriate records from the Transfer Agent and Registrar to
surrender their Certificates for cancellation and receive the final distribution
with respect thereto. If within one and one-half years after the second notice
with respect to a Series, all the Investor Certificates of such Series shall not
have been surrendered for cancellation, the Trustee may take appropriate steps
or may appoint an agent to take appropriate steps, to contact the remaining
Investor Certificateholders of such Series concerning surrender of their
Certificates, and the cost thereof shall be paid out of the funds in the
Distribution Account or any Series Account held for the benefit of such Investor
Certificateholders. The Trustee and the Paying Agent shall pay to the Transferor
upon request any monies held by them for the payment of principal or interest
which remains unclaimed for two years. After payment to the Transferor, Investor
Certificateholders entitled to the money must look to the Transferor for payment
as general creditors unless an applicable abandoned property law designates
another Person.

                 (c) All Certificates surrendered for payment of the final
distribution with respect to such Certificates and cancellation shall be
canceled by the Transfer Agent and Registrar and be disposed of in a manner
satisfactory to the Trustee and the Transferor.

                 Section 12.4 Termination Rights of Holder of Transferor
Certificate. Upon the termination of the Trust pursuant to Section 12.1, and
after payment of all amounts due hereunder on or prior to such termination and
the surrender of the Transferor Certificate, the Trustee shall execute a written
reconveyance substantially in the form of Exhibit H pursuant to which it shall
reconvey to the Holder of the Transferor Certificate, without recourse,
representation or warranty, all right, title and interest of the Trust in the
Receivables, whether then existing or thereafter created, all moneys due or to
become due with respect to such Receivables (including all accrued interest
theretofore posted as Finance Charge Receivables) and all proceeds of such
Receivables and Insurance Proceeds relating to such Receivables allocable to the
Trust, except for amounts held by the Trustee pursuant to subsection 12.3(b).
The Trustee shall execute and deliver such instruments of transfer and
assignment, in each case without recourse, representation or warranty, as

                                      -91-

<PAGE>

shall be reasonably requested by the Holder of the Transferor Certificate to
vest in such Holder all right, title and interest which the Trust had in the
Receivables.

                 Section 12.5  Defeasance.  Notwithstanding anything to
the contrary in this Agreement or any Supplement:

                 (a) The Transferor may at its option be discharged from its
         obligations with respect to all of the Investor Certificates issued by
         the Trust or any specified Series thereof on the date the applicable
         conditions set forth in Section 12.5(c) are satisfied ("Defeasance");
         provided, however, that the following rights, obligations, powers,
         duties and immunities shall survive until otherwise terminated or
         discharged hereunder: (A) the rights of Holders of Investor
         Certificates of the Trust or any specified Series thereof to receive,
         solely from the trust fund provided for in Section 12.5(c), payments in
         respect of principal of and interest on such Investor Certificates when
         such payments are due; (B) the Transferor's obligations with respect to
         such Series of Certificates under Sections 6.3, 6.4 and 12.3; (C) the
         rights, powers, trusts, duties and immunities of the Trustee, the
         Paying Agent and the Transfer Agent and Registrar hereunder; and (D)
         this Section 12.5.

                 (b) Subject to Section 12.5(c), the Transferor at its option
         may use Collections to purchase Permitted Investments rather than
         additional Receivables for transfer to the Trust until such time as no
         Receivables remain in the Trust.

                 (c) The following shall be the conditions to Defeasance under
         Section 12.5(a): (1) the Transferor irrevocably shall have deposited or
         caused to be deposited with the Trustee, under the terms of an
         irrevocable trust agreement in form and substance satisfactory to the
         Trustee, as trust funds in trust for making the payments described
         below: (A) Dollars in an amount, or (B) Permitted Investments which
         through the scheduled payment of principal and interest in respect
         thereof will provide, not later than the due date of payment thereon,
         money in an amount, or (C) a combination thereof, in each case
         sufficient to pay and discharge, and, which shall be applied by the
         Trustee to pay and discharge, all remaining scheduled interest and
         principal payments on all outstanding Investor Certificates of the
         Trust or any specified Series thereof on the dates scheduled for such
         payments in this Agreement and the applicable Supplements and all
         amounts owed to the Credit Enhancement Provider for any Series if so
         provided in the related Supplements or agreements with such Credit
         Enhancement Provider; (2) prior to each exercise of its right to
         substitute money or Permitted Investments for Receivables, the
         Transferor shall deliver to the Trustee a Tax Opinion with respect to
         such substitution and an Opinion of Counsel to the effect that the
         Trust will not be required to register as an

                                      -92-

<PAGE>

         "investment company" within the meaning of the Investment Company Act
         of 1940, as amended; (3) such deposit and termination of obligations
         will not result in a Pay Out Event for any Series and (4) the
         Transferor shall deliver to the Trustee and Officer's Certificate and
         an Opinion of Counsel, each stating that all conditions precedent
         provided for herein relating to the contemplated Defeasance have been
         complied with.

                                  ARTICLE XIII

                            MISCELLANEOUS PROVISIONS

                 Section 13.1 Amendment.

                 (a) This Agreement (including any Supplement) may be amended
from time to time by the Transferor, the Servicer and the Trustee, without the
consent of any of the Certificateholders, (i) to cure any ambiguity, to revise
any exhibits or schedules (other than Schedule 1), to correct or supplement any
provisions herein or thereon or (ii) to add any other provisions with respect to
matters or questions raised under this Agreement which shall not be inconsistent
with the provisions of this Agreement; provided, however, that such action shall
not, as evidenced by an Opinion of Counsel, adversely affect in any material
respect the interests of any of the Certificateholders unless such
Certificateholders have consented thereto.

                 (b) This Agreement (including any Supplement) and any schedule
or exhibit thereto may also be amended from time to time by the Transferor, the
Servicer and the Trustee, without the consent of any of the Certificateholders,
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement, or of modifying in any
manner the rights of the Holders of Certificates; provided, however, that (i)
the Servicer shall have provided an Officer's Certificate to the Trustee to the
effect that such amendment will not materially and adversely affect the
interests of any Certificateholder, (ii) the Servicer shall have provided a Tax
Opinion to the Trustee with respect to such amendment and (iii) the Servicer
shall have provided at least ten Business Days' prior written notice to each
Rating Agency of such amendment and shall have received written confirmation
from each Rating Agency that such action will satisfy the Rating Agency
Condition; provided, further, that such amendment shall not, without the consent
of each Certificateholder of each Series affected thereby, (i) reduce in any
manner the amount of, or delay the timing of, distributions which are required
to be made on any Certificate of such Series, (ii) alter the requirements for
changing the Minimum Transferor Interest Percentage for such Series, (iii)
change the definition of or the manner of calculating the interest of any
Certificateholder of such Series, (iv) change the manner in which the Transferor
Interest is determined or (v) reduce the percentage pursuant to Subsection
13.1(c) required to consent to any such amendment.

                                      -93-

<PAGE>

                 (c) This Agreement and any Supplement may also be amended from
time to time by the Transferor, the Servicer and the Trustee with the consent of
Certificateholders evidencing Undivided Interests aggregating more than 66 2/3%
of the Investor Interest of each and every Series adversely affected, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Certificateholders of any Series then issued and outstanding; provided,
however, that no such amendment under this subsection shall (i) reduce in any
manner the amount of, or delay the timing of, distributions which are required
to be made on any Certificate of such Series without the consent of all of the
related Certificateholders; (ii) change the definition of or the manner of
calculating the Investor Interest, the Investor Percentage or the Investor
Default Amount of such Series without the consent of the related
Certificateholders or (iii) reduce the aforesaid percentage required to consent
to any such amendment, in each case without the consent of each
Certificateholder of all Series affected. The Transferor shall give written
notice to the Ratings Agencies of any such amendment.

                 (d) It shall not be necessary to obtain the consent of
Certificateholders under this Section 13.1 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Trustee may prescribe.

                 (e) Promptly after the execution of any amendment pursuant to
subsection 13.1(a) or 13.1(c) above, the Trustee shall furnish notification of
the substance of such amendment to each Rating Agency providing a rating for any
Series.

                 (f) Any Supplement executed and delivered pursuant to Section
6.9 and any amendments regarding the addition to or removal of Receivables from
the Trust as provided in Sections 2.6 or 2.7, executed in accordance with the
provisions hereof, shall not be considered amendments to this Agreement for the
purpose of Section 13.1.

                 (g) In connection with any amendment, the Trustee may request,
in addition to the Opinion of Counsel required by subsection 13.2(d), an Opinion
of Counsel from the Transferor or the Servicer to the effect that the amendment
complies with all requirements of this Agreement. The Trustee may, but shall not
be obligated to, enter into any amendment which affects the Trustee's rights,
duties or immunities under this Agreement or otherwise.

                 Section 13.2  Protection of Right, Title and Interest to
Trust.

                 (a) The Servicer shall cause this Agreement, all amendments
hereto and/or all financing statements and continuation statements and any other
necessary documents covering the

                                      -94-

<PAGE>

Certificateholders and the Trustee's right, title and interest to the Trust to
be promptly recorded, registered and filed, and at all times to be kept
recorded, registered and filed, all in such manner and in such places as may be
required by law fully to preserve and protect the right, title and interest of
the Certificateholders or the Trustee, as the case may be, hereunder to all
property comprising the Trust. The Servicer shall deliver to the Trustee
file-stamped copies of, or filing receipts for, any document recorded,
registered or filed as provided above, promptly after the same become available
following such recording, registration of filing. The Transferor shall cooperate
fully with the Servicer in connection with the obligations set forth above and
will execute any and all documents reasonably required to fulfill the intent of
this subsection 13.2(a).

                 (b) Within 30 days after the Transferor makes any change in its
name, identity or corporate structure which would make any financing statement
or continuation statement filed in accordance with paragraph (a) above seriously
misleading within the meaning of Section 9- 402(7) of the UCC, the Transferor
shall give the Trustee notice of any such change and shall file such financing
statements or amendments as may be necessary to continue the perfection of the
Trust's security interest in the Receivables and the proceeds thereof.

                 (c) Each of the Transferor and the Servicer will give the
Trustee prompt written notice of any relocation of any office from which it
services Receivables or keeps records concerning the Receivables or of its
principal executive office and whether, as a result of such relocation, the
applicable provisions of the UCC would require the filing of any amendment of
any previously filed financing or continuation statement or of any new financing
statement and shall file such financing statements or amendments as may be
necessary to continue the perfection of the Trust's security interest in the
Receivables and the proceeds thereof. Each of the Transferor and the Servicer
will at all times maintain each office from which it services Receivables and
its principal executive office within the United States of America.

                 (d) The Servicer will deliver to the Trustee: (i) upon each
date that any Additional Accounts are to be included in the Accounts pursuant to
Section 2.6(a) or (b), an Opinion of Counsel substantially in the form of
Exhibit E; and (ii) on or before March 31 of each year, beginning with March 31,
2001, an Opinion of Counsel, substantially in the form of Exhibit F.

                 Section 13.3  Limitation on Rights of
Certificateholders.

                 (a) The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust, nor shall such death or
incapacity entitle such Certificateholder's legal representatives or heirs to
claim an accounting or to take any action or commence any proceeding in any
court for a partition or winding up of the Trust, nor otherwise affect the
rights, obligations and liabilities of the parties hereto or any of them.

                                      -95-

<PAGE>

                 (b) No Certificateholder shall have any right to vote (except
with respect to the Investor Certificateholders as provided in Section 13.1
hereof) or in any manner otherwise control the operation and management of the
Trust, or the obligations of the parties hereto, nor shall anything herein set
forth, or contained in the terms of the Certificates, be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
person by reason of any action taken by the parties to this Agreement pursuant
to any provision hereof.

                 (c) No Certificateholder shall have any right by virtue of any
provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Certificateholder previously shall have given written notice to the Trustee, and
unless the Holders of Certificates evidencing Undivided Interests aggregating
more than 50% of the Investor Interest of any Series which may be adversely
affected but for the institution of such suit, action or proceeding, shall have
made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Certificateholders shall have the right in any manner whatever by
virtue or by availing itself or themselves of any provisions of this Agreement
to affect, disturb or prejudice the rights of the Certificateholders of any
other of the Certificates, or to obtain or seek to obtain priority over or
preference to any other such Certificateholder, or to enforce any right under
this Agreement, except in the manner herein provided and for the equal, ratable
and common benefit of all Certificateholders. For the protection and enforcement
of the provisions of this Section 13.3, each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.

                 Section 13.4 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.

                 Section 13.5 Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
when personally delivered at, sent by facsimile to, (ii) two Business Days after
being sent by courier at or (iii) five Business Days after being mailed by
registered mail, return receipt requested, to (a) in the case of the Transferor,
to Dillard Asset Funding Company, c/o Chase Manhattan Bank USA, N.A., 1201
Market Street, Wilmington, Delaware 19801, Attention: Corporate Trust
Department, with copies to James Freeman and David Helm, as Administrators, c/o
Dillard's Inc., 1600 Cantrell, Little Rock, Arkansas 72201, (b) in the case of
the

                                      -96-

<PAGE>

Servicer, to Dillard National Bank, 396 North William Dillard Drive, Gilbert,
Arizona 85233, Attention Randall Hankins, (c) in the case of the Trustee, to the
Corporate Trust Office, (d) in the case of the Credit Enhancement Provider for a
particular Series, the address, if any, specified in the Supplement relating to
such Series and (e) in the case of the Rating Agency for a particular Series,
the address, if any, specified in the Supplement relating to such Series; or, as
to each party, at such other address as shall be designated by such party in a
written notice to each other party. Unless otherwise provided with respect to
any Series in the related Supplement any notice required or permitted to be
mailed to a Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Certificateholder as shown in the Certificate
Register, or with respect to any notice required or permitted to be made to the
Holders of Bearer Certificates, by publication in the manner provided in the
related Supplement. If and so long as any Series or Class is listed on the
Luxembourg Stock Exchange and such Exchange shall so require, any Notice to
Investor Certificateholders shall be published in a newspaper of general
circulation in Luxembourg within the time period prescribed in this Agreement.
Any notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice.

                 Section 13.6 Severability of Provisions. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity of
enforceability of the other provisions of this Agreement or of the Certificates
or rights of the Certificateholders thereof.

                 Section 13.7  [RESERVED]

                 Section 13.8 Certificates Non-Assessable and Fully Paid. It is
the intention of the parties to this Agreement that the Certificateholders shall
not be personally liable for obligations of the Trust, that the Undivided
Interests represented by the Certificates shall be non-assessable for any losses
or expenses of the Trust or for any reason whatsoever, and that Certificates
upon authentication thereof by the Trustee pursuant to Sections 2.1 and 6.2 are
and shall be deemed fully paid.

                 Section 13.9 Further Assurances. The Transferor and the
Servicer agree to do and perform, from time to time, any and all acts and to
execute any and all further instruments required or reasonably requested by the
Trustee more fully to effect the purposes of this Agreement, including, without
limitation, the execution of any financing statements or continuation statements
relating to the Receivables for filing under the provisions of the Uniform
Commercial Code of any applicable jurisdiction.

                                      -97-

<PAGE>

                 Section 13.10 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Trustee, any Credit
Enhancement Provider or the Investor Certificateholders, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exhaustive of any rights, remedies,
powers and privileges provided by law.

                 Section 13.11 Counterparts. This Agreement may be executed in
two or more counterparts (and by different parties on separate counterparts),
each of which shall be an original, but all of which together shall constitute
one and the same instrument.

                 Section 13.12 Third-Party Beneficiaries. This Agreement will
inure to the benefit of and be binding upon the parties hereto, the
Certificateholders and, to the extent provided in the related Supplement, to the
Credit Enhancement Provider named therein, and their respective successors and
permitted assigns. Except as otherwise provided in this Article XIII, no other
Person will have any right or obligation hereunder.

                 Section 13.13  Actions by Certificateholders.

                 (a) Wherever in this Agreement a provision is made that an
action may be taken or a notice, demand or instruction given by Investor
Certificateholders, such action, notice or instruction may be taken or given by
any Investor Certificateholder, unless such provision requires a specific
percentage of Investor Certificateholders.

                 (b) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Certificateholder shall bind such
Certificateholder and every subsequent holder of such Certificate issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done or omitted to be done by the Trustee or the Servicer
in reliance thereon, whether or not notation of such action is made upon such
Certificate.

                 Section 13.14 Rule 144A Information. For so long as any of the
Investor Certificates of any Series or any Class are "restricted securities"
within the meaning of Rule 144(a)(3) under the Securities Act, each of the
Transferor, the Servicer, the Trustee and the Enhancement Provider for such
Series agree to cooperate with each other to provide to any Investor
Certificateholders of such Series or Class and to any prospective purchaser of
Certificates designated by such an Investor Certificateholder upon the request
of such Investor Certificateholder or prospective purchaser, any information
required to be provided to such holder or prospective purchaser to satisfy the
condition set forth in Rule 144A(d)(4) under the Securities Act.

                                      -98-

<PAGE>

                 Section 13.15 Merger and Integration. Except as specifically
stated otherwise herein, this Agreement sets forth the entire understanding of
the parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.

                 Section 13.16 Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.

13.17No Recourse. No recourse may be taken, directly or indirectly, with respect
to the obligations of the Transferor, the Trust, Chase Manhattan Bank USA, N.A.
or the Trustee on the Certificates or under this Agreement or any certificate or
other writing delivered in connection herewith or therewith, against:

                 (i)  the Trustee or Chase Manhattan Bank USA, N.A. in
its individual capacity;

                 (ii)  any owner of a beneficial interest in the
Transferor; or

                 (iii) any partner, owner, beneficiary, agent, officer,
director, employee or agent of the Trustee or Chase Manhattan Bank USA, N.A. in
their individual capacities, any holder of a beneficial interest in the
Transferor, the Trustee or Chase Manhattan Bank USA, N.A. or of any successor or
assign of the Trustee or Chase Manhattan Bank USA, N.A. in their individual
capacities (or any of their successors or assigns), except as any such Person
may have expressly agreed (it being understood that the Trustee and Chase
Manhattan Bank USA, N.A. have no such obligations in their individual
capacities) and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity. For all purposes of this Agreement, in
the performance of any duties or obligations of the Transferor hereunder, Chase
Manhattan Bank USA, N.A. shall be subject to, and entitled to the benefits of,
the terms and provisions of Article XI hereof.

                                      -99-

<PAGE>

                 IN WITNESS WHEREOF, the Transferor, the Servicer and the
Trustee have caused this Agreement to be duly executed by their respective
officers as of the day and year first above written.

                                             DILLARD ASSET FUNDING COMPANY,
                                               as Transferor

                                             By: CHASE MANHATTAN BANK USA, N.A.,
                                                 not in its individual capacity
                                                 but solely as owner trustee

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

                                             DILLARD NATIONAL BANK,
                                               as Servicer

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

                                             THE CHASE MANHATTAN BANK,
                                               as Trustee

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

                                      -100-

<PAGE>

                                    EXHIBIT A

                             TRANSFEROR CERTIFICATE

No. 1                                                           One Unit

                       DILLARD CREDIT CARD MASTER TRUST I
                            ASSET BACKED CERTIFICATE

                 THIS CERTIFICATE WAS ISSUED PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), AND MAY BE
SOLD ONLY PURSUANT TO A REGISTRATION STATEMENT EFFECTIVE UNDER THE ACT OR AN
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE ACT. IN ADDITION, THE TRANSFER
OF THIS CERTIFICATE IS SUBJECT TO RESTRICTIONS SET FORTH IN THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN. A COPY OF THE POOLING AND SERVICING
AGREEMENT WILL BE FURNISHED TO THE HOLDER OF THIS CERTIFICATE BY THE TRUSTEE
UPON WRITTEN REQUEST.

                         This Certificate represents an

                            Undivided Interest in the

                       Dillard Credit Card Master Trust I

                 Evidencing an Undivided Interest in a trust, the corpus of
which consists of a portfolio of Dillard's and Mercantile credit card
receivables generated or acquired by Dillard Asset Funding Company and other
assets and interests constituting the Trust under the Pooling and Servicing
Agreement described below.

                 This certifies that Dillard Asset Funding Company (the
"Holder") is the registered owner of an undivided interest in a trust (the
"Trust"), the corpus of which consists of a portfolio of receivables (the
"Receivables") now existing or hereafter created under selected Dillard's and
Mercantile credit card accounts (the"Accounts") of Dillard Asset Funding Company
(the "Transferor"), a business trust organized and existing under the laws of
the State of Delaware, all monies due or to become due in payment of the
Receivables (including all Finance Charge Receivables), all proceeds of such
Receivables and Insurance Proceeds relating to the Receivables, the other assets
and interests constituting the Trust and the proceeds thereof pursuant to the
Amended and Restated Pooling and Servicing Agreement dated as of June 28, 2000,
as supplemented by any Supplement relating to a Series of Investor Certificates
(the "Pooling and Servicing Agreement"), by and between Dillard Asset Funding
Company, as Transferor, Dillard National Bank, as Servicer, and The Chase
Manhattan Bank, as Trustee (the "Trustee"), a summary of certain of the
pertinent provisions of which is set forth herein.

                                       A-1

<PAGE>

                 To the extent not defined herein, the capitalized terms used
herein have the meanings assigned to them in the Pooling and Servicing
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Pooling and Servicing Agreement, to which
Pooling and Servicing Agreement, as amended from time to time, the Holder by
virtue of the acceptance hereof assents and by which the Holder is bound.

                 This Certificate has not been registered or qualified under the
Securities Act of 1933, as amended, or any state securities law. No sale,
transfer or other disposition of this Certificate shall be permitted other than
in accordance with the provisions of Section 6.3, 6.9 or 7.2 of the Pooling and
Servicing Agreement.

                 The Receivables consist of Principal Receivables which arise
generally from the purchase of goods and services and of Finance Charge
Receivables which arise generally from Periodic Finance Charges and other fees
and charges, as more fully specified in the Pooling and Servicing Agreement.

                 This Certificate is the Transferor Certificate (the
"Certificate"), which represents an Undivided Interest in the Trust, including
the right to receive the Collections and other amounts at the times and in the
amounts specified in the Pooling and Servicing Agreement to be paid to the
Holder of the Transferor Certificate. The aggregate interest represented by this
Certificate in the Principal Receivables in the Trust shall not at any time
exceed the Transferor Interest at such time. In addition to this Certificate,
Series of Investor Certificates will be issued to investors pursuant to the
Pooling and Servicing Agreement, each of which will represent an Undivided
Interest in the Trust. This Certificate shall not represent any interest in the
Investor Accounts, any Series Accounts or any Credit Enhancement, except to the
extent provided in the Pooling and Servicing Agreement. The Transferor Interest
on any date of determination will be an amount equal to the aggregate amount of
Principal Receivables and the principal amounts on deposit in the Excess Funding
Account, any Principal Funding Account and any other Series Account (if so
provided in the applicable Supplement) at the end of the day immediately prior
to such date of determination minus the Aggregate Investor Interest at the end
of such day, minus the aggregate Enhancement Invested Amounts (if such amounts
are not included in the Investor Interest in the applicable Supplement), if any,
for each Series outstanding at the end of such day.

                 The Servicer shall deposit all Collections in the Collection
Account as promptly as possible after the Date of Processing of such
Collections, but in no event later than the second Business Day following such
Date of Processing (except as provided below and except as provided in any
Supplement to the Pooling and Servicing Agreement). Unless otherwise stated in
any Supplement, throughout the existence of the Trust, the Servicer shall
allocate to the Holder of the Certificate an amount equal to the product of (A)
the Transferor Percentage and (B) the aggregate amount of such Collections
allocated to Principal Receivables and Finance Charge Receivables, respectively,
in respect of each Monthly Period. Notwithstanding the first sentence of this
paragraph, the Servicer need not deposit this amount or any other amounts

                                       A-2

<PAGE>

so allocated to the Certificate pursuant to the Pooling and Servicing Agreement
into the Collection Account and shall pay, or be deemed to pay, such amounts as
collected to the Holder of the Certificate.

                 Dillard National Bank, as Servicer, is entitled to receive as
servicing compensation a monthly servicing fee. The portion of the servicing fee
which will be allocable to the Holder of the Certificate pursuant to the Pooling
and Servicing Agreement will be payable by the Holder of the Certificate and
neither the Trust nor the Trustee or the Investor Certificateholders will have
any obligations to pay such portion of the servicing fee.

                 This Certificate does not represent an obligation of, or any
interest in, the Transferor or the Servicer, and neither the Certificates nor
the Accounts or Receivables are insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency. This Certificate is
limited in right of payment to certain Collections respecting the Receivables,
all as more specifically set forth hereinabove and in the Pooling and Servicing
Agreement.

                 Upon the termination of the Trust pursuant to Section 12.1 of
the Pooling and Servicing Agreement, the Trustee shall assign and convey to the
Holder of the Certificate (without recourse, representation or warranty) all
right, title and interest of the Trust in the Receivables, whether then existing
or thereafter created, all monies due or to become due with respect thereto
(including all accrued interest theretofore posted as Finance Charge
Receivables) and all proceeds thereof and Insurance Proceeds relating thereto
and Interchange allocable to the Trust pursuant to any Supplement, except for
amounts held by the Trustee pursuant to subsection 12.3(b) of the Pooling and
Servicing Agreement. The Trustee shall execute and deliver such instruments of
transfer and assignment, in each case without recourse, as shall be reasonably
requested by the Holder of the Certificate to vest in such Holder all right,
title and interest which the Trustee had in the Receivables.

                 Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Pooling and Servicing Agreement,
or be valid for any purpose.

                 IN WITNESS WHEREOF, Dillard Asset Funding Company has caused
this Certificate to be duly executed under its official seal.

                                          DILLARD ASSET FUNDING COMPANY

                                          By:
                                             ------------------------------
                                              Authorized Officer

Date:

                                       A-3
<PAGE>

                     Trustee's Certificate of Authentication
                     ---------------------------------------

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                 This is the Transferor Certificate referred to in the
within-mentioned Pooling and Servicing Agreement.

                                          ---------------------------,
                                          as Trustee

                                          By:
                                             ------------------------------
                                             Authorized Officer

                                       A-5

<PAGE>

                                    EXHIBIT B
                                    ---------

                              FORM OF ASSIGNMENT OF
                       RECEIVABLES IN ADDITIONAL ACCOUNTS
                    ----------------------------------

                 ASSIGNMENT No. _____ OF RECEIVABLES IN ADDITIONAL ACCOUNTS,
dated as ___________ __, by and between Dillard Asset Funding Company, a
business trust organized and existing under the laws of the State of Delaware
("Transferor"), to The Chase Manhattan Bank, a banking corporation organized and
existing under the laws of the State of New York (the "Trustee") pursuant to the
Pooling and Servicing Agreement referred to below.

                              W I T N E S S E T H :
                               - - - - - - - - - -

                 WHEREAS, the Transferor and the Trustee are parties to the
Amended and Restated Pooling and Servicing Agreement, dated as of June 28, 2000
(hereinafter as such agreement may have been, or may from time to time be,
amended, supplemented or otherwise modified, the "Pooling and Servicing
Agreement");

                 WHEREAS, pursuant to the Pooling and Servicing Agreement, the
Transferor wishes to designate Additional Accounts of the Transferor to be
included as Accounts and to convey the Receivables of such Additional Accounts,
whether now existing or hereafter created, to the Trust as part of the corpus of
the Trust (as each such term is defined in the Pooling and Servicing Agreement);
and

                 WHEREAS, the Trustee is willing to accept such
designation and conveyance subject to the terms and conditions hereof;

                 NOW, THEREFORE, the Transferor and the Trustee hereby agree as
follows:

                 1.  Defined Terms.  All terms defined in the Pooling and
Servicing Agreement and used herein shall have such defined meanings when
used herein, unless otherwise defined herein.

                 "Addition Date" shall mean, with respect to the
Additional Accounts designated hereby, ___________, ____.

                 "Notice Date" shall mean, with respect to the Additional
Accounts designated hereby, __________, ____ (which shall be a date on or prior
to the fifth Business Day prior to the Addition Date with respect to additions
pursuant to subsection 2.6(a) of the Pooling and Servicing Agreement and the
tenth Business Day prior to the Addition Date with respect to additions pursuant
to subsection 2.6(b) of the Pooling and Servicing Agreement).

                 2.  Designation of Additional Accounts.  The Transferor
shall deliver to the Trustee not later than five Business Days after the

                                       B-1

<PAGE>

Addition Date, a computer file or microfiche list containing a true and complete
list of each Dillard's and Mercantile account which as of the Addition Date
shall be deemed to be an Additional Account, such accounts being identified by
account number and by the amount of Receivables in such accounts as of the close
of business on the Addition Date. Such list shall be delivered five Business
Days after the date of this Agreement and shall be marked as Schedule 1 to this
Assignment and, as of the Addition Date, shall be incorporated into and made a
part of this Assignment.

                 3.  Conveyance of Receivables.

                 (a) The Transferor does hereby transfer, assign, set- over and
otherwise convey to the Trust for the benefit of the Certificateholders, without
recourse on and after the Addition Date, all right, title and interest of the
transferor in and to the Receivables now existing and hereafter created in the
Additional Accounts designated hereby, all monies due or to become due with
respect thereto (including all Finance Charge Receivables) and all proceeds of
such Receivables, Insurance Proceeds relating to such Receivables and the
proceeds thereof.

                 (b) In connection with such transfer, the transferor agrees to
record and file, at its own expense, a financing statement with respect to the
Receivables now existing and hereafter created in the Additional Accounts
designated hereby (which may be a single financing statement with respect to all
such Receivables) for the transfer of accounts as defined in Section 9-106 of
the UCC as in effect in the State of New York meeting the requirements of
applicable state law in such manner and such jurisdictions as are necessary to
perfect the assignment of such Receivables to the Trust, and to deliver a
file-stamped copy of such financing statement or other evidence of such filing
(which may, for purposes of this Section 3, consist of telephone confirmation of
such filing) to the Trustee on or prior to the date of this Agreement.

                 (c) In connection with such transfer, the transferor further
agrees, at its own expense, on or prior to the date of this Assignment to
indicate in its computer files that Receivables created in connection with the
Additional Accounts designated hereby have been transferred to the Trust
pursuant to this Assignment for the benefit of the Certificateholders.

                 4. Acceptance by Trustee. The Trustee hereby acknowledges its
acceptance on behalf of the Trust for the benefit of the Certificateholders of
all right, title and interest previously held by the transferor in and to the
Receivables now existing and hereafter created, and declares that it shall
maintain such right, title and interest, upon the Trust herein set forth, for
the benefit of all Certificateholders.

                 5.  Representations and Warranties of the Transferor.
The Transferor hereby represents and warrants to the Trust as of the
Addition Date:

                                       B-2

<PAGE>

                 (a) Legal, Valid and Binding Obligation. This Assignment
         constitutes a legal, valid and binding obligation of the transferor
         enforceable against the transferor in accordance with its terms, except
         as such enforceability may be limited by applicable bankruptcy,
         insolvency, reorganization, moratorium or other similar laws now or
         hereafter in effect affecting the enforcement of creditors' rights in
         general and the rights of creditors of [banking associations] and
         except as such enforceability may be limited by general principles of
         equity (whether considered in a suit at law or in equity).

                 (b) Eligibility of Accounts and Receivables. Each Additional
         Account designated hereby is an Eligible Account and each Receivable in
         such Additional Account is an Eligible Receivable.

                 (c) Selection Procedures. No selection procedures believed by
         the Transferor to be materially adverse to the interests of the
         Investor Certificateholders were utilized in selecting the Additional
         Accounts designated hereby from the available Eligible Accounts in the
         Credit Card Portfolio.

                 (d) Insolvency. The Transferor is not insolvent and, after
         giving effect to the conveyance set forth in Section 3 of this
         Assignment, will not be insolvent.

                 (e) Security Interest. This Assignment constitutes either: (i)
         a valid transfer and assignment to the Trust of all right, title and
         interest of the Transferor in and to Receivables now existing and
         hereafter created in the Additional Accounts designated hereby, and all
         proceeds (as defined in the UCC as in effect in the State of New York)
         of such Receivables and Insurance Proceeds relating thereto, and such
         Receivables and any proceeds thereof and Insurance Proceeds relating
         thereto will be held by the Trust free and clear of any Lien of any
         Person claiming through or under the Transferor or any of its
         Affiliates except for (x) Liens permitted under subsection 2.5(b) of
         the Pooling and Servicing Agreement, (y) the interest of the holder of
         the Transferor Certificate and (z) the Transferor's right to receive
         interest accruing on, and investment earnings in respect of, the
         Finance Charge Account and the Principal Account as provided in the
         Pooling and Servicing Agreement; or (ii) a grant of a security interest
         (as defined in the UCC as in effect in the State of New York) in such
         property to the Trust, which is enforceable with respect to existing
         Receivables of the Additional Accounts, the proceeds (as defined in the
         UCC as in effect in the State of New York) thereof and Insurance
         Proceeds relating thereto, upon the conveyance of such Receivables to
         the Trust, and which will be enforceable with respect to the
         Receivables thereafter created in respect of Additional Accounts
         designated hereby, the proceeds (as defined in the UCC as in effect in
         the State of New York) thereof and Insurance Proceeds relating thereto,
         upon such

                                       B-3

<PAGE>

         creation; and (iii) if this Assignment constitutes the grant of a
         security interest to the Trust in such property, upon the filing of a
         financing statement described in Section 3 of this Assignment with
         respect to the Additional Accounts designated hereby and in the case of
         the Receivables of such Additional Accounts thereafter created and the
         proceeds (as defined in the UCC as in effect in the State of New York)
         thereof, and Insurance Proceeds relating to such Receivables, upon such
         creation, the Trust shall have a first priority perfected security
         interest in such property (subject to Section 9-306 of the UCC as in
         effect in the State of New York), except for Liens permitted under
         subsection 2.5(b) of the Pooling and Servicing Agreement.

                 6.  Conditions Precedent.  The acceptance by the Trustee
set forth in Section 4 and the amendment of the Pooling and Servicing
Agreement set forth in Section 7 are subject to the satisfaction, on or
prior to the Addition Date, of the following conditions precedent:

                 (a) Officer's Certificate. The Transferor shall have delivered
         to the Trustee a certificate of a Vice President or more senior officer
         substantially in the form of Schedule 2 hereto, certifying that (i) all
         requirements set forth in Section 2.6 of the Pooling and Servicing
         Agreement for designating Additional Accounts and conveying the
         Principal Receivables of such Account, whether now existing or
         hereafter created, have been satisfied and (ii) each of the
         representations and warranties made by the Transferor in Section 5 is
         true and correct as of the Addition Date. The Trustee may conclusively
         rely on such Officer's Certificate, shall have no duty to make
         inquiries with regard to the matters set forth therein, and shall incur
         no liability in so relying.

                 (b) Opinion of Counsel. The Transferor shall have delivered to
         the Trustee an Opinion of Counsel with respect to the Additional
         Accounts designated hereby substantially in the form of Exhibit E to
         the Pooling and Servicing Agreement.

                 (c) Additional Information. The Transferor shall have delivered
         to the Trustee such information as was reasonably requested by the
         Trustee to satisfy itself as to the accuracy of the representation and
         warranty set forth in subsection 5(d) to this Agreement.

                 7. Amendment of the Pooling and Servicing Agreement. The
Pooling and Servicing Agreement is hereby amended to provide that all references
therein to the "Pooling and Servicing Agreement," to "this Agreement" and
"herein" shall be deemed from and after the Addition Date to be a dual reference
to the Pooling and Servicing Agreement as supplemented by this Assignment.
Except as expressly amended hereby, all of the representations, warranties,
terms, covenants and conditions to the Pooling and Servicing Agreement shall
remain unamended and shall continue to be, and shall remain, in full force and
effect in accordance

                                       B-4

<PAGE>

with its terms and except as expressly provided herein shall not constitute or
be deemed to constitute a waiver of compliance with or a consent to
noncompliance with any term or provisions of the Pooling and Servicing
Agreement.

                 8.  Counterparts.  This Assignment may be executed in
two or more counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of which
together shall constitute one and the same instrument.

                 9.  GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK.

                                       B-5

<PAGE>

                 IN WITNESS WHEREOF, the undersigned have caused this Assignment
of Receivables in Additional Accounts to be duly executed and delivered by their
respective duly authorized officers on the day and year first above written.

                                       DILLARD ASSET FUNDING COMPANY

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

                                       THE CHASE MANHATTAN BANK,
                                         as Trustee

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

Title:

                                       B-6

<PAGE>

                                                            Schedule 1
                                                            to Assignment of
                                                            Receivables in
                                                            Additional Accounts
                                                            -------------------

                               ADDITIONAL ACCOUNTS
                               -------------------

                                       B-7

<PAGE>

                                                            Schedule 2
                                                            to Assignment of
                                                            Receivables in
                                                            Additional Accounts
                                                            -------------------

                          Dillard Asset Funding Company
                       Dillard Credit Card Master Trust I
                              Officer's Certificate

                 __________________________, a duly authorized officer of
Dillard Asset Funding Company, a business trust organized and existing under the
laws of the State of Delaware, (the "Transferor"), hereby certifies and
acknowledges on behalf of the Transferor that to the best of his knowledge the
following statements are true on ____________, ____, (the "Addition Date"), and
acknowledges on behalf of the Transferor that this Officer's Certificate will be
relied upon by The Chase Manhattan Bank, as Trustee (the "Trustee") of the
Dillard Credit Card Master Trust I in connection with the Trustee entering into
Assignment No. ______ of Receivables in Additional Accounts, dated as of the
Addition Date (the "Assignment"), by and between the Transferor and the Trustee,
in connection with the Amended and Restated Pooling and Servicing Agreement,
dated as of June 28, 2000, as heretofore supplemented and amended (the "Pooling
and Servicing Agreement") pursuant to which Dillard Asset Funding Company, as
Transferor, Dillard National Bank, as Servicer and the Trustee are parties. The
undersigned hereby certifies and acknowledges on behalf of the Transferor that:

                 (a) on or prior to the Addition Date, The Transferor has
delivered to the Trustee the Assignment (including an acceptance by the Trustee
on behalf of the Trust for the benefit of the Investor Certificateholders) and
The Transferor has indicated in its computer files that the Receivables created
in connection with the Additional Accounts have been transferred to the Trust
and within five Business Days after the Addition Date The Transferor shall
deliver to the Trustee a computer file or microfiche list containing a true and
complete list of all Additional Accounts identified by account number and the
aggregate amount of the Receivables in such Additional Accounts as of the
Addition Date, which computer file or microfiche list shall be as of the date of
such Assignment, incorporated into and made a part of such Assignment and the
Pooling and Servicing Agreement.

                 (b) Legal, Valid and Binding Obligation. The Assignment
constitutes a legal, valid and binding obligation of The Transferor, enforceable
against The Transferor in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws

                                       B-8

<PAGE>

now or hereafter in effect affecting the enforcement of creditors' rights in
general and the rights of creditors of (banking associations) and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).

                 (c) Eligibility Of Accounts.  Each Additional Account
designated pursuant to the Assignment is an Eligible Account and each
Receivable in such Additional Account is an Eligible Receivable.

                 (d) Selection Procedures. No selection procedures believed by
the Transferor to be materially adverse to the interests of the Investor
Certificateholders were utilized in selecting the Additional Accounts designated
hereby from the available Eligible Accounts in the Credit Card Portfolio.

                 (e) Insolvency. The Transferor is not insolvent and, after
giving effect to the conveyance set forth in Section 3 of the Assignment, will
not be insolvent.

                 (f) Security Interest. The Assignment constitutes either: (i) a
valid transfer and assignment to the Trust of all right, title and interest of
The Transferor in and to Receivables now existing and hereafter created in the
Additional Accounts designated pursuant to the Assignment, and all proceeds (as
defined in the UCC as in effect in the State of New York) of such Receivables
and Insurance Proceeds relating thereto, and such Receivables and any proceeds
thereof and Insurance Proceeds relating thereto will be held by the Trust free
and clear of any Lien of any Person claiming through or under the Transferor or
any of its Affiliates except for (x) Liens permitted under subsection 2.5(b) of
the Pooling and Servicing Agreement, (y) the interest of The Transferor as
holder of the Transferor Certificate and (z) the Transferor's right to receive
interest accruing on, and investment earnings in respect of, the Finance Charge
Account and the Principal Account as provided in the Pooling and Servicing
Agreement and any Supplement; or (ii) a grant of a security interest (as defined
in the UCC as in effect in the State of New York) in such property to the Trust,
which is enforceable with respect to the existing Receivables of the Additional
Accounts designated pursuant to the Assignment, the proceeds (as defined in the
UCC as in effect in the State of New York) thereof and Insurance Proceeds
relating thereto upon the conveyance of such Receivables to the Trust, and which
will be enforceable with respect to the Receivables thereafter created in
respect of Additional Accounts designated pursuant to the Assignment, the
proceeds (as defined in the UCC as in effect in the State of New York) thereof
and Insurance Proceeds relating thereto, upon such creation; and (iii) if the
Assignment constitutes the grant of a security interest to the Trust in such
property, upon the filing of a financing statement described in Section 3 of the
Assignment with respect to the Additional Accounts designated pursuant to the
Assignment and in the case of the Receivables of such Additional Accounts
thereafter created and the proceeds (as defined in the UCC as in effect in the
State of New York) thereof, and Insurance Proceeds relating to such Receivables,
upon such creation, the Trust shall have a first priority perfected security
interest in such property

                                       B-9

<PAGE>

(subject to Section 9-306 of the UCC as in effect in the State of New York),
except for Liens permitted under subsection 2.5(b) of the Pooling and Servicing
Agreement.

                 (g) Requirements of Pooling and Servicing Agreement. All
requirements set forth in Section 2.6 of the Pooling and Servicing Agreement for
designating Additional Accounts and conveying the Principal Receivables of such
Accounts, whether now existing or hereafter created, have been satisfied.

                 Initially capitalized terms used herein and not otherwise
defined are used as defined in the Pooling and Servicing Agreement.

                 IN WITNESS WHEREOF, I have hereunto set my hand this
_____ day of___________, ____.

                                       DILLARD ASSET FUNDING COMPANY

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

                                      B-10

<PAGE>

                                    EXHIBIT C
                                    ---------

                     FORM OF MONTHLY SERVICER'S CERTIFICATE
                     --------------------------------------

                              Dillard National Bank
--------------------------------------------------------------------------------
                       DILLARD CREDIT CARD MASTER TRUST I
--------------------------------------------------------------------------------

                 1. Capitalized terms used in this Certificate have their
respective meanings set forth in the Amended and Restated Pooling and Servicing
Agreement; provided, that the "preceding Monthly Period" shall mean the Monthly
Period immediately preceding the calendar month in which this Certificate is
delivered. This Certificate is delivered pursuant to subsection 3.4(b) of the
Amended and Restated Pooling and Servicing Agreement. References herein to
certain sections and subsections are references to the respective sections and
subsections of the Amended and Restated Pooling and Servicing Agreement.

                 2.  DNB is Servicer under the Amended and Restated
Pooling and Servicing Agreement.

                 3.  The undersigned is a Servicing Officer.

                 4.  The date of this Certificate is a Determination Date
under the Amended and Restated Pooling and Servicing.

                 5.  The aggregate amount of Collections
processed during the preceding Monthly Period was equal to
excluding Annual Membership Fees and Interchange). . . . . . . . .  $---------

                 6.  The Aggregate Investor Percentage of
Receivables processed by the Servicer during the preceding
Monthly Period was equal to . . . . . . . . .. . . . . . . . . . .  $---------

                 7.  The Aggregate Investor Percentage of
Collections of Finance Charge Receivables processed by the
Servicer during the preceding Monthly Period was equal to
(excluding Annual Membership Fees and Interchange) . . . . . . . .  $---------

                 8.  The aggregate amount of Receivables
processed by the Servicer as of the end of the last day
of the preceding Monthly Period . . . . . . . . . . . . . . . . . . $---------

                 9.  Of the balance on deposit in the
Finance Charge Account, the amount attributable to the
Aggregate Investor Percentage of Collections processed
by the Servicer during the preceding Monthly Period . . . . . . . . $---------

                 10.  Of the balance on deposit in the
Principal Account, the amount attributable to the Aggregate
Investor Percentage of Collections processed by the Servicer
during the preceding Monthly Period . . . . . . . . . . . . . . . . $---------

                                       C-1

<PAGE>

                 11.  The aggregate amount, if any, of
withdrawals, drawings or payments under any Credit Enhancement,
if any, required to be made with respect to any Series outstanding
for the preceding Monthly Period . . . . . . . . . . . . . . . . . . $---------

                 12.  The Aggregate Investor Percentage of
Collections of Principal Receivables processed by the Servicer
during the current month is equal to . . . . . . . . . . . . . . . . $---------

                 13.  The amount equal to the Aggregate
Investor Percentage of Annual Membership Fees deposited to
the Finance Charge Account or any Series Account on or before
the Transfer Date during the current month is equal to . . . . . . . $---------

                 14.  The aggregate amount of Interchange
to be deposited in the Finance Charge Account on the Transfer
Date of the current month is equal to  . . . . . . . . . . . . . . . $---------

                 15.  The aggregate amount of all sums
payable to the Investor Certificateholder of each Series on
the succeeding Distribution Date with respect to
Certificate Principal  . . . . . . . . . . . . . . . . . . . . . . . $---------

                 16.  The aggregate amount of all sums
payable to the Investor Certificateholder of each Series on
the succeeding Distribution Date with respect to
Certificate Interest . . . . . . . . . . . . . . . . . . . . . . . . $---------

                 17.  To the knowledge of the undersigned, there are no
Liens on any Receivables in the Trust except as described below:

                 [If applicable, insert "None."]

                                       C-2

<PAGE>

                 IN WITNESS WHEREOF, the undersigned has duly executed
and delivered this certificate this ____ day of __________, ____.

                                       DILLARD NATIONAL BANK,
                                         as Servicer

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

                                       C-3

<PAGE>

                                                     Schedule to Monthly
                                                     Servicer's Certificate<F1>

                              Dillard National Bank
-------------------------------------------------------------------------------
                       DILLARD CREDIT CARD MASTER TRUST I
-------------------------------------------------------------------------------

---------------------
1  A separate schedule is to be attached for each series, with appropriate
   changes and additions to reflect the specifics of the related Series
   Supplement.

                                       C-4

<PAGE>

                                    EXHIBIT D
                                    ---------

                      FORM OF ANNUAL SERVICER'S CERTIFICATE
                      -------------------------------------

                              Dillard National Bank
-------------------------------------------------------------------------------
                       DILLARD CREDIT CARD MASTER TRUST I
-------------------------------------------------------------------------------

                 The undersigned, a duly authorized representative of DILLARD
NATIONAL BANK, a national banking association organized and existing under the
laws of the United States ("DNB"), as Servicer pursuant to the Amended and
Restated Pooling and Servicing Agreement dated as of June 28, 2000 (the "Pooling
and Servicing Agreement") by and among Dillard Asset Funding Company, DNB and
The Chase Manhattan Bank, as trustee (the "Trustee") does hereby certify that:

                 1.  DNB is Servicer under the Pooling and Servicing
         Agreement.

                 2. The undersigned is duly authorized pursuant to the Pooling
         and Servicing Agreement to execute and deliver this Certificate to the
         Trustee.

                 3.  This Certificate is delivered pursuant to Section
         3.5 of the Pooling and Servicing Agreement.

                 4. A review of the activities of the Servicer during [the
         period from the Closing date until December 31, 2000] or [the
         twelve-month period ended December 31, ___] was conducted under the
         supervision of the undersigned.

                 5. Based on such review, the Servicer has, to the best of the
         knowledge of the undersigned, fully performed all its obligations under
         the Pooling and Servicing Agreement throughout such period and no
         default in the performance of such obligations has occurred or is
         continuing except as set forth in paragraph 6 below.

                 6. The following is a description of each default in the
         performance of the Servicer's obligations under the provisions of the
         Pooling and Servicing Agreement, including any Supplement, known to the
         undersigned to have been made during such period which sets forth in
         detail (i) the nature of each such default, (ii) the action taken by
         the Servicer, if any, to remedy each such default and (iii) the current
         status of each such default:

                 [If applicable, insert "None."]

                                       D-1

<PAGE>

                 IN WITNESS WHEREOF, the undersigned has duly executed
this certificate this ____ day of ____________, ____.

                                       By:
                                          ------------------------------
                                          Name:
                                          Title: Vice President

                                       D-2

<PAGE>

                                    EXHIBIT E
                                    ---------
            FORM OF OPINION OF COUNSEL REGARDING ADDITIONAL ACCOUNTS
            --------------------------------------------------------

 PROVISIONS TO BE INCLUDED IN OPINION OF COUNSEL TO BE DELIVERED PURSUANT
     TO SUBSECTION 2.6(c)(vi) OF THE POOLING AND SERVICING AGREEMENT

                 The opinions set forth below may be subject to certain
qualifications, assumptions, limitations and exceptions taken or made in the
opinion of Transferor's counsel with respect to similar matters delivered on the
Closing Date.

                 The Assignment has been duly authorized, executed and delivered
by the Transferor and constitutes the legal, valid and binding agreement of the
Transferor, enforceable against the Transferor in accordance with its terms
subject to the effects of bankruptcy, insolvency, liquidation, receivership,
conservatorship, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.

                 If the transfer of the Receivables in the Additional Accounts
designated in the Assignment to the Trust pursuant to the Pooling and Servicing
Agreement constitutes a true sale of such Receivables to the Trust:

                 With respect to such Receivables in existence on the date
         hereof, such sale transfers all of the right, title and interest of the
         Transferor in and to such Receivables and the proceeds thereof to the
         Trust, free and clear of any liens now existing (other than existing
         liens as to which a filing under the Code is not required to perfect
         such liens) or hereafter created but subject to the rights of the
         Transferor as holder of the Transferor Certificate. With respect to
         such Receivables which come into existence after the date hereof, upon
         the creation of such Receivables, such sale will transfer all of the
         right, title and interest of the Transferor in and to such Receivables
         and the proceeds thereof to the Trust free and clear of any liens other
         than liens which are in existence on the date of such transfer
         ("Intervening Liens") but subject to the rights of the Transferor as
         holder of the Transferor Certificate. Any such Intervening Liens would
         be subject to the prior perfected security interest in favor of the
         Trustee as set forth in paragraph 3 below. In either case, no further
         action will thereafter be required under New York or federal law to
         protect the Trust's ownership interest in such Receivables against
         creditors of, or subsequent purchasers from, the Transferor. We note,
         however, that unless the obligor in respect of a Receivable has
         received notice of such assignment, bona fide payments made by such
         obligor to a second assignee of such

                                       E-1

<PAGE>

         Receivable will discharge such obligor's obligations to the extent of
         such payment, and such payment will be recoverable only from such
         second assignee.

                 If the transfer of the Receivables to the Trust pursuant to the
Pooling and Servicing Agreement as supplemented by the Assignment does not
constitute a true sale of such Receivables to the Trust, then the Pooling and
Servicing Agreement creates a valid security interest in favor of the Trustee,
for the benefit of the Investor Certificateholders in the Transferor's right,
title and interest in and to such Receivables and the proceeds thereof. If the
transfer of such Receivables to the Trust constitutes a true sale of such
Receivables to the Trust but such sale is not effective as of such date to
convey Receivables not existing on such date, the Pooling and Servicing
Agreement as supplemented by the Assignment creates a valid security interest in
favor of the Trustee, for the benefit of the Investor Certificateholders, in the
Transferor's interest in such Receivables and the proceeds thereof to the extent
such interest is not so conveyed to the Trust. In either event, such security
interest constitutes a perfected security interest in such Receivables subject
to no prior or equal liens, enforceable as such against creditors of, and
purchasers from, the Transferor and the FDIC as conservator or receiver for the
Transferor, except:

                          (i) as enforceability may be subject to (A) the right
         of the FDIC, as receiver for the Transferor, to enforce the Pooling and
         Servicing Agreement, notwithstanding any provision thereof providing
         for termination, default, acceleration, or exercise of rights upon, or
         solely by reason of, insolvency or the appointment of a conservator or
         receiver, (B) the FDIC's authority, as receiver for the Transferor, to
         transfer any asset or liability of the Transferor to another depository
         institution, (C) the statutory prohibition on any attachment or
         execution being issued by any court upon assets in the possession of
         the FDIC as receiver for the Transferor, (D) the right of the FDIC to
         obtain a stay, for a period not to exceed 90 days, in any judicial
         action or proceeding to which the Transferor is a party and (E) the
         right of the FDIC, as receiver for the Transferor, to require a secured
         party to establish its right to payments by submitting to and
         completing the claims procedure established by the Financial
         Institutions Reform, Recovery and Enforcement Act of 1989;

                          (ii) as perfection may be limited (A) with respect to
         any such Receivables which are evidenced by instruments (as defined in
         Section 9-105(l)(i) of the Code) which are not in the possession of the
         Trustee; and (B) in the case of proceeds, by Section 9-306 of the Code;
         and

                          (iii) as priority may be subject to (A) any liens,
         claims or other interests that arise by operation of law and do not
         require any filing or similar action in order to take priority over a
         perfected security interest; (B) any claim or lien in favor of the
         United States, any state or any agency or

                                       E-2

<PAGE>

         instrumentality thereof (including, without limitation, liens arising
         under the federal, state or local tax laws or under the Employee
         Retirement Income Security Act of 1974, as amended); (C) the security
         interest of any Person claiming any portion of the collateral as
         proceeds (other than Receivables in which the Trustee has a prior lien)
         of such Person's security interest or (D) the security interest of any
         Person previously perfected without filing or the taking of possession
         pursuant to Section 9-304(4) of the UCC; (E) liens under Section 4-208
         of the Code (relating to the security interest of a collecting bank);
         (F) with respect to any Receivables represented by chattel paper (and
         proceeds thereof), the interest of a purchaser of such chattel paper
         under Section 9-308 of the Code; and (G) a claim by the FDIC or any
         other receiver or conservator of the Transferor for administrative
         expenses. Such perfection and priority of the security interest of the
         Trustee for the benefit of the Investor Certificateholders would not be
         affected by an increase or a decrease in the relative interests in the
         Receivables of the Transferor as holder of the Transferor Certificate
         and the Investor Certificateholders.

                 In addition, in connection with the opinions set forth in
paragraph 2 and this paragraph 3, no opinion is expressed herein with respect to
Receivables or the proceeds thereof other than the Receivables in the Additional
Accounts designated by the Assignment and the proceeds thereof. No opinion is
expressed herein with respect to the perfection, priority or enforceability of
the Trust's interest in proceeds of the Receivables except to the extent such
proceeds consist of either (1) identifiable cash proceeds held in the Collection
Account maintained by a Eligible Institution in the name of the Trust in
accordance with the terms of the Pooling and Servicing Agreement and the
Supplements or (2) Permitted Investments held by or on behalf of the Trustee in
accordance with the terms of the Pooling and Servicing Agreement and the
Supplements. We do not express any opinion herein: (i) as to the creation,
validity or enforceability of any interest of the Transferor in the Receivables
or the proceeds thereof, (ii) as to the Transferor's title to any of the
Receivables or the proceeds thereof, (iii) as to whether the transfer of the
Receivables constitutes a true sale or a grant of a security interest, (iv) as
to whether the purported sale of all Receivables now existing and hereafter
created is effective to convey as a true sale to the Trust, as of the purported
date of sale, Receivables which do not exist as of such date of sale, or as to
whether Receivables hereafter created in an Account are deemed to exist as of
the date hereof or (v) as to whether a court may temporarily restrain the
exercise of the Trust's rights to the Receivables and the proceeds thereof.
Further, we point out that delays in the exercise of the rights and interests of
the Trust may occur with respect to the Receivables and their proceeds in the
possession of a receiver or conservator, regardless of whether the transaction
constitutes a true sale or a secured transaction, by actions unilaterally taken
by such receiver or conservator.

                                       E-3

<PAGE>

                 With respect to the opinions expressed in paragraphs 2 and 3,
we note that pursuant to Section 2.1 of the Pooling and Servicing Agreement, the
Transferor has filed the Financing Statements with the Office of the Secretary
of State of the State of New York and the City Register in the County of New
York. In expressing the opinions set forth herein, we have assumed that in the
event that a change in the Transferor's name, identity or corporate structure
makes the Financing Statements seriously misleading within the meaning of
Section 9-402(7) of the New York Uniform Commercial Code (the "Code"), or the
Transferor moves the location of its executive office outside the State of
__________, the Transferor will file such financing statements or amendments as
may be necessary to continue the perfection of the Trust's interest in the
Receivables and the proceeds thereof as required by Section 13.2 of the Pooling
and Servicing Agreement within the time specified in Section 9-402(7) of the
Code or Section 9-103(3)(e) of the Code, as the case may be.

                 In expressing the opinions set forth herein, we have relied,
without independent investigation, upon reports received from the Office of the
Secretary of State of the State of __________ and the City Register in the
County of __________ with respect to financing statements and related filings
and with respect to certain notices of federal government liens, __________
State government tax liens, certain attachment liens and judgment liens with
respect to the Transferor on file with such offices. The effective dates of the
latest of such reports are set forth in Schedule A attached hereto (the "UCC
Report Schedule"). [In addition, with respect to the items identified on
Schedule B attached hereto, we have relied without independent investigation, on
a certificate of an officer of the Transferor attached hereto to the effect that
such items do not represent a lien or security interest on the Receivables.] [We
have assumed that no such filings or notices were made with respect to the
Transferor between the effective time of such reports and the time of the filing
of the Financing Statements. We note that the Transferor has delivered to us a
certificate to the effect of the preceding sentence.] In the Pooling and
Servicing Agreement, the Transferor represents and warrants that it has good and
marketable title to the Receivables free and clear of all Liens, and we note
that the Transferor has delivered to us a certificate to such effect.

                 In addition, we call to your attention the fact that if the
FDIC were appointed receiver for the Transferor, the FDIC could repudiate any
contract it determined to be burdensome and the repudiation of which it
determined would promote the orderly administration of the Transferor's affairs.
12 U.S.C. (S) 1821(e)(1), (2). However, Section 1821 provides that the FDIC's
power as receiver to repudiate contracts is not to be construed to permit the
avoidance of a properly perfected security interest except where such an
interest is taken in contemplation of insolvency or with the intent to hinder,
delay, or defraud the institution or the creditors of the institution. 12 U.S.C.
(S) 1821(e)(11). We have relied, without independent verification, upon on a
certificate of an officer of the Transferor (attached hereto as Annex I), to the
effect that (i) the Transferor was not as of the date of transfer

                                       E-4

<PAGE>

of the Receivables, insolvent or on the verge of insolvency and was not rendered
insolvent or on the verge of insolvency by reason thereof, (ii) the transfer was
not made in contemplation of insolvency and (iii) the transfer was made in good
faith and without the intent to hinder, delay or defraud any of the Transferor's
creditors. In reliance upon the certificate of the Transferor referred to above,
we are of the opinion that the transfer of, or the grant of a security interest
in, the Receivables to the Trust would not be subject to repudiation by the
FDIC.

                                       E-5

<PAGE>

                                    EXHIBIT F
                                    ---------

                        FORM OF ANNUAL OPINION OF COUNSEL
                        ---------------------------------

                 The opinions set forth below, which are to be delivered
pursuant to subsection 13.2(d)(ii) of the Pooling and Servicing Agreement, may
be subject to certain qualifications, assumptions, limitations and exceptions
taken or made in the opinion of counsel to the Transferor with respect to
similar matters delivered on the Closing Date.

                 1. If the transfer of the Receivables to the Trust pursuant to
the Pooling and Servicing Agreement constitutes a true sale of such Receivables
to the Trust:

                 (a) With respect to such Receivables in existence on the date
         hereof, such sale transfers all of the right, title and interest of the
         Transferor in and to such Receivables and the proceeds thereof to the
         Trust, free and clear of any liens now existing (other than existing
         liens as to which a filing under the Code is not required to perfect
         such liens) or hereafter created but subject to the rights of the
         Transferor as holder of the Transferor Certificate.

                 (b) With respect to such Receivables which come into existence
         after the date hereof, upon the creation of such Receivables, such sale
         will transfer all of the right, title and interest of the Transferor in
         and to such Receivables and the proceeds thereof to the Trust free and
         clear of any liens other than liens which are in existence on the date
         of such transfer ("Intervening Liens") but subject to the rights of the
         Transferor as holder of the Transferor Certificate. Any such
         Intervening Liens would be subject to the prior perfected security
         interest in favor of the Trustee as set forth in paragraph 3 below.

In either case, no further action will thereafter be required under New York or
federal law to protect the Trust's ownership interest in such Receivables
against creditors of, or subsequent purchasers from, the Transferor. We note,
however, that unless the obligor in respect of a Receivable has received notice
of such assignment, bona fide payments made by such obligor to a second assignee
of such Receivable will discharge such obligor's obligations to the extent of
such payment, and such payment will be recoverable only from such second
assignee.

                 2. If the transfer of the Receivables to the Trust pursuant to
the Pooling and Servicing Agreement does not constitute a true sale of such
Receivables to the Trust, then the Pooling and Servicing Agreement creates a
valid security interest in favor of the Trustee, for the benefit of the Investor
Certificateholders in the Transferor's right, title and interest in and to such
Receivables and the

                                       F-1

<PAGE>

proceeds thereof. If the transfer of such Receivables to the Trust constitutes a
true sale of such Receivables to the Trust but such sale is not effective as of
such date to convey Receivables not existing on such date, the Pooling and
Servicing Agreement creates a valid security interest in favor of the Trustee,
for the benefit of the Investor Certificateholders, in the Transferor's interest
in such Receivables and the proceeds thereof to the extent such interest is not
so conveyed to the Trust. In either event, such security interest constitutes a
perfected security interest in such Receivables subject to no prior or equal
liens, enforceable as such against creditors of, and purchasers from, the
Transferor and the FDIC as conservator or receiver for the Transferor, except:

                          (i) as enforceability may be subject to (A) the right
         of the FDIC, as receiver for the Transferor, to enforce the Pooling and
         Servicing Agreement, notwithstanding any provision thereof providing
         for termination, default, acceleration, or exercise of rights upon, or
         solely by reason of, insolvency or the appointment of a conservator or
         receiver, (B) the FDIC's authority, as receiver for the Transferor, to
         transfer any asset or liability of the Transferor to another depository
         institution, (C) the statutory prohibition on any attachment or
         execution being issued by any court upon assets in the possession of
         the FDIC as receiver for the Transferor, (D) the right of the FDIC to
         obtain a stay, for a period not to exceed 90 days, in any judicial
         action or proceeding to which the Transferor is a party and (E) the
         right of the FDIC, as receiver for the Transferor, to require a secured
         party to establish its right to payments by submitting to and
         completing the claims procedure established by the Financial
         Institutions Reform, Recovery and Enforcement Act of 1989;

                          (ii) as perfection may be limited (A) with respect to
         any such Receivables which are evidenced by instruments (as defined in
         Section 9105(l)(i) of the Code) which are not in the possession of the
         Trustee; and (B) in the case of proceeds, by Section 9-306 of the Code;
         and

                          (iii) as priority may be subject to (A) any liens,
         claims or other interests that arise by operation of law and do not
         require any filing or similar action in order to take priority over a
         perfected security interest; (B) any claim or lien in favor of the
         United States, any state or any agency or instrumentality thereof
         (including, without limitation, liens arising under the federal, state
         or local tax laws or under the Employee Retirement Income Security Act
         of 1974, as amended); (C) the security interest of any Person claiming
         any portion of the collateral as proceeds (other than Receivables in
         which the Trustee has a prior lien) of such Person's security interest
         or (D) the security interest of any Person previously perfected without
         filing or the taking of possession pursuant to Section 9-304(4) of the
         UCC; (E) liens under Section 4-208 of the Code (relating to the
         security interest of a collecting bank); (F)

                                       F-2

<PAGE>

         with respect to any Receivables represented by chattel paper (and
         proceeds thereof), the interest of a purchaser of such chattel paper
         under Section 9-308 of the Code; and (G) a claim by the FDIC or any
         other receiver or conservator of the Transferor for administrative
         expenses. Such perfection and priority of the security interest of the
         Trustee for the benefit of the Investor Certificateholders would not be
         affected by an increase or a decrease in the relative interests in the
         Receivables of the Transferor as holder of the Transferor Certificate
         and the Investor Certificateholders.

                 In addition, in connection with the opinions set forth in
paragraph 1 and this paragraph 2, no opinion is expressed herein with respect to
Receivables or the proceeds thereof other than the Receivables in the Additional
Accounts designated by the Assignment and the proceeds thereof. No opinion is
expressed herein with respect to the perfection, priority or enforceability of
the Trust's interest in proceeds of the Receivables except to the extent such
proceeds consist of either (1) identifiable cash proceeds held in the Collection
Account maintained by a Eligible Institution in the name of the Trust in
accordance with the terms of the Pooling and Servicing Agreement and the
Supplements or (2) Permitted Investments held by or on behalf of the Trustee in
accordance with the terms of the Pooling and Servicing Agreement and the
Supplements. We do not express any opinion herein: (i) as to the creation,
validity or enforceability of any interest of the Transferor in the Receivables
or the proceeds thereof, (ii) as to the Transferor's title to any of the
Receivables or the proceeds thereof, (iii) as to whether the transfer of the
Receivables constitutes a true sale or a grant of a security interest, (iv) as
to whether the purported sale of all Receivables now existing and hereafter
created is effective to convey as a true sale to the Trust, as of the purported
date of sale, Receivables which do not exist as of such date of sale, or as to
whether Receivables hereafter created in an Account are deemed to exist as of
the date hereof or (v) as to whether a court may temporarily restrain the
exercise of the Trust's rights to the Receivables and the proceeds thereof.
Further, we point out that delays in the exercise of the rights and interests of
the Trust may occur with respect to the Receivables and their proceeds in the
possession of a receiver or conservator, regardless of whether the transaction
constitutes a true sale or a secured transaction, by actions unilaterally taken
by such receiver or conservator.

                 With respect to the opinions expressed in paragraphs 1 and 2,
we note that pursuant to Section 2.1 of the Pooling and Servicing Agreement, the
Transferor has filed the Financing Statements with the Office of the Secretary
of State of the State of __________ and the City Register in the County of New
York. In expressing the opinions set forth herein, we have assumed that in the
event that a change in the Transferor's name, identity or corporate structure
makes the Financing Statements seriously misleading within the meaning of
Section 9-402(7) of the [New York Uniform Commercial Code] (the "Code"), or the
Transferor moves the location of its executive office outside the State of
__________, the Transferor will file such financing statements or

                                       F-3

<PAGE>

amendments as may be necessary to continue the perfection of the Trust's
interest in the Receivables and the proceeds thereof as required by Section 13.2
of the Pooling and Servicing Agreement within the time specified in Section
9-402(7) of the Code or Section 9-103(3)(e) of the Code, as the case may be.

                 In expressing the opinions set forth herein, we have relied,
without independent investigation, upon reports received from the Office of the
Secretary of State of the State of __________ and the City Register in the
County of __________ with respect to financing statements and related filings
and with respect to certain notices of federal government liens, __________
State government tax liens, certain attachment liens and judgment liens with
respect to the Transferor on file with such offices. The effective dates of the
latest of such reports are set forth in Schedule A attached hereto (the "UCC
Report Schedule"). [In addition, with respect to the items identified on
Schedule B attached hereto, we have relied without independent investigation, on
a certificate of an officer of the Transferor attached hereto to the effect that
such items do not represent a lien or security interest on the Receivables.] [We
have assumed that no such filings or notices were made with respect to the
Transferor between the effective time of such reports and the time of the filing
of the Financing Statements. We note that the Transferor has delivered to us a
certificate to the effect of the preceding sentence.] In the Pooling and
Servicing Agreement, the Transferor represents and warrants that it has good and
marketable title to the Receivables free and clear of all Liens, and we note
that the Transferor has delivered to us a certificate to such effect.

                 In addition, we call to your attention the fact that if the
FDIC were appointed receiver for the Transferor, the FDIC could repudiate any
contract it determined to be burdensome and the repudiation of which it
determined would promote the orderly administration of the Transferor's affairs.
12 U.S.C. (S) 1821(e)(1), (2). However, Section 1821 provides that the FDIC's
power as receiver to repudiate contracts is not to be construed to permit the
avoidance of a properly perfected security interest except where such an
interest is taken in contemplation of insolvency or with the intent to hinder,
delay, or defraud the institution or the creditors of the institution. 12 U.S.C.
(S) 1821(e)(11). We have relied, without independent verification, upon on a
certificate of an officer of the Transferor (attached hereto as Annex I), to the
effect that (i) the Transferor was not as of the date of transfer of the
Receivables, insolvent or on the verge of insolvency and was not rendered
insolvent or on the verge of insolvency by reason thereof, (ii) the transfer was
not made in contemplation of insolvency and (iii) the transfer was made in good
faith and without the intent to hinder, delay or defraud any of the Transferor's
creditors. In reliance upon the certificate of the Transferor referred to above,
we are of the opinion that the transfer of, or the grant of a security interest
in, the Receivables to the Trust would not be subject to repudiation by the
FDIC.

                                       F-4

<PAGE>

                                    EXHIBIT G
                                    ---------
                       FORM OF REASSIGNMENT OF RECEIVABLES
                     -----------------------------------

                 REASSIGNMENT NO. ____ OF RECEIVABLES, dated as of __________
___, ____, by and between Dillard Asset Funding Company, a business trust
organized and existing under the laws of the State of Delaware (the
"Transferor"), and The Chase Manhattan Bank, a banking corporation organized
under the laws of the State of New York (the "Trustee") pursuant to the Pooling
and Servicing Agreement referred to below.

                              W I T N E S S E T H :
                              - - - - - - - - - -

                 WHEREAS, the Transferor, Dillard National Bank, as Servicer and
the Trustee are parties to the Pooling and Servicing Agreement, dated as of June
28, 2000 (hereinafter as such agreement may have been, or may from time to time
be, amended, supplemented or otherwise modified, the "Pooling and Servicing
Agreement");

                 WHEREAS, pursuant to the Pooling and Servicing Agreement, the
Transferor wishes to remove all Receivables from certain designated Accounts of
the Transferor (the "Removed Accounts") and to cause the Trustee to reconvey the
Receivables of such Removed Accounts, whether now existing or hereafter created,
from the Trust to the Transferor (as each such term is defined in the Pooling
and Servicing Agreement); and

                 WHEREAS, the Trustee is willing to accept such designation and
to reconvey the Receivables in the Removed Accounts subject to the terms and
conditions hereof;

                 NOW, THEREFORE, the Bank and the Trustee hereby agree as
follows:

                 1.  Defined Terms.  All terms defined in the Pooling and
Servicing Agreement and used herein shall have such defined meanings when
used herein, unless otherwise defined herein.

                 "Removal Date" shall mean, with respect to the Removed
Accounts designated hereby, ___________, _____.

                 "Removal Notice Date" shall mean, with respect to the Removed
Accounts designated hereby, ___________, _____ (which shall be a date on or
prior to the fifth Business Day prior to the Removal Date).

                 2.  Designation of Removed Accounts.  The Transferor
shall deliver to the Trustee, not later than five Business Days after the
Removal Date, a computer file or microfiche list containing a true and
complete list of each Dillard's and Mercantile account which as of the

                                       G-1

<PAGE>

Removal Date shall be deemed to be a Removed Account, such accounts being
identified by account number and by the aggregate amount of Receivables in such
accounts as of the close of business on the Removal Date. Such list shall be
marked as Schedule 1 to this Reassignment and shall be incorporated into and
made a part of this Reassignment as of the Removal Date.

                 3.  Conveyance of Receivables.

                  (a) The Bank does hereby reconvey to the Bank, without
recourse on and after the Removal Date, all right, title and interest of the
Trust in and to the Receivables now existing and hereafter created in the
Removed Accounts designated hereby, all monies due or to become due with respect
thereto (including all Finance Charge Receivables), all proceeds (as defined in
Section 9-306 of the UCC as in effect in the State of New York) of such
Receivables, Insurance Proceeds relating to such Receivables and the proceeds
thereof.

                 (b) In connection with such transfer, the Trustee agrees to
execute and deliver to the Transferor on or prior to the date of this
Reassignment, a termination statement with respect to the Receivables now
existing and hereafter created in the Removed Accounts designated hereby (which
may be a single termination statement with respect to all such Receivables)
evidencing the release by the Trust of its Lien on the Receivables in the
Removed Accounts, and meeting the requirements of applicable state law, in such
manner and such jurisdictions as are necessary to remove such Lien.

                 4.  Representations and Warranties of the Bank.  The
Transferor hereby represents and warrants to the Trust as of the Removal
Date:

                 (a) Legal Valid and Binding Obligation. This Reassignment
         Constitutes a legal, valid and binding obligation of the Transferor
         enforceable against the Transferor in accordance with its terms, except
         as such enforceability may be limited by applicable bankruptcy,
         insolvency, reorganization, moratorium or other similar laws now or
         hereafter in effect affecting the enforcement of creditors' rights in
         general and the rights of creditors of banking associations and except
         as such enforceability may be limited by general principles of equity
         (whether considered in a suit at law or in equity).

                 (b)  Selection Procedures.  No selection procedures
         believed by the Transferor to be materially adverse to the
         interests of the Investor Certificateholders were utilized in
         selecting the Removed Accounts designated hereby.

                 5.  Conditions Precedent.  The amendment of the Pooling
and Servicing Agreement set forth in Section 6 hereof is subject to the
satisfaction, on or prior to the Removal Date, of the following condition
precedent:

                                       G-2

<PAGE>

                          The Transferor shall have delivered to the Trustee an
         Officer's Certificate certifying that (i) as of the Removal Date, all
         requirements set forth in Section 2.7 of the Pooling and Servicing
         Agreement for designating Removed Accounts and reconveying the
         receivables of such Removed Accounts, whether now existing or hereafter
         created, have been satisfied, and (ii) each of the representations and
         warranties made by the Transferor in Section 4 hereof is true and
         correct as of the Removal Date. The Trustee may conclusively rely on
         such Officer's Certificate, shall have no duty to make inquiries with
         regard to the matters set forth therein, and shall incur no liability
         in so relying.

                 6. Amendment of the Pooling and Servicing Agreement. The
Pooling and Servicing Agreement is hereby amended to provide that all references
therein to the "Pooling and Servicing Agreement," to "this Agreement" and
"herein" shall be deemed from and after the Removal Date to be a dual reference
to the Pooling and Servicing Agreement as supplemented by this Reassignment.
Except as expressly amended hereby, all of the representations, warranties,
terms, covenants and conditions to the Pooling and Servicing Agreement shall
remain unamended and shall continue to be, and shall remain, in full force and
effect in accordance with its terms and except as expressly provided herein
shall not constitute or be deemed to constitute a waiver of compliance with or a
consent to non-compliance with any term or provision of the Pooling and
Servicing Agreement.

                 7.  Counterparts.  This Reassignment may be executed in
two or more counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of which
together shall constitute one and the same instrument.

                 8.  GOVERNING LAW.  THIS REASSIGNMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.

                                       G-3

<PAGE>

                 IN WITNESS WHEREOF, the undersigned have caused this
Reassignment of Receivables to be duly executed and delivered by their
respective duly authorized officers on the day and year first above written.

                                      DILLARD ASSET FUNDING COMPANY

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

                                      THE CHASE MANHATTAN BANK

                                      --------------------------------,
                                      as Trustee

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

                                       G-4

<PAGE>

                                                                      Schedule I
                                                                 to Reassignment
                                                                  of Receivables
                                                                 ---------------

                                REMOVED ACCOUNTS
                                ----------------

                                       G-5

<PAGE>

                                    EXHIBIT H
                                    ---------
                       FORM OF RECONVEYANCE OF RECEIVABLES
                       -----------------------------------

                 RECONVEYANCE OF RECEIVABLES, dated as of ____________ ___,
____, by and between Dillard Asset Funding Company, a business trust organized
and existing under the laws of the State of Delaware (the "Transferor"), and The
Chase Manhattan Bank, a banking corporation organized and existing under the
laws of New York (the "Trustee") pursuant to the Pooling and Servicing Agreement
referred to below.

                              W I T N E S S E T H :
                              - - - - - - - - - -

                 WHEREAS, the Transferor, Dillard National Bank and the Trustee
are parties to the Amended and Restated Pooling and Servicing Agreement dated as
of June 28, 2000 (hereinafter as such agreement may have been, or may from time
to time be, amended, supplemented or otherwise modified, the "Pooling and
Servicing Agreement");

                 WHEREAS, pursuant to the Pooling and Servicing Agreement, the
Transferor wishes to cause the Trustee to reconvey all of the Receivables and
proceeds thereof, whether now existing or hereafter created, from the Trust to
the Transferor pursuant to the terms of Section 12.4 of the Pooling and
Servicing Agreement upon termination of the Trust pursuant to subsection 12.1(a)
of the Pooling and Servicing Agreement (as each such term is defined in the
Pooling and Servicing Agreement);

                 WHEREAS, the Trustee is willing to reconvey Receivables
subject to the terms and conditions hereof;

                 NOW, THEREFORE, the Transferor and the Trustee hereby agree as
follows:

                 1.  Defined Terms.  All terms defined in the Pooling and
Servicing Agreement and used herein shall have such defined meanings when
used herein, unless otherwise defined herein.

                 "Reconveyance Date" shall mean ______________, ____.

                                       H-1

<PAGE>

                 2. Return of Lists of Accounts. The Trustee shall deliver to
the Transferor, not later than three Business Days after the Reconveyance Date,
each and every computer file or microfiche list of Accounts delivered to the
Trustee pursuant to the terms of the Pooling and Servicing Agreement.

                 3. Conveyance of Receivables. (a) The Trustee does hereby
reconvey to the Transferor, without recourse, on and after the Reconveyance
Date, all right, title and interest of the Trust in and to each and every
Receivable now existing and hereafter created in the Accounts, all monies due or
to become due with respect thereto (including all Finance Charge Receivables),
all proceeds (as defined in Section 9- 306 of the UCC as in effect in the State
of [New York]) of such Receivables and Insurance Proceeds relating to such
Receivables and any Interchange, except for amounts, if any, held by the Trustee
pursuant to subsection 12.3(b) of the Pooling and Servicing Agreement.

                 (b) In connection with such transfer, the Trustee agrees to
execute and deliver to the Transferor on or prior to the date of this
Reconveyance, such UCC termination statements as the Transferor may reasonably
request, evidencing the release by the Trust of its lien on the Receivables.

                 4. Counterparts.  This Reconveyance may be executed in
two or more counterparts (and by different parties on separate counterparts),
each of which shall be an original, but all of which together shall constitute
one and the same instrument.

                 5. GOVERNING LAW.  THIS RECONVEYANCE SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.

                                       H-2

<PAGE>

                 IN WITNESS WHEREOF, the undersigned have caused this
Reconveyance of Receivables to be duly executed and delivered by their
respective duly authorized officers on the day and year first above written.

                                          DILLARD ASSET FUNDING COMPANY

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

                                          THE CHASE MANHATTAN BANK

                                          ------------------------------,
                                           as Trustee

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

                                       H-3

<PAGE>

                                                                      SCHEDULE I

----------

                                LIST OF ACCOUNTS
                                ----------------

                            Delivered to Trustee only

                              [Deemed Incorporated]

                                       H-4

<PAGE>

                                TABLE OF CONTENTS

                                                                            Page

ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
         Section 1.1  Definitions . . . . . . . . . . . . . . . . . . . 1
         Section 1.2  Other Definitional Provisions . . . . . . . . .  20

ARTICLE II CONVEYANCE OF RECEIVABLES;ISSUANCE OF CERTIFICATES . . . .  22
         Section 2.1  Conveyance of Receivables . . . . . . . . . . .  22
         Section 2.2  Acceptance by Trustee . . . . . . . . . . . . .  23
         Section 2.3  Representations and Warranties of the Transferor 24
         Section 2.4  Representations and Warranties of the Transferor
                      Relating to the Agreement and the Receivables .  26
         Section 2.5  Covenants of the Transferor . . . . . . . . . .  30
         Section 2.6  Addition of Accounts  . . . . . . . . . . . . .  33
         Section 2.7  Removal of Accounts . . . . . . . . . . . . . .  36
         Section 2.8  Discount Option . . . . . . . . . . . . . . . .  37

ARTICLE III ADMINISTRATION ANDSERVICING OF RECEIVABLES . . . . . . . . 38
         Section 3.1  Acceptance of Appointment and Other Matters
                      Relating to the Servicer. . . . . . . . . . . .  38
         Section 3.2  Servicing Compensation  . . . . . . . . . . . .  40
         Section 3.3  Representations and Warranties of the Servicer   40
         Section 3.4  Reports and Records for the Trustee . . . . . .  41
         Section 3.5  Annual Servicer's Certificate . . . . . . . . .  42
         Section 3.6  Annual Independent Accountants' Servicing Report 42
         Section 3.7  Tax Treatment . . . . . . . . . . . . . . . . .  43
         Section 3.8  Notices to the Transferor . . . . . . . . . . .  43
         Section 3.9  Sub-Servicing . . . . . . . . . . . . . . . . .  43

ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS ANDALLOCATION AND APPLICATION
         OF COLLECTIONS . . . . . . . . . . . . . . . . . . . . . . .  44
         Section 4.1  Rights of Certificateholders  . . . . . . . . .  44
         Section 4.2  Establishment of Accounts . . . . . . . . . . .  44
         Section 4.3  Collections and Allocations . . . . . . . . . .  46
         Section 4.4  Allocations During Funding Period . . . . . . .  48
         Section 4.5  Certain Fees  . . . . . . . . . . . . . . . . .  49

ARTICLE V [ARTICLE V IS RESERVED AND SHALL BE SPECIFIEDIN ANY
         SUPPLEMENT WITH RESPECT TO ANY SERIES] . . . . . . . . . . .  49

ARTICLE VI THE CERTIFICATES . . . . . . . . . . . . . . . . . . . . .  49
         Section 6.1  The Certificates  . . . . . . . . . . . . . . .  49
         Section 6.2  Authentication of Certificates  . . . . . . . .  50
         Section 6.3  Registration of Transfer and Exchange of
                      Certificates. . . . . . . . . . . . . . . . . .  50
         Section 6.4  Mutilated, Destroyed, Lost or Stolen
                      Certificates. . . . . . . . . . . . . . . . . .  53
         Section 6.5  Persons Deemed Owners . . . . . . . . . . . . .  53
         Section 6.6  Appointment of Paying Agent . . . . . . . . . .  54
         Section 6.7  Access to List of Certificateholders' Names and
                      Addresses   . . . . . . . . . . . . . . . . . .  55

                                       -i-

<PAGE>

         Section 6.8   Authenticating Agent  . . . . . . . . . . . . .  55
         Section 6.9   Tender of Transferor Certificate  . . . . . . .  57
         Section 6.10  Book-Entry Certificates   . . . . . . . . . . .  59
         Section 6.11  Notices to Clearing Agency  . . . . . . . . . .  59
         Section 6.12  Definitive Certificates   . . . . . . . . . . .  59
         Section 6.13  Global Certificate  . . . . . . . . . . . . . .  60
         Section 6.14  Meetings of Certificateholders  . . . . . . . .  60

ARTICLE VII OTHER MATTERS RELATING TO THE TRANSFEROR  . . . . . . . .   61
         Section 7.1  Liability of the Transferor . . . . . . . . . .   61
         Section 7.2  Merger or Consolidation of, or Assumption
                      of the Obligations of, the Transferor . . . . .   61
         Section 7.3  Limitation of Liability . . . . . . . . . . . .   62

ARTICLE VIII OTHER MATTERS RELATING TO THE SERVICER . . . . . . . . .   62
         Section 8.1  Liability of the Servicer . . . . . . . . . . .   62
         Section 8.2  Merger or Consolidation of, or Assumption
                      of the Obligations of, the Servicer . . . . . .   62
         Section 8.3  Limitation of Liability of the
                      Servicer and Others   . . . . . . . . . . . . .   63
         Section 8.4  Servicer Indemnification of the Trust
                      and the Trustee   . . . . . . . . . . . . . . .   63
         Section 8.5  The Servicer Not to Resign  . . . . . . . . . .   64
         Section 8.6  Access to Certain Documentation and
                      Information Regarding the Receivables  . . . .    64
         Section 8.7  Delegation of Duties  . . . . . . . . . . . . .   65
         Section 8.8  Examination of Records  . . . . . . . . . . . .   65
         Section 8.9  Securities Act Filings. . . . . . . . . . . . .   65

ARTICLE IX  PAY OUT EVENTS. . . . . . . . . . . . . . . . . . . . . .   65
         Section 9.1  Pay Out Events  . . . . . . . . . . . . . . . .   65
         Section 9.2  Additional Rights Upon the Occurrence
                      of Certain Events . . . . . . . . . . . . . . .   66

ARTICLE X  SERVICER DEFAULTS. . . . . . . . . . . . . . . . . . . . .   67
         Section 10.1  Servicer Defaults   . . . . . . . . . . . . . .  67
         Section 10.2  Trustee to Act; Appointment of Successor  . . .  69
         Section 10.3  Notification to Certificateholders  . . . . . .  71
         Section 10.4  Waiver of Past Defaults   . . . . . . . . . . .  71

ARTICLE XI  THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . .  72
         Section 11.1  Duties of Trustee   . . . . . . . . . . . . . .  72
         Section 11.2  Certain Matters Affecting the Trustee   . . . .  73
         Section 11.3  Trustee Not Liable for Recitals
                       in Certificates . . . . . . . . . . . . . . . .  75
         Section 11.4  Trustee May Own Certificates  . . . . . . . . .  75
         Section 11.5  The Servicer to Pay Trustee's
                       Fees and Expenses . . . . . . . . . . . . . . .  75
         Section 11.6  Eligibility Requirements for Trustee  . . . . .  75
         Section 11.7  Resignation or Removal of Trustee   . . . . . .  76
         Section 11.8  Successor Trustee   . . . . . . . . . . . . . .  76
         Section 11.9  Merger or Consolidation of Trustee  . . . . . .  77
         Section 11.10 Appointment of Co-Trustee or Separate Trustee .  77
         Section 11.11 Tax Returns . . . . . . . . . . . . . . . . . .  78

                                      -ii-

<PAGE>

         Section 11.12  Trustee may Enforce Claims Without
                        Possession of Certificates. . . . . . . . . .   79
         Section 11.13  Suits for Enforcement . . . . . . . . . . . .   79
         Section 11.14  Rights of Certificateholders to
                        Direct Trustee. . . . . . . . . . . . . . . .   79
         Section 11.15  Representations and Warranties of Trustee . .   79
         Section 11.16  Maintenance of Office or Agency . . . . . . .   80

ARTICLE XII TERMINATION  . . . . . . . . . . . . . . . . . . . . . . .  80
         Section 12.1   Termination of Trust . . . . . . . . . . . . .  80
         Section 12.2   Optional Purchase  . . . . . . . . . . . . . .  81
         Section 12.3   Final Payment with Respect to any Series . . .  81
         Section 12.4   Termination Rights of Holder of Transferor
                        Certificate. . . . . . . . . . . . . . . . . .  82
         Section 12.5   Defeasance . . . . . . . . . . . . . . . . . .  83

ARTICLE XIII MISCELLANEOUS PROVISIONS  . . . . . . . . . . . . . . . .  84
         Section 13.1   Amendment  . . . . . . . . . . . . . . . . . .  84
         Section 13.2   Protection of Right, Title and
                        Interest to Trust  . . . . . . . . . . . . . .  85
         Section 13.3   Limitation on Rights of Certificateholders.  .  86
         Section 13.4   GOVERNING LAW  . . . . . . . . . . . . . . . .  87
         Section 13.5   Notices  . . . . . . . . . . . . . . . . . . .  87
         Section 13.6   Severability of Provisions . . . . . . . . . .  88
         Section 13.7   [RESERVED] . . . . . . . . . . . . . . . . . .  88
         Section 13.8   Certificates Non-Assessable and Fully Paid . .  88
         Section 13.9   Further Assurances . . . . . . . . . . . . . .  88
         Section 13.10  No Waiver; Cumulative Remedies   . . . . . . .  88
         Section 13.11  Counterparts  . . . . . . . . . . . . . . . .   88
         Section 13.12  Third-Party Beneficiaries . . . . . . . . . .   88
         Section 13.13  Actions by Certificateholders . . . . . . . .   88
         Section 13.14  Rule 144A Information . . . . . . . . . . . .   89
         Section 13.15  Merger and Integration  . . . . . . . . . . .   89
         Section 13.16  Headings  . . . . . . . . . . . . . . . . . .   89

                                      -iii-

<PAGE>

EXHIBITS

Exhibit A        Form of Transferor Certificate
Exhibit B        Form of Assignment of Receivables in Additional Accounts
Exhibit C        Form of Monthly Servicer's Certificate
Exhibit D        Form of Annual Servicer's Certificate
Exhibit E        Form of Opinion of Counsel Regarding Additional Accounts
Exhibit F        Form of Annual Opinion of Counsel
Exhibit G        Form of Reassignment of Receivables
Exhibit H        Form of Reconveyance of Receivables

SCHEDULES

Schedule 1 List of Accounts [Deemed Incorporated]

                                      -iv-

<PAGE>

--------------------------------------------------------------------------------
                          DILLARD ASSET FUNDING COMPANY
                                   Transferor

                              DILLARD NATIONAL BANK
                                    Servicer

                                       and

                            THE CHASE MANHATTAN BANK

                                     Trustee

                       on behalf of the Certificateholders

                  of Dillard Credit Card Master Trust I

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

           AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT

                            Dated as of June 28, 2000
--------------------------------------------------------------------------------

<PAGE>

6.____________________
7.[FN]
<F1>
         A separate schedule is to be attached for each Series, with appropriate
         changes and additions to reflect the specifics of the related Series
         Supplement.
</FN><PAGE>

                                                                EXECUTION COPY

===============================================================================

                      GREENPOINT MORTGAGE SECURITIES INC.,
                                    Sponsor,

                       GREENPOINT MORTGAGE FUNDING, INC.,
                                    Servicer,

                    GREENPOINT HOME EQUITY LOAN TRUST 2000-1,
                                     Issuer,

                                       and

                             BANKERS TRUST COMPANY,
                                     Trustee

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

                          SALE AND SERVICING AGREEMENT

                            Dated as of June 1, 2000

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

                    Home Equity Loan Asset-Backed Securities

                                  Series 2000-1

================================================================================
<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                Page
<S>                                                                                                             <C>
ARTICLE I DEFINITIONS.............................................................................................1
Section 1.01.     Definitions.....................................................................................1
Section 1.02.     Other Definitional Provisions...................................................................1
Section 1.03.     Interest Calculations...........................................................................2

ARTICLE II CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF SECURITIES; TAX TREATMENT...........................2
Section 2.01.     Conveyance of Mortgage Loans; Retention of Obligation to Fund Advances Under Credit
                  Line Agreements.................................................................................2
Section 2.02.     Further Encumbrance of Trust Property...........................................................6
Section 2.03.     Acceptance by Trustee;  Certain Substitution of Mortgage Loans..................................6
Section 2.04      Representations and Warranties Regarding the Servicer and the Sponsor...........................8
Section 2.05.     Representations and Warranties of the Sponsor Regarding the Mortgage Loans;
                  Removal of Certain Mortgage Loans..............................................................10
Section 2.06.     Covenants of the Sponsor.......................................................................22
Section 2.07.     Removal of Mortgage Loans at Election of Issuer................................................23
Section 2.08.     Execution and Authentication of Securities.....................................................24
Section 2.09.     Tax Treatment..................................................................................24

ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS.......................................................24
Section 3.01.     The Servicer...................................................................................24
Section 3.02.     Collection of Certain Mortgage Loan Payments...................................................26
Section 3.03.     Withdrawals from the Collection Account........................................................28
Section 3.04.     Maintenance of Hazard Insurance; Property Protection Expenses..................................28
Section 3.05.     Assumption and Modification Agreements.........................................................29
Section 3.06.     Realization Upon Defaulted Mortgage Loans; Repurchase of Certain Mortgage Loans................29
Section 3.07.     Trustee to Cooperate...........................................................................30
Section 3.08.     Servicing Compensation; Payment of Certain Expenses by Servicer................................31
Section 3.09.     Annual Statement as to Compliance..............................................................31
Section 3.10.     Annual Servicing Report........................................................................32
Section 3.11.     Annual Opinion of Counsel......................................................................32
Section 3.12.     Access to Certain Documentation and Information Regarding the Mortgage Loans...................32
Section 3.13.     Maintenance of Certain Servicing Insurance Policies............................................33
Section 3.14.     Reports to the Securities and Exchange Commission..............................................33
Section 3.15.     Tax Returns....................................................................................33
Section 3.16.     Information Required by the Internal Revenue Service Generally and Reports of
                  Foreclosures and Abandonments of Mortgaged Property............................................34
Section 3.17.     Inspection Rights; Miscellaneous...............................................................34
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                                                             <C>
ARTICLE IV SERVICING CERTIFICATE.................................................................................35
Section 4.01.     Servicing Certificate..........................................................................35
Section 4.02.     Freddie Mac Certificate........................................................................37
Section 4.03.     The Trustee Remittance Report..................................................................37
Section 4.04.     Loan Remittance Report.........................................................................38
Section 4.05.     Reserve Fund...................................................................................39

ARTICLE V THE SERVICER AND THE SPONSOR...........................................................................39
Section 5.01.     Liability of the Servicer and the Sponsor......................................................39
Section 5.02.     Merger or Consolidation of, or Assumption of the Obligations of, the Servicer or
                  the Sponsor....................................................................................39
Section 5.03.     on Liability of the Servicer and Others........................................................39
Section 5.04.     Servicer Not to Resign.........................................................................40
Section 5.05.     Delegation of Duties...........................................................................41
Section 5.06.     Indemnification of the Trust by the Servicer...................................................41
Section 5.07.     Indemnification of the Trust by the Sponsor....................................................41
Section 5.08.     Limitation on Liability of the Sponsor.........................................................41

ARTICLE VI SERVICING TERMINATION.................................................................................42
Section 6.01.     Events of Servicing Termination................................................................42
Section 6.02.     Trustee to Act; Appointment of Successor.......................................................44
Section 6.03.     Notification to Securityholders and Residual Certificateholders................................45

ARTICLE VII TERMINATION..........................................................................................45
Section 7.01.     Termination....................................................................................45

ARTICLE VIII ADMINISTRATIVE DUTIES OF THE SERVICER...............................................................47
Section 8.01.     Administrative Duties..........................................................................47
Section 8.02.     Records........................................................................................49
Section 8.03.     Additional Information to be Furnished to the Issuer...........................................49

ARTICLE IX MISCELLANEOUS PROVISIONS..............................................................................49
Section 9.01.     Amendment......................................................................................49
Section 9.02.     Recordation of Agreement.......................................................................50
Section 9.03.     Limitation on Rights of Securityholders........................................................51
Section 9.04.     Governing Law..................................................................................51
Section 9.05.     Notices........................................................................................51
Section 9.06.     Severability of Provisions.....................................................................52
Section 9.07.     Assignment.....................................................................................52
Section 9.08.     Third-Party Beneficiaries......................................................................52
Section 9.09.     Counterparts...................................................................................52
Section 9.10.     Effect of Headings and Table of Contents.......................................................52
Section 9.11.     Insurance Agreement............................................................................52
Section 9.12.     Nonpetition Covenant...........................................................................52
</TABLE>

                                       ii
<PAGE>

                                    EXHIBITS

EXHIBIT A:  MORTGAGE LOAN SCHEDULE........................................A-1

EXHIBIT B:  FORM OF OPINION OF COUNSEL....................................B-1

EXHIBIT C:  OFFICER'S CERTIFICATES........................................C-1

EXHIBIT D:  FORM OF CREDIT LINE AGREEMENT.................................D-1

EXHIBIT E:  FORM OF MORTGAGE NOTE (SECOND LIEN)...........................E-1

EXHIBIT F:  FORMS OF FREDDIE MAC CERTIFICATES.............................F-1

                                      iii
<PAGE>

         SALE AND SERVICING AGREEMENT, dated as of June 1, 2000, (the
"Agreement") among GREENPOINT HOME EQUITY LOAN TRUST 2000-1, a Delaware business
trust (the "Issuer" or "Trust"), GREENPOINT MORTGAGE SECURITIES INC., a Delaware
corporation (the "Sponsor"), GREENPOINT MORTGAGE FUNDING, INC., a New York
corporation (the "Servicer"), and BANKERS TRUST COMPANY, a national banking
association (the "Trustee")

         WHEREAS, the Issuer desires to purchase a portfolio of Mortgage Loans
arising in connection with Loan Agreements acquired by GreenPoint Mortgage
Funding, Inc.;

         WHEREAS, the Sponsor has purchased such Mortgage Loans from GreenPoint
Mortgage Funding, Inc. and is willing to sell such Mortgage Loans to the Issuer;

         WHEREAS, such Mortgage Loans consist of certain home equity revolving
lines of credit (the "HELOC Mortgage Loans") and certain second lien, closed-end
mortgage loans (the "Closed End Mortgage Loans");

         WHEREAS, the Servicer is willing to service all such Mortgage Loans;

         NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, the parties hereto agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

         Section 1.01. Definitions. All capitalized terms used in this Agreement
and not otherwise defined herein, shall have the meanings assigned thereto in
Annex A to the Pooling Agreement dated as of June 1, 2000, between the Issuer
and the Trustee, as the same may be amended and supplemented from time to time.

         Section 1.02. Other Definitional Provisions.

         (a) All terms defined in this Agreement shall have the defined meanings
when used in any instrument governed hereby and in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein.

          (b) As used in this Agreement, in any instrument governed hereby and
 in any certificate or other document made or delivered pursuant hereto or
 thereto, accounting terms not defined in this Agreement or in any such
 instrument, certificate or other document, and accounting terms partly defined
 in this Agreement or in any such instrument, certificate or other document to
 the extent not defined, shall have the respective meanings given to them under
 generally accepted accounting principles as in effect on the date of this
 Agreement or any such instrument, certificate or other document, as applicable.
 To the extent that the definitions of accounting terms in this Agreement or in
 any such instrument, certificate or other document are inconsistent with the
 meanings of such terms under generally accepted accounting principles, the

<PAGE>

definitions contained in this Agreement or in any such instrument, certificate
or other document shall control.

         (c)    Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.

         Section 1.03.    Interest Calculations. All calculations of interest
hereunder that are made in respect of the Principal Balance of a Mortgage Loan
shall be made on a daily basis using a 365-day year. All calculations of
interest on the Securities shall be made on the basis of the actual number of
days in an Interest Period and a year assumed to consist of 360 days. The
calculation of the Servicing Fee shall be made on the basis of a 360-day year
consisting of twelve 30-day months. All dollar amounts calculated hereunder
shall be rounded to the nearest penny with one-half of one penny being rounded
down.

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                        ORIGINAL ISSUANCE OF SECURITIES;
                                  TAX TREATMENT

         Section 2.01.    Conveyance of Mortgage Loans; Retention of Obligation
to Fund Advances Under Credit Line Agreements. (a) In consideration of the
Issuer's delivery to or upon the order of the Sponsor on the Closing Date of the
net proceeds from the sale of the Securities and Residual Certificates and the
other amounts to be distributed from time to time to the Sponsor in accordance
with the terms of this Agreement, the Sponsor, concurrently with the execution
and delivery of this Agreement, hereby sells, transfers, assigns, sets over and
otherwise conveys to the Issuer, without recourse (subject to Sections 2.03 and
2.05), all of its right, title and interest in and to (i) each Mortgage Loan,
including its Principal Balance (including any Additional Balances related
thereto) and all collections in respect thereof received after the Cut-Off Date
(excluding Interest Collection due on or prior to the Cut-Off Date); (ii)
property that secured a Mortgage Loan that is acquired by foreclosure or deed in
lieu of foreclosure; (iii) all of the Sponsor's rights under the Purchase
Agreement (including all representations and warranties of the Company contained
therein); (iv) the Sponsor's rights under the hazard insurance policies; (v) the
Reserve Fund; (vi) the Policy; (vii) the Demand Note; and (viii) any proceeds of
the foregoing and all other assets included or to be included in the Trust for
the benefit of Securityholders and the Residual Certificateholders, the Insurer
and Freddie Mac; provided, however, neither the Trustee nor the Trust assumes
the obligation under any Credit Line Agreement that provides for the funding of
future advances to the Mortgagor thereunder, and neither the Trust nor the
Trustee shall be obligated or permitted to fund any such future advances. With
respect to the HELOC Mortgage Loans, Additional Balances shall be part of the
related Principal Balance and are hereby transferred to the Trust on the Closing
Date pursuant to this Section 2.01, and therefore part of the Trust Property. On
or prior to the Closing Date, the Sponsor shall cause the Insurer to deliver the
Policy to the Trustee for the benefit of the Securityholders. It is the
intention of the Sponsor that the transfer and assignment contemplated

                                       2
<PAGE>

by this Agreement shall constitute a sale of the Mortgage Loans and other Trust
Property from the Sponsor to the Issuer and that such sale should constitute a
valid transfer and assignment of the Mortgage Loans and other Trust Property to
the Issuer and the beneficial interest in and title to the Mortgage Loans and
the other Trust Property shall not be part of the Sponsor's estate in the event
of the filing of a bankruptcy petition by or against the Sponsor under any
bankruptcy law. In the event that, notwithstanding the intent of the Sponsor,
the transfer and assignment contemplated hereby is held not to be a sale, this
Agreement shall constitute a grant of a security interest in the property
referred to in this Section 2.01 for the benefit of the Securityholders, the
Residual Certificateholders, the Insurer and Freddie Mac. To the extent that the
fair market value of any Additional Balance is greater than the cash
consideration paid by the Issuer for such Additional Balance, the difference
between such fair market value and the amount of such cash consideration shall
be deemed to be a capital contribution made to the Issuer by the Sponsor.

         (b)    Each of the Company and the Sponsor agrees to take or cause to
be taken such actions and execute such documents (including, without limitation,
the filing of all necessary continuation statements for the UCC-1 financing
statements filed in the States of California and Delaware, respectively, (which
shall have been filed on or as of the Closing Date) describing the Cut-Off Date
Principal Balances and Additional Balances and naming (i) the Company as debtor
and the Sponsor as secured party, and (ii) the Sponsor as debtor and the Issuer
as secured party and any amendments to UCC-1 financing statements required to
reflect a change in the name or corporate structure of the Company or the
Sponsor or the filing of any additional UCC-1 financing statements due to the
change in the principal office of the Company or the Sponsor (within 10 days of
any event necessitating such filing) as are necessary to perfect and protect the
Securityholders', Insurer's and Freddie Mac's interests in each Cut-Off Date
Principal Balance and Additional Balance and the proceeds thereof (other than
maintaining possession by the Trustee of the Mortgage Loans and the Mortgage
Files).

         (c)    In connection with such transfer and assignment, the Servicer
shall deliver to the Trustee the following documents or instruments (each a
"Related Document" and together for each Mortgage Loan, the "Mortgage File")
with respect to each Mortgage Loan on the Closing Date:

                (i)     with respect to any Closed-End Mortgage Loan, the
         original Mortgage Note endorsed in blank, and with respect to any HELOC
         Mortgage Loan, the original Credit Line Agreement;

                (ii)    an original Assignment of Mortgage in blank in
         recordable form;

                (iii)   the original recorded Mortgage or, if, in connection
         with any Mortgage Loan, the original recorded Mortgage with evidence of
         recording thereon cannot be delivered on or prior to the Closing Date
         because of a delay caused by the public recording office where such
         original Mortgage has been delivered for recordation or because such
         original Mortgage has been lost, the Sponsor shall deliver or cause to
         be delivered to the Trustee, a true and correct copy of such Mortgage,
         together with (i) in the case of a delay caused by the public recording
         office, an Officer's Certificate of the Sponsor stating that such
         original Mortgage has been dispatched to the appropriate public

                                       3
<PAGE>

         recording official or (ii) in the case of an original Mortgage that has
         been lost, a certificate by the appropriate county recording office
         where such Mortgage is recorded;

                (iv)    if applicable, the original intervening assignments, if
         any ("Intervening Assignments"), with evidence of recording thereon,
         showing a complete chain of title to the Mortgage from the originator
         to the Trustee or, if any such original Intervening Assignment has not
         been returned from the applicable recording office or has been lost, a
         true and correct copy thereof, together with (i) in the case of a delay
         caused by the public recording office, an Officer's Certificate of the
         Sponsor stating that such original Intervening Assignment has been
         dispatched to the appropriate public recording official for recordation
         or (ii) in the case of an original Intervening Assignment that has been
         lost, a certificate by the appropriate county recording office where
         such Mortgage is recorded;

                (v)     either a title policy, a title search or guaranty title
         with respect to the related Mortgaged Property;

                (vi)    the original of any guaranty executed in connection with
         the Mortgage Note;

                (vii)   the original of each assumption, modification,
         consolidation or substitution agreement, if any, relating to the
         Mortgage Loans; and

                (viii)  any security agreement, chattel mortgage or equivalent
         instrument executed in connection with the Mortgage.

         The Sponsor hereby confirms to the Trustee that it has caused the
portions of the Electronic Ledgers relating to the Mortgage Loans as of the
Closing Date to be clearly and unambiguously marked, and has made, or will make,
the appropriate entries in its general accounting records to indicate that such
Mortgage Loans have been transferred to the Trust. The Servicer hereby confirms
to the Trustee that it has clearly and unambiguously made appropriate entries in
its general accounting records indicating that such Mortgage Loans constitute
part of the Trust and are serviced by it on behalf of the Trust in accordance
with the terms hereof.

         (d)    Notwithstanding the characterization of the Securities as debt
for Federal, state and local income and franchise tax purposes, the parties
hereto intend to treat the transfer of the Mortgage Loans to the Trust as
provided herein as a sale, for certain non-tax purposes, of all the Sponsor's
right, title and interest in and to the Mortgage Loans, whether now existing or
hereafter created, and the other property described above and all proceeds
thereof. In the event such transfer is deemed not to be a sale for such
purposes, the Sponsor grants to the Trust, a security interest in all of such
party's right, title and interest in, to and under the Mortgage Loans, whether
now existing or hereafter created, and the other property described above and
all proceeds thereof; and this Agreement shall constitute a security agreement
under applicable law.

         (e)    Within 90 days following delivery of the Mortgage Files to the
Trustee pursuant to this Section, the Trustee shall review each such Mortgage
File to ascertain that all required documents set forth in this Section 2.01
have been executed and received, and that such documents relate to the Mortgage
Loans identified on the Mortgage Loan Schedule and in so doing the Trustee may
rely on the purported due execution and genuineness of any signature

                                       4
<PAGE>

thereon. If within such 90-day period the Trustee finds any document
constituting a part of a Mortgage File not to have been executed or received or
to be unrelated to the Mortgage Loans identified in said Mortgage Loan Schedule
or, if in the course of its review, the Trustee determines that such Mortgage
File is otherwise defective in any material respect, the Trustee shall promptly
upon the conclusion of its review notify the Sponsor, the Insurer and Freddie
Mac, and the Sponsor shall have a period of 90 days after such notice within
which to correct or cure any such defect.

         The Trustee shall have no responsibility for reviewing any Mortgage
File except as expressly provided in this Section 2.01. In reviewing any
Mortgage File pursuant to this Section, the Trustee shall have no responsibility
for determining whether any document is valid and binding, whether the text of
any assignment or endorsement is in proper or recordable form (except, if
applicable, to determine if the Trustee is the assignee or endorsee), whether
any document has been recorded in accordance with the requirements of any
applicable jurisdiction, or whether a blanket assignment is permitted in any
applicable jurisdiction, whether any Person executing any document is authorized
to do so or whether any signature thereon is genuine, but shall only be required
to determine whether a document has been executed, that it appears to be what it
purports to be, and, where applicable, that it purports to be recorded.

         (f)    The Sponsor shall take all necessary steps to prepare and submit
for recordation an Assignment or Mortgage in the name of the Trustee for each
Mortgage Loan within 30 days after the Closing Date.

         (g)    The Sponsor shall sell, assign, transfer, set over and otherwise
convey without recourse to the Trustee all right, title and interest of the
Sponsor in and to any Eligible Substitute Mortgage Loan delivered to the Trustee
on behalf of the Trust by the Sponsor pursuant to Section 2.03 or Section 2.05
hereof and all its right, title and interest to principal collected and interest
accruing on such Eligible Substitute Mortgage Loan on and after the applicable
Substitute Cut-Off Date; provided, however, that the Sponsor shall reserve and
retain all right, title and interest in and to payments of interest due on such
Eligible Substitute Mortgage Loan prior to the applicable Substitute Cut-Off
Date; provided, further, that neither the Trust nor the Trustee shall be
obligated to fund any future advances to the related Mortgagor under such
Eligible Substitute Mortgage Loan.

         In connection with any transfer and assignment of an Eligible
Substitute Mortgage Loan to the Trustee on behalf of the Trust, the Sponsor
agrees to cause to be delivered to the Trustee the items described in Section
2.01(c) on the date of such transfer and assignment or, if a later delivery time
is permitted by Section 2.01(c), then no later than such later delivery time.

         (h)    Each Defective Mortgage Loan that is required to be repurchased
or substituted pursuant to the provisions this Agreement or the Purchase
Agreement shall, upon such repurchase or substitution in accordance with the
provisions hereof, be released from the Trust and from the lien created by the
Pooling Agreement. As to each Mortgage Loan released from the Trust in
connection with the repurchase thereof or the conveyance of an Eligible
Substitute Mortgage Loan therefor, the Trustee will transfer, assign, set over
and otherwise convey without recourse, to or upon the order of the Sponsor, all
of its right, title and interest in and to such released Mortgage Loan and all
the Trust's right title and interest to principal collected and

                                       5
<PAGE>

interest accruing on such released Mortgage Loan on and after the first day of
the calendar month in which such Mortgage Loan is released; provided, however,
that the Trust shall reserve and retain all right, title and interest in and to
payments of principal and interest collected on such released Mortgage Loan
prior to such date.

         Section 2.02.    Further Encumbrance of Trust Property.

         (a)    Immediately upon the conveyance to the Trust by the Sponsor of
any item of the Trust Property pursuant to Section 2.01, all right, title and
interest of the Sponsor in and to such item of Trust Property shall terminate,
and all such right, title and interest shall vest in the Trust, in accordance
with the Trust Agreement and Sections 3802 and 3805 of the Delaware Business
Trust Act (12 Del. Code, ss. 3801 et seq.).

         (b)    Immediately upon the vesting of the Trust Property in the Trust,
the Trust shall have the sole right to pledge or otherwise encumber, such Trust
Property. Pursuant to the Pooling Agreement and contemporaneously with such
property vesting in the Trust pursuant to (a) above, the Trust shall grant a
security interest in the Trust Property to secure the repayment of the
Securities. The Residual Certificates shall represent the beneficial ownership
interest in the Trust Property, and the Residual Certificateholders shall be
entitled to receive distributions with respect thereto as set forth herein.

         (c)    Prior to the payment in full on the Securities, the payment of
all amounts due to the Insurer under the Insurance Agreement, the payment of all
amounts due Freddie Mac under the Pooling Agreement, the termination of the
Policy (as defined therein) and the surrender of the Policy by the Trustee to
the Insurer, the Trustee shall hold the Trust Property on behalf of the
Securityholders, the Insurer and Freddie Mac. Following the payment in full of
the Securities and the release and discharge of the Pooling Agreement, all
covenants of the Issuer under Article III of the Pooling Agreement shall, until
payment in full of the Residual Certificates, remain as covenants of the Issuer
for the benefit of the Residual Certificateholders, enforceable by the Residual
Certificateholders to the same extent as such covenants were enforceable by the
Securityholders prior to the discharge of the Pooling Agreement. Any rights of
the Trustee under Article III of the Pooling Agreement, following the discharge
of the Pooling Agreement, shall vest in the Residual Certificateholders.

         Section 2.03.    Acceptance by Trustee; Certain Substitution of
Mortgage Loans.

         (a)    The Trustee shall, at such time as there are no Securities
outstanding and all sums due to (i) the Trustee or any agent or counsel thereof
pursuant to the Pooling Agreement, (ii) the Trustee pursuant to this Agreement
and (iii) the Insurer pursuant to the Insurance Agreement and Freddie Mac
pursuant to the Pooling Agreement have been paid, release any remaining portion
of the Trust Property to the Sponsor; provided, that the release of the Reserve
fund is subject to Section 2.05 of the Insurance Agreement.

         (b)    The Trust hereby acknowledges its receipt of the Policy and the
Mortgage Loans, and declares that the Trustee holds and will hold such
instrument, and to the extent that any documents are delivered to it pursuant to
Section 2.01, will hold such documents, and all amounts received by it
thereunder and hereunder, in trust, upon the terms herein set forth, for the

                                       6
<PAGE>

use and benefit of all present and future Securityholders, the Insurer and
Freddie Mac. If the time to cure any defect in respect of any Mortgage Loan of
which the Trustee has notified the Sponsor following the review pursuant to
Section 2.01 has expired or if at any time any loss is suffered by the Trustee
on behalf of the Securityholders, the Insurer or Freddie Mac, in respect of any
Mortgage Loan as a result of (i) a defect in any document constituting a part of
its Mortgage File or (ii) an Assignment of Mortgage to the Trustee not having
been recorded as required by Section 2.01, then on the next succeeding Business
Day, the Trustee shall (i) substitute in lieu of such Mortgage Loan all Eligible
Substitute Mortgage Loans and, deliver the Substitution Amount applicable
thereto to the Servicer for deposit in the Collection Account or (ii) purchase
such Mortgage Loan at a purchase price equal to the Loan Purchase Price thereof,
which purchase price shall be delivered to the Servicer for deposit in the
Collection Account. Upon receipt of any Mortgage Loan or of written notification
signed by a Servicing Officer to the effect that the Loan Purchase Price in
respect of a Defective Mortgage Loan has been deposited into the Collection
Account, then as promptly as practicable, the Trustee shall execute such
documents and instruments of transfer presented by the Sponsor, in each case
without recourse, representation or warranty, and take such other actions as
shall reasonably be requested by the Sponsor to effect such transfer by the
Trust of such Defective Mortgage Loan pursuant to this Section. It is understood
and agreed that the obligation of the Sponsor to accept a transfer of a
Defective Mortgage Loan and to either convey an Eligible Substitute Mortgage
Loan or to make a deposit of any related Loan Purchase Price into the Collection
Account shall constitute the sole remedy respecting such defect available to
Securityholders and the Trustee against the Sponsor.

         (c)    As to any Eligible Substitute Mortgage Loan, the Sponsor shall,
if required to deliver any such Eligible Substitute Mortgage Loan, deliver to
the Trustee with respect to such Eligible Substitute Mortgage Loan such
documents and agreements as are required to be held by the Trustee in accordance
with Section 2.01. For any Collection Period during which the Sponsor
substitutes one or more Eligible Substitute Mortgage Loan, the Servicer shall
determine the Substitution Amount which amount shall be deposited by the Sponsor
in the Collection Account at the time of substitution. All amounts received in
respect of the Eligible Substitute Mortgage Loan during the Collection Period in
which the circumstances giving rise to such substitution occur shall not be a
part of the Trust and shall not be deposited by the Servicer in the Collection
Account. All amounts received by the Servicer during the Collection Period in
which the circumstances giving rise to such substitution occur in respect of any
Defective Mortgage Loan so removed by the Trust shall be deposited by the
Servicer in the Collection Account. Upon such substitution, the Eligible
Substitute Mortgage Loan shall be subject to the terms of this Agreement in all
respects, and the Sponsor shall be deemed (i) to have made with respect to such
Eligible Substitute Mortgage Loan as of the date of substitution, the covenants,
representations and warranties set forth in Section 2.05 and (ii) to have
certified that such Mortgage Loan is an Eligible Substitute Mortgage Loan. The
procedures applied by the Sponsor in selecting each Eligible Substitute Mortgage
Loan shall not be materially adverse to the interests of the Trustee, the
Securityholders, the Insurer or Freddie Mac.

         The Servicer, promptly following the transfer of a Defective Mortgage
Loan from or to the Trust pursuant to this Section, shall amend the Mortgage
Loan Schedule and make appropriate entries in its general account records to
reflect such transfer. The Servicer shall, following such removal, appropriately
mark its records to indicate that it is no longer servicing such Mortgage Loan
on behalf of the Trust. The Sponsor, promptly following such transfer,

                                       7
<PAGE>

shall appropriately mark its Electronic Ledger and make appropriate entries in
its general account records to reflect such transfer.

         Section 2.04.    Representations and Warranties Regarding the Servicer
and the Sponsor. (a) The Servicer represents and warrants to the Trustee, the
Insurer and Freddie Mac that as of the Closing Date:

                (i)     The Servicer is a New York corporation, validly existing
         and in good standing under the laws of the State of New York, and has
         the corporate power to own its assets and to transact the business in
         which it is currently engaged. The Servicer is duly qualified to do
         business as a foreign corporation and is in good standing in each
         jurisdiction in which the character of the business transacted by it or
         any properties owned or leased by it requires such qualification and in
         which the failure so to qualify would have a material adverse effect on
         the business, properties, assets, or condition (financial or other) of
         the Servicer;

                (ii)    The Servicer has the power and authority to make,
         execute, deliver and perform this Agreement and all of the transactions
         contemplated under this Agreement, and has taken all necessary
         corporate action to authorize the execution, delivery and performance
         of this Agreement. When executed and delivered, this Agreement will
         constitute the legal, valid and binding obligation of the Servicer
         enforceable in accordance with its terms, except as enforcement of such
         terms may be limited by bankruptcy, insolvency, reorganization,
         moratorium or other similar laws affecting the enforcement of
         creditors' rights generally and by the availability of equitable
         remedies;

                (iii)   The Servicer is not required to obtain the consent of
         any other party or any consent, license, approval or authorization
         from, or registration or declaration with, any governmental authority,
         bureau or agency in connection with the execution, delivery,
         performance, validity or enforceability of this Agreement, except for
         such consent, license, approval or authorization, or registration or
         declaration, as shall have been obtained or filed, as the case may be,
         prior to the Closing Date;

                (iv)    The execution, delivery and performance of this
         Agreement by the Servicer will not violate any provision of any
         existing law or regulation or any order or decree of any court
         applicable to the Servicer or any provision of the Certificate of
         Incorporation or Bylaws of the Servicer, or constitute a material
         breach of any mortgage, Pooling Agreement, contract or other agreement
         to which the Servicer is a party or by which the Servicer may be bound;
         and

                (v)     No litigation or administrative proceeding of or before
         any court, tribunal or governmental body is currently pending, or to
         the knowledge of the Servicer threatened, against the Servicer or any
         of its properties or with respect to this Agreement or the Securities.

The representations and warranties set forth in this Section 2.04(a) shall
survive the sale and assignment of the Mortgage Loans to the Trust. Upon
discovery of a breach of any representations and warranties which materially and
adversely affects the interests of the

                                       8
<PAGE>

Securityholders, the Insurer or Freddie Mac, the person discovering such breach
shall give written notice within five (5) days of discovery to the other
parties, the Insurer and Freddie Mac. Within 90 days of its discovery or its
receipt of notice of breach, or, with the prior written consent of a Responsible
Officer of the Trustee and the Controlling Party, such longer period specified
in such consent, the Servicer shall cure such breach in all material respects.

         (b)    The Sponsor represents and warrants to the Trustee, the Insurer
and Freddie Mac that as of the Closing Date:

                (i)     The Sponsor is a Delaware corporation, validly existing
         and in good standing under the laws of the State of Delaware, and has
         the statutory power to own its assets and to transact the business in
         which it is currently engaged. The Sponsor is duly qualified to do
         business as a foreign limited liability company and is in good standing
         in each jurisdiction in which the character of the business transacted
         by it or any properties owned or leased by it requires such
         qualification and in which the failure so to qualify would have a
         material adverse effect on the business, properties, assets, or
         condition (financial or other) of the Sponsor;

                (ii)    The Sponsor has the power and authority to make,
         execute, deliver and perform this Agreement and all of the transactions
         contemplated under this Agreement, and has taken all necessary
         corporate action to authorize the execution, delivery and performance
         of this Agreement. When executed and delivered, this Agreement will
         constitute the legal, valid and binding obligation of the Sponsor
         enforceable in accordance with its terms, except as enforcement of such
         terms may be limited by bankruptcy, insolvency, reorganization,
         moratorium or other similar laws affecting the enforcement of
         creditors' rights generally and by the availability of equitable
         remedies;

                (iii)   The Sponsor is not required to obtain the consent of any
         other party or any consent, license, approval or authorization from, or
         registration or declaration with, any governmental authority, bureau or
         agency in connection with the execution, delivery, performance,
         validity or enforceability of this Agreement;

                (iv)    The execution, delivery and performance of this
         Agreement by the Sponsor will not violate any provision of any existing
         law or regulation or any order or decree of any court applicable to the
         Sponsor or any provision of the Certificate of Incorporation or bylaws
         of the Sponsor, or constitute a material breach of any mortgage,
         Pooling Agreement, contract or other agreement to which the Sponsor is
         a party or by which the Sponsor may be bound; and

                (v)     No litigation or administrative proceeding of or before
         any court, tribunal or governmental body is currently pending, or to
         the knowledge of the Sponsor threatened, against the Sponsor or any of
         its properties or with respect to this Agreement or the Securities.

The representations and warranties set forth in this Section 2.04(b) shall
survive the sale and assignment of the Mortgage Loans to the Trust. Upon
discovery of a breach of any representations and warranties which materially and
adversely affects the interests of the

                                       9
<PAGE>

Securityholders, the Insurer or Freddie Mac, the person discovering such breach
shall give prompt written notice to the other parties, the Insurer, and Freddie
Mac. Within 90 days of its discovery or its receipt of notice of breach, or,
with the prior written consent of a Responsible Officer of the Trustee and the
Controlling Party, such longer period specified in such consent, the Sponsor
shall cure such breach in all material respects.

         Section 2.05.    Representations and Warranties of the Sponsor
Regarding the Mortgage Loans; Removal of Certain Mortgage Loans.

         (a)    The Sponsor hereby makes the following representations and
warranties on which the Issuer is deemed to have relied in acquiring the
Mortgage Loans and upon which the Insurer is deemed to rely in issuing the
Policy, and upon which Freddie Mac is deemed to have relied as well. Such
representations and warranties speak as of the execution and delivery of this
Agreement and as of the Closing Date with respect to the Mortgage Loans, but
shall survive the sale, transfer, and assignment of the Mortgage Loans to the
Issuer and the pledge thereof to the Trustee pursuant to the Pooling Agreement,

                (i)     As of the Closing Date with respect to the Mortgage
         Loans and as of the related Transfer Date with respect to any Eligible
         Substitute Mortgage Loans and with respect to any HELOC Mortgage Loan,
         as of the date any Additional Balance is created, the information set
         forth in the Mortgage Loan Schedule for such Mortgage Loans is true and
         correct in all material respects;

                (ii)    Each Mortgage Loan is being serviced by the Servicer;

                (iii)   The applicable Cut-Off Date Principal Balance has not
         been assigned or pledged, and the Sponsor is the sole owner and holder
         of such Cut-Off Date Principal Balance free and clear of any and all
         liens, claims, encumbrances, participation interests, equities,
         pledges, charges or security interests of any nature, and has full
         right and authority, under all governmental and regulatory bodies
         having jurisdiction over the ownership of the applicable Mortgage
         Loans, to sell, assign or transfer the same pursuant to this Agreement;

                (iv)    Except with respect to liens released immediately prior
         to the transfer herein contemplated, each Mortgage Note and related
         Mortgage has not been assigned or pledged and immediately prior to the
         transfer and assignment herein contemplated, the Sponsor held good,
         marketable and indefeasible title to, and was the sole owner and holder
         of, each Mortgage Loan subject to no liens, charges, mortgages, claims,
         participation interests, equities, pledges or security interests of any
         nature, encumbrances or rights of others (collectively, a "Lien"); the
         Sponsor has full right and authority under all governmental and
         regulatory bodies having jurisdiction over the Sponsor, subject to no
         interest or participation of, or agreement with, any party, to sell and
         assign the same pursuant to this Agreement; and immediately upon the
         transfers and assignments herein contemplated, the Sponsor shall have
         transferred all of its right, title and interest in and to each
         Mortgage Loan and the Trustee will hold good, marketable and
         indefeasible title, to, and be the sole owner of, each Mortgage Loan
         subject to no Liens;

                                       10
<PAGE>

                (v)     As of the Closing Date with respect to the Mortgage
         Loans and the applicable Transfer Date with respect to any Eligible
         Substitute Mortgage Loans, the related Mortgage is a valid and
         subsisting first or second lien, as set forth on the Mortgage Loan
         Schedule with respect to each related Mortgaged Property, and as of the
         applicable Cut-Off Date the related Mortgaged Property is free and
         clear of all encumbrances and liens having priority over the first or
         second lien, as applicable, of such Mortgage except for liens for (i)
         real estate taxes and special assessments not yet delinquent; (ii) any
         first mortgage loan secured by such Mortgaged Property and specified on
         the Mortgage Loan Schedule; (iii) covenants, conditions and
         restrictions, rights of way, easements and other matters of public
         record as of the date of recording that are acceptable to mortgage
         lending institutions generally; and (iv) other matters to which like
         properties are commonly subject which do not materially interfere with
         the benefits of the security intended to be provided by such Mortgage;

                (vi)    As of the Closing Date with respect to the Mortgage
         Loans and the applicable Transfer Date with respect to any Eligible
         Substitute Mortgage Loans, there is no valid offset, defense or
         counterclaim of any obligor under any Loan Agreement or Mortgage;

                (vii)   As of the Closing Date with respect to the Mortgage
         Loans and the applicable Transfer Date with respect to any Eligible
         Substitute Mortgage Loans, there is no delinquent recording or other
         tax or fee or assessment lien against any related Mortgaged Property;

                (viii)  As of the Closing Date with respect to the Mortgage
         Loans and the applicable Transfer Date with respect to any Eligible
         Substitute Mortgage Loans, there is no proceeding pending or threatened
         for the total or partial condemnation of any Mortgaged Property, nor is
         such a proceeding currently occurring, and such property is undamaged
         by waste, fire, earthquake or earth movement, windstorm, flood, tornado
         or other casualty, so as to affect adversely the value of the Mortgaged
         Property as security for the Mortgage Loan or the use for which the
         premises were intended;

                (ix)    As of the Closing Date with respect to the Mortgage
         Loans and the applicable Transfer Date with respect to any Eligible
         Substitute Mortgage Loans, there are no mechanics' or similar liens or
         claims which have been filed for work, labor or material affecting the
         related Mortgaged Property which are, or may be, liens prior or equal
         to the lien of the related Mortgage, except liens which are fully
         insured against by the title insurance policy referred to in clause
         (xiv);

                (x)     No Minimum Monthly Payment is more than 59 days
         delinquent (measured on a contractual basis);

                (xi)    As of the Closing Date with respect to the Mortgage
         Loans and the applicable Transfer Date with respect to any Eligible
         Substitute Mortgage Loans, for each Mortgage Loan, the related Mortgage
         File contains each of the documents and instruments specified to be
         included therein;

                                       11
<PAGE>

                (xii)   The related Loan Agreement and the related Mortgage at
         origination complied in all material respects with applicable state and
         federal laws, including, without limitation, usury, truth-in-lending,
         real estate settlement procedures, consumer credit protection, equal
         credit opportunity or disclosure laws applicable to the Mortgage Loans
         and consummation of the transactions contemplated hereby, including
         without limitation the receipt of interest, will not involve the
         violation or such laws;

                (xiii)  On the Closing Date with respect to the Mortgage Loans
         and to the extent not already included in such filing, on the
         applicable Transfer Date with respect to any Eligible Substitute
         Mortgage Loans, the Sponsor has filed UCC-1 financing statements with
         respect to such Mortgage Loans.

                (xiv)   A lender's policy of title insurance, expressClose.com
         lender master protection program (standard mortgage guaranty) or a
         commitment (binder) to issue the same or an attorney's certificate or
         opinion of title was effective on the date of the origination of each
         mortgage loan and each such policy or certificate or opinion of title
         is valid and remains in full force and effect;

                (xv)    As of the Closing Date with respect to the Mortgage
         Loans and the applicable Transfer Date with respect to any Eligible
         Substitute Mortgage Loans, none of the Mortgaged Properties is a mobile
         home or a manufactured housing unit;

                (xvi)   As of the Cut-Off Date for the Mortgage Loans no more
         than (a) 0.63% of the Pool I Mortgage Loans (by Pool I Balance), or (b)
         1.73% of the Pool II Mortgage Loans (by Pool II Balance) are secured by
         Mortgaged Properties located in one United States postal zip code;

                (xvii)  The Combined Loan-to-Value Ratio for each Pool I
         Mortgage Loan was not in excess of 100% and the Combined Loan-to-Value
         Ratio for each Pool II Mortgage Loan was not in excess of 100%;

                (xviii) Each Pool I Mortgage Loan conforms to all applicable
         loan origination standards with respect to loan balances as of the date
         of origination set forth by Freddie Mac.

                (xix)   No selection procedure reasonably believed by the
         Sponsor to be adverse to the interests of the Securityholders, the
         Insurer or Freddie Mac was utilized in selecting the Mortgage Loans;

                (xx)    The Sponsor has not transferred the Mortgage Loans to
         the Trust with any intent to hinder, delay or defraud any of its
         creditors;

                (xxi)   The Minimum Monthly Payment with respect to any Mortgage
         Loan is not less than the interest accrued at the applicable Loan Rate
         on the average daily Principal Balance during the interest period
         relating to the date on which such Minimum Monthly Payment is due;

                                       12
<PAGE>

                (xxii)  As of the Closing Date with respect to the Mortgage
         Loans and the applicable Transfer Date with respect to any Eligible
         Substitute Mortgage Loans, each Loan Agreement and each Mortgage Loan
         is a legal, valid and binding obligation and is an enforceable
         obligation of the related Mortgagor, except as the enforceability
         thereof may be limited by the bankruptcy, insolvency or similar laws
         affecting creditors' rights generally;

                (xxiii)  As of the Closing Date with respect to the Mortgage
         Loans and the applicable Transfer Date with respect to any Eligible
         Substitute Mortgage Loans, there has been no default of any senior
         mortgage loan related to a Mortgaged Property that has not been cured
         by a party other than the Servicer;

                (xxiv)  The terms of each Mortgage Note and each Mortgage have
         not been impaired, altered or modified in any respect, except by a
         written instrument which (if such instrument is secured by real
         property) has been recorded, if necessary, to protect the interest of
         the Securityholders and which has been delivered to the Trustee. The
         substance of any such alteration or modification is reflected on the
         related Mortgage Loan Schedule and has been approved by the primary
         mortgage guaranty insurer, if any;

                (xxv)   The definition of "prime rate" in each Credit Line
         Agreement relating to a HELOC Mortgage Loan does not differ materially
         from the definition in the form of Credit Line Agreement in Exhibit D;

                (xxvi)  The weighted average remaining term to maturity of the
         Pool I Mortgage Loans on a contractual basis as of the related Cut-Off
         Date is approximately 205 months and for the Pool II Mortgage Loans is
         approximately 203 months. On each date that the Loan Rates relating to
         HELOC Mortgage Loans have been adjusted, interest rate adjustments on
         the HELOC Mortgage Loans were made in compliance with the related
         Mortgages and Credit Line Agreement and applicable law. Over the term
         of each HELOC Mortgage Loan, the Loan Rate may not exceed the related
         Loan Rate Cap, if any. With respect to the Pool I HELOC Mortgage Loans,
         the weighted average Loan Rate Cap is approximately 18.000%. With
         respect to the Pool II HELOC Mortgage Loans, the weighted average Loan
         Rate Cap is approximately 18.000%. With respect to the Pool I HELOC
         Mortgage Loans, the margins range between 0.000% and 7.500% and the
         weighted average margin is approximately 2.903% as of the related
         Cut-Off Date. With respect to the Pool II HELOC Mortgage Loans, the
         margins range between 0.000% and 6.500% and the weighted average margin
         is approximately 2.698% as of the related Cut-Off Date. The Loan Rates
         on the Pool I Mortgage Loans range between 5.875% and 18.000%, the Loan
         Rates on the Pool II Mortgage Loans range between 5.875% and 18% and
         the weighted average Loan Rate is approximately 8.749% for Pool I and
         8.977% for Pool II;

                (xxvii)  As of the Closing Date with respect to the Mortgage
         Loans and the applicable Transfer Date with respect to any Eligible
         Substitute Mortgage Loans, each Mortgaged Property consists of a single
         parcel of real property with a one-to-four unit single family residence
         erected thereon, or an individual condominium unit, planned unit
         development unit or townhouse;

                                       13
<PAGE>

                (xxviii) No more than 29.08% (by Pool I Balance) of the Pool I
         Mortgage Loans are secured by real property improved by individual
         condominium units, planned development units or two-to-four family
         residences erected thereon, and approximately 70.92% (by Pool I
         Balance) of the Pool I Mortgage Loans are secured by real property with
         a one-family residence erected thereon;

                         No more than 27.89% (by Pool II Balance) of the Pool II
         Mortgage Loans are secured by real property improved by individual
         condominium units, planned development units or two-to-four family
         residences erected thereon, and approximately 72.11% (by Pool II
         Balance) of the Pool II Mortgage Loans are secured by real property
         with a one-family residence erected thereon;

                (xxix)   Each Mortgage Note evidencing a Closed End Mortgage
         Loan is comprised of one original promissory note and each such
         promissory note constitutes an "instrument" for purposes of Section
         9-105(1)(i) of the UCC. There is no obligation on the part of the
         Sponsor or any other party to make payments in addition to those made
         by the Mortgagor with respect to the Closed End Mortgage Loans;

                (xxx)    The Credit Limits on the Pool I HELOC Mortgage Loans
         range between $10,000 and $241,000 with an average of approximately
         $51,858. The Credit Limits on the Pool II HELOC Mortgage Loans range
         between $4,800 and $750,000 with an average of approximately $128,173.
         The Principal Balances on the Pool I HELOC Mortgage Loans range between
         $0 and $240,318 with an average of approximately $40,287. The Principal
         Balances on the Pool II HELOC Mortgage Loans range between $0 and
         $750,000 with an average of approximately $91,494. The Principal
         Balances on the Pool I Closed End Mortgage Loans range between $7,087
         and $175,000 with an average of approximately $41,340. The average
         Credit Limit Utilization Rate (weighted by credit line) of the Pool I
         HELOC Mortgage Loans is approximately 77.69% and of the Pool II HELOC
         Mortgage Loans is approximately 71.38%;

                (xxxi)   Substantially all of the Mortgage Loans are second
         liens, and either (A) no consent for each Mortgage Loan was required by
         the holder of the related senior lien, if any, prior to the making of
         such Mortgage Loan or (B) such consent has been obtained and is
         contained in the related Mortgage File;

                (xxxii)  This Agreement constitutes a valid transfer and
         assignment to the Trust of all right, title and interest of the Sponsor
         in and to the Cut-Off Date Principal Balances with respect to the
         applicable Mortgage Loans, all monies due or to become due with respect
         thereto and all proceeds of such Cut-Off Date Principal Balances with
         respect to the Mortgage Loans and such funds as are from time to time
         deposited in the Collection Account (excluding any investment earnings
         thereon) and all other property specified in the definition of "Trust"
         as being part of the corpus of the Trust conveyed to the Trust, and
         upon payment for the Additional Balances, will constitute a valid
         transfer and assignment to the Trustee of all right, title and interest
         of the Sponsor in and to the Additional Balances, all monies due or to
         become due with respect thereto, and all proceeds of such Additional
         Balances and all other property specified in the definition of "Trust"
         relating to the Additional Balances;

                                       14
<PAGE>

                (xxxiii) As of the Closing Date, no Mortgage Loan is the subject
         of foreclosure proceedings and, to the best of the Sponsor's knowledge,
         no obligor of any of the Mortgage Loans has filed for bankruptcy
         protection;

                (xxxiv)  The proceeds of each Closed End Mortgage Loan have been
         fully disbursed, and there is no obligation on the part of the
         mortgagee to make future advances thereunder. Any and all requirements
         as to completion of any on-site or off-site improvements and as to
         disbursements of any escrow funds therefor have been complied with. All
         costs, fees and expenses incurred in making or closing or recording
         such Closed End Mortgage Loans were paid;

                (xxxv)   Each Mortgage contains customary and enforceable
         provisions which render the rights and remedies of the holder thereof
         adequate for the realization against the related Mortgaged Property of
         the benefits of the security, including (A) in the case of a Mortgage
         designated as a deed of trust, by trustee's sale and (B) otherwise by
         judicial foreclosure;

                (xxxvi)  As of the Closing Date with respect to the Mortgage
         Loans and the applicable Transfer Date with respect to any Eligible
         Substitute Mortgage Loan, there is no default, breach, violation or
         event of acceleration existing under any Mortgage or the related
         Mortgage Note and no event which, with the passage of time or with
         notice and the expiration of any grace or cure period, would constitute
         a default, breach, violation or event of acceleration; and the Sponsor
         has not waived any default, breach, violation or event of acceleration;

                (xxxvii) To the best knowledge of the Sponsor, all parties to
         the Mortgage Note and the Mortgage had legal capacity to execute the
         Mortgage Note and the Mortgage and each Mortgage Note and Mortgage have
         been duly and properly executed by such parties; Each Mortgage and
         Mortgage Note is the legal, valid and binding obligation of the related
         Mortgagor and is enforceable by the Issuer against the Mortgagor in
         accordance with its terms, except only as such enforcement may be
         limited by bankruptcy, insolvency, reorganization, moratorium or other
         similar laws affecting the enforcement of creditors' rights generally
         and by law;

                (xxxviii) As of the Cut-Off Date no more than 0.16% of the
         Principal Balance of the Pool I Mortgage Loans nor more than 0.19% of
         the Principal Balance of the Pool II Mortgage Loans represents Mortgage
         Loans with respect to which the related Mortgagor had a Credit Score of
         600 or less at the time of origination or whose Credit Score was
         unavailable.

                (xxxix)  As of the Closing Date with respect to the Mortgage
         Loans and the applicable Transfer Date with respect to any Eligible
         Substitute Mortgage Loan, no Mortgagor has been released, in whole or
         in part, except in connection with an assumption agreement which has
         been approved by the applicable title insurer (to the extent required
         by such title insurer) and which is part of the Mortgage File delivered
         to the Trustee;

                                       15
<PAGE>

                (xl)     At the time of origination of each Mortgage Loan, the
         related prior lien was not more than 30 days delinquent. Additionally,
         as of the Closing Date, no senior mortgage loan on the related
         Mortgaged Property was more than 59 days delinquent;

                (xli)    All required inspections, licenses and certificates
         with respect to the use and occupancy of all occupied portions of all
         property securing the Mortgages have been made, obtained or issued, as
         applicable;

                (xlii)   With respect to the Pool I Mortgage Loans, if the
         improvements securing a Mortgage Loan were in a federally designated
         special flood hazard area as of the date of origination, flood
         insurance to the extent required in Section 3.04 hereof covers the
         related Mortgaged Property (either by coverage under the federal flood
         insurance program or by coverage by private insurers);

                (xliii)  With respect to each Mortgage Loan, the related prior
         lien does not provide for negative amortization;

                (xliv)   With respect to each Mortgage Loan, the maturity date
         of the Mortgage Loan is prior to the maturity date of the related prior
         lien if such prior lien provides for a balloon payment;

                (xlv)    With respect to the Pool I Mortgage Loans, all amounts
         received after the Cut-Off Date with respect to the Mortgage Loans to
         which the Sponsor is not entitled will be deposited into the Collection
         Account within one Business Day after the Closing Date;

                (xlvi)   Each Pool I Mortgage Loan is secured by a property
         having an appraised value as of origination of $334,539 or less and
         each Pool II Mortgage Loan is secured by a property having an appraised
         value as of origination of $562,260 or less;

                (xlvii)  With respect to the Pool I Mortgage Loans, there are no
         defaults in complying with the terms of the Mortgage, and either (1)
         any taxes, governmental assessments, insurance premiums, water, sewer
         and municipal changes or ground rents which previously became due and
         owing have been paid, or (2) an escrow of funds has been established in
         an amount sufficient to pay for every such item which remains unpaid
         and which has been assessed but is not yet due and payable. There are
         no defaults in complying with the terms of any senior mortgage on the
         related Mortgaged Property that have not been cured by anyone other
         than the Servicer. Except for payments in the nature of escrow
         payments, including without limitation, taxes and insurance payments,
         the Sponsor has not advanced funds, or induced, solicited or knowingly
         received any advance of funds by a party other than the Mortgagor,
         directly or indirectly, for the payment of any amount required by the
         Mortgage Note, except for interest accruing from the date of the
         Mortgage Note or date of disbursement of the Mortgage proceeds,
         whichever is greater, to the day which precedes by one month the Due
         Date of the first installment of principal and interest;

                (xlviii) With respect to each Mortgage Loan, the improvements
         upon each Mortgaged Property are covered by a valid and existing hazard
         insurance policy with a

                                       16
<PAGE>

         carrier generally acceptable to the Servicer that provides for fire and
         extended coverage representing coverage not less than (a) the Credit
         Limit of such HELOC Mortgage Loan or (b) the Cut-Off Date Principal
         Balance of such Closed End Mortgage Loan or (c) the maximum insurable
         value of the Mortgaged Property;

                (xlix)   With respect to the Pool I Mortgage Loans, no
         misrepresentation of a material fact or fraud in respect of the
         origination, modification or amendment of any Mortgage Loan has taken
         place on the part of any person, including, without limitation, the
         related Mortgagor, any appraiser, any builder or developer or any party
         involved in the origination of such Mortgage Loan;

                (l)      With respect to the Pool I Mortgage Loans, the terms of
         the Mortgage Note and the Mortgage have not been impaired, altered or
         modified in any material respect, except by a written instrument which
         has been recorded or is in the process of being recorded, if necessary,
         to protect the interests of the Securityholders and which has been or
         will be delivered to the Document Custodian on behalf of the Trustee;

                (li)     With respect to the Pool I Mortgage Loans, as of the
         Cut-Off Date, no Mortgage Loan is 30 or more days delinquent in payment
         of principal and interest. In addition, none of the Mortgage Loans have
         been 30 or more days delinquent in the last 12 months and none of the
         Mortgage Loans have been 30 or more days delinquent for two payment
         periods in the last 12 months;

                (lii)    With respect to the Pool I Mortgage Loans, 12.84% of
         the Mortgage Loans, as of the Closing Date, are fixed rate Mortgage
         Loans having an original term to maturity from the date on which the
         first monthly payment is due of not more than 30 years. Each Mortgage
         Note with respect to a fixed rate and balloon Mortgage Note will
         provide for a schedule of substantially level and equal Monthly
         Payments which are sufficient to amortize fully the principal balance
         of such Mortgage Loan over a period of time equal to the amortization
         period of such Mortgage Note; provided, however, that certain Mortgage
         Loans constituting approximately 5.03% of the Cut-Off Date Aggregate
         Loan Balance are balloon loans that provide for final monthly payment
         substantially greater than the preceding monthly payments. All such
         balloon loans provide for monthly payment based upon a 30 year
         amortization schedule with a final balloon payment no later than the
         15th year.

                (liii)   With respect to the Pool I Mortgage Loans, except for
         Mortgage Loans that are delinquent for a time period less than that set
         forth in (li) above, there is no default, breach, violation or event of
         acceleration existing under any Mortgage or the related Mortgage Note
         and no event which, with the passage of time or with notice and the
         expiration of any grace or cure period, would constitute a default,
         breach, violation or event of acceleration; and neither the Sponsor,
         nor any other entity involved in originating or servicing a Mortgage
         Loan, has waived any default, breach, violation or event of
         acceleration;

                (liv)    With respect to the Pool I Mortgage Loans, none of the
         Mortgage Loans are cooperative share mortgages;

                                       17
<PAGE>

                (lv)     With respect to the Pool I Mortgage Loans, each
         appraisal of a Mortgage Loan that was used to determine the appraised
         value of the related Mortgaged Property was conducted generally in
         accordance with customary industry standards and included an assessment
         of the fair market value of the related mortgaged property at the time
         of the appraisal. The Mortgage File contains an appraisal of the
         applicable Mortgaged Property;

                (lvi)    With respect to the Pool I Mortgage Loans, all
         individual insurance policies contain a standard mortgagee clause
         naming the Sponsor, its successors and assigns, as mortgagee. All
         premiums thereon have been paid. Each Mortgage obligates the Mortgagor
         thereunder to maintain all such insurance at the Mortgagor's cost and
         expense, and upon the Mortgagor's failure to do so, authorizes the
         holder of the Mortgage to obtain and maintain such insurance at the
         Mortgagor's cost and expense and to seek reimbursement therefor from
         the Mortgagor;

                (lvii)   With respect to the Pool I Mortgage Loans, any advances
         made after the date of origination of a Mortgage Loan but prior to the
         Cut-Off Date have been consolidated with the outstanding principal
         amount secured by the related Mortgage, and the secured principal
         amount, as consolidated, bears a single interest rate and single
         repayment term reflected on the Mortgage Loan Schedule. The
         consolidated principal amount does not exceed the original principal
         amount of the related Mortgage Loan;

                (lviii)  With respect to the Pool I Mortgage Loans, there are no
         defaults in complying with the terms of the Mortgage, and either (1)
         any taxes, governmental assessments, insurance premiums, water, sewer
         and municipal changes or ground rents which previously became due and
         owing have been paid, or (2) an escrow of funds has been established in
         an amount sufficient to pay for every such item which remains unpaid
         and which has been assessed but is not yet due and payable. There are
         no defaults in complying with the terms of any senior mortgage on the
         related Mortgaged Property that have not been cured by anyone other
         than the Servicer. Except for payments in the nature of escrow
         payments, including without limitation, taxes and insurance payments,
         the Sponsor has not advanced funds, or induced, solicited or knowingly
         received any advance of funds by a party other than the Mortgagor,
         directly or indirectly, for the payment of any amount required by the
         Mortgage Note, except for interest accruing from the date of the
         Mortgage Note or date of disbursement of the Mortgage proceeds,
         whichever is greater, to the day which precedes by one month the due
         date of the first installment of principal and interest;

                (lix)    With respect to the Pool I Mortgage Loans, no
         improvement located on or being part of any Mortgaged Property is in
         violation of any applicable zoning law or regulation. All inspections,
         licenses and certificates required to be made or issued with respect to
         all occupied portions of each Mortgaged Property and, with respect to
         the use and occupancy of the same, including but not limited to
         certificates of occupancy and fire underwriting certificates, have been
         made or obtained from the appropriate authorities and such Mortgaged
         Property is lawfully occupied under the applicable law;

                                       18
<PAGE>

                (lx)     With respect to the Pool I Mortgage Loans, the proceeds
         of each fixed rate and balloon Mortgage Loan have been fully disbursed
         and there is no obligation on the part of the mortgagee to make future
         advances thereunder and any and all requirements as to completion of
         any on-site or off-site improvements and as to disbursement of any
         escrow funds therefor have been complied with. All costs , fees and
         expenses incurred in making, closing or recording the Mortgage Loans
         were paid and the Mortgagor is not entitled to any refund of amounts
         paid or due under the Mortgage Note;

                (lxi)    With respect to the Pool I Mortgage Loans, no Mortgage
         Loan has a shared appreciation feature, or other contingent interest
         feature;

                (lxii)   With respect to the Pool I Mortgage Loans, all parties
         which have had any interest in the Mortgage Loan, whether as
         originator, mortgagee, assignee, pledgee or otherwise, are (or, during
         the period in which they held and disposed of such interest, were): (A)
         organized under the laws of such state, or (B) qualified to do business
         in such state, or (C) federal savings and loan associations or national
         banks having principal offices in such state, or (D) not doing business
         in such state so as to require qualification or licensing, or (E) not
         otherwise required or licensed in such state. To the best of Sponsor's
         knowledge, all parties which have had any interest in the Mortgage Loan
         were in compliance with any and all applicable licensing requirements
         of the laws of the state wherein the Mortgaged Property is located or
         were not required to be licensed in such state;

                (lxiii)  With respect to the Pool I Mortgage Loans, each
         document or instrument in the related Mortgage File is in a form
         generally acceptable to prudent mortgage lenders that regularly
         originate or purchase mortgage loans comparable to the Mortgage Loans
         for sale to prudent investors in the secondary market that invest in
         mortgage loans such as the Mortgage Loans;

                (lxiv)   With respect to the Pool I Mortgage Loans, each
         original Mortgage was recorded and all subsequent assignments of the
         original Mortgage (other than the assignment to the Trustee) have been
         recorded in the appropriate jurisdictions wherein such recordation is
         necessary to perfect the lien thereof as against creditors of the
         Sponsor, or is in the process of being recorded;

                (lxv)    With respect to the Pool I Mortgage Loans, no Mortgage
         Loan was originated under a buydown plan;

                (lxvi)   With respect to the Pool I Mortgage Loans, no Mortgage
         Loan is subject to the requirements of the Home Ownership and Equity
         Protection Act of 1994 or any comparable state law;

                (lxvii)  With respect to the Pool I Mortgage Loans, the Servicer
         for each Mortgage Loan has accurately and fully reported its borrower
         credit files to each of the credit repositories in a timely manner;

                (lxviii) With respect to the Pool I Mortgage Loans, no proceeds
         from any Mortgage Loan were used to purchase single-premium credit
         insurance policies;

                                       19
<PAGE>

                (lxix)   With respect to the Pool I Mortgage Loans, no Mortgage
         Loan has a prepayment penalty term longer than three years after its
         origination;

                (lxx)    With respect to the Pool I Mortgage Loans, each
         Mortgage Loan conforms, and all Mortgage Loans in the aggregate
         conform, in all material respects, to the descriptions thereof set
         forth in the Information Circular and the Prospectus Supplement;

                (lxxi)   With respect to the Pool I Mortgage Loans, each
         Mortgage Loan was originated on or after November 9, 1996;

                (lxxii) With respect to the Pool I Mortgage Loans, the Sponsor
         represents and warrants that the Servicer currently operates or
         actively participates in an on-going business (A) to originate single
         family mortgage loans ("Loans"), and/or (B) to make periodic purchases
         of Loans from originators or sellers, and/or (C) to issue and/or
         purchase securities or bonds supported by the Loans, a portion of which
         Loans are made to borrowers who are:

                         (a) low-income families (families with incomes of 80%
                         or less of area median income) living in low-income
                         areas (a census tract or block numbering area in which
                         the median income does not exceed 80 percent of the
                         area median income); or

                         (b) very low-income families (families with incomes of
                         60% or less of area median income).

                (lxxiii) With respect to the Pool I Mortgage Loans, each
         Mortgage contains a provision for the acceleration of the payment of
         the unpaid principal balance of the related Mortgage Loan in the event
         the related Mortgaged Property is sold without the prior consent of the
         mortgagee thereunder;

                (lxxiv)  With respect to the Pool I Mortgage Loans, to the best
         of Sponsor's knowledge, no Mortgage Loan that is a second-lien Mortgage
         Loan has a principal balance as of the applicable Cut-Off Date in
         excess of half of Freddie Mac's loan limits for such type of residence;

                (lxxv)   To the best of Sponsor's knowledge, the pool of
         Mortgages backing the Class A-1 Certificates does not contain the first
         and second lien mortgage loans relating to a single Mortgaged property
         if the aggregate original principal balance of such mortgage loans
         exceeds Freddie Mac's loan limits. To the best of Sponsor's knowledge,
         the pool of Mortgages backing the Securities will not result in a
         violation of Freddie Mac's loan limitations;

                (lxxvi) With respect to the Pool I Mortgage Loans, each
         Mortgage Loan was originated substantially in accordance with
         Servicer's underwriting criteria, which conform to the underwriting
         criteria set forth in the Information Circular.

                                       20
<PAGE>

With respect to the representations and warranties set forth in this Section
2.05 that are made to the best of the Sponsor's knowledge or as to which the
Sponsor has no knowledge, if it is discovered by the Sponsor, the Servicer, the
Insurer, Freddie Mac or a Responsible Officer of the Trustee that the substance
of such representation and warranty is inaccurate and such inaccuracy materially
and adversely affects the value of the related Mortgage Loan then,
notwithstanding the Sponsor's lack of knowledge with respect to the substance of
such representation and warranty being inaccurate at the time the representation
or warranty was made, such inaccuracy shall be deemed a breach of the applicable
representation or warranty.

         (b)    It is understood and agreed that the representations and
warranties set forth in this Section 2.05 shall survive delivery of the
respective Mortgage Files to the Trustee pursuant to Section 2.01 and the
termination of the rights and obligations of the Servicer pursuant to Section
5.04 or 6.02. Upon discovery by the Sponsor, the Servicer, the Insurer, Freddie
Mac or a Responsible Officer of the Trustee of a breach of any of the foregoing
representations and warranties, without regard to any limitation set forth
therein concerning the knowledge of the Sponsor as to the facts stated therein,
which materially and adversely affects the interests of the Trust or the
Securityholders or the Insurer or Freddie Mac in the related Mortgage Loans, the
party discovering such breach shall give prompt written notice to the other
parties and to the Insurer and Freddie Mac. Within 90 days of its discovery or
its receipt of notice of such breach, the Sponsor shall use all reasonable
efforts to cure such breach in all material respects or shall, not later than
the Business Day next preceding the Payment Date in the month following the
Collection Period in which any such cure period expired (or such later date that
is acceptable to the Trustee or the Controlling Party as evidenced by their
written consents), either (a) accept a transfer of such Mortgage Loan from the
Trust or (b) substitute an Eligible Substitute Mortgage Loan, each in the same
manner and subject to the same conditions as set forth in Section 2.03;
provided, however, that the cure for any breach of a representation and warranty
relating to the characteristics of the Mortgage Loans in the aggregate shall be
a repurchase of or substitution for only the Mortgage Loans necessary to cause
such characteristics to be in compliance with the related representation and
warranty. Upon accepting such transfer and making any required deposit into the
Collection Account or substitution of an Eligible Substitute Mortgage Loans, as
the case may be, the Sponsor shall be entitled to receive an instrument of
assignment or transfer from the Trustee to the same extent as set forth in
Section 2.03 with respect to the transfer of Mortgage Loans under that Section.
Freddie Mac shall be notified of any substitution of an Eligible Substitute
Mortgage Loan.

         It is understood and agreed that the obligation of the Sponsor to
accept a removal of a Mortgage Loan as to which a breach has occurred and is
continuing and to make any required deposit in the Collection Account or to
substitute an Eligible Substitute Mortgage Loan, as the case may be, shall
constitute the sole remedy against the Sponsor respecting such breach available
to Securityholders, the Trustee on behalf of Securityholders, the Insurer and
Freddie Mac; provided, however, that the Sponsor shall defend and indemnify the
Trustee, the Insurer, Freddie Mac and the Securityholders against all reasonable
costs and expenses, and all losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel and the amount of any settlement entered
into with the consent of the Sponsor (such consent not to be unreasonably
withheld), which may be asserted against or incurred by any of them as a result
of any third-party action arising out of any breach of any such representation
and warranty. Notwithstanding the foregoing, with regard to any breach of the
representation and warranty set

                                       21
<PAGE>

forth in Section 2.05(a)(xxix), the Sponsor shall pay to the Trust the sum of
(i) the amount of the related Principal Balances, plus unpaid accrued interest
on each such Principal Balance at the applicable Loan Rate to the date of
payment, (ii) the amount of any loss suffered by the Securityholders, the
Insurer or Freddie Mac with respect to the affected Mortgage Loans and (iii) all
amounts owing to the Insurer pursuant to the Insurance Agreement.

         The Sponsor does hereby assign to the Trust the benefits of the
representations and warranties made to it with respect to the Mortgage Loans
under the Mortgage Loan Purchase Agreement and the Trust may exercise the rights
with respect thereto relating to a Mortgage Loan, including the right to require
repurchase in the event such Mortgage Loan is not repurchased by the Sponsor

         Section 2.06.    Covenants of the Sponsor. The Sponsor hereby covenants
that:

         (a)    Security Interests. The Sponsor will not sell, pledge, assign or
transfer to any other Person, or grant, create, incur, assume or suffer to exist
any Lien on any Mortgage Loans, whether now existing or hereafter created, or
any interest therein; the Sponsor will notify the Trustee, the Insurer and
Freddie Mac of the existence of any Lien on any Mortgage Loans immediately upon
discovery thereof; and the Sponsor will defend the Trust's right, title and
interest (including the Trust's security interest) in, to and under the Mortgage
Loans, whether now existing or hereafter created, against all claims of third
parties claiming through or under the Sponsor; provided, however, that nothing
in this Section 2.06(a) shall prevent or be deemed to prohibit the Sponsor from
suffering to exist upon any of the Mortgage Loans any Liens for municipal or
other local taxes and other governmental charges if such taxes or governmental
charges shall not at the time be due and payable or if the Sponsor shall
currently be contesting the validity thereof in good faith by appropriate
proceedings and shall have set aside on its books adequate reserves with respect
thereto.

         (b)    UCC-1 Financing Statements. On the Closing Date with respect to
the Mortgage Loans and, to the extent not already included in such filing, on
the applicable Transfer Date with respect to any Eligible Substitute Mortgage
Loans, the Sponsor will file UCC-1 financing statements with respect to such
Mortgage Loans.

         (c)    Negative Pledge. The Sponsor hereby agrees not to transfer,
assign, exchange, pledge, finance, hypothecate, grant a security interest in or
otherwise convey the Residual Certificates except in accordance with Sections
5.05 and 6.02 hereof and in accordance with the Insurance Agreement and the
Trust Agreement.

         (d)    Downgrading. The Sponsor will not engage in any activity which
would result in a downgrading or withdrawal of the ratings on the Securities
without regard to the effect of the Policy.

         (e)    Amendment to Certificate of Incorporation. The Sponsor will not
amend its Certificate of Incorporation without prior written notice to the
Trustee and the Rating Agencies and the prior written consent of the Insurer
which consent shall not be unreasonably withheld.

                                       22
<PAGE>

         (f)    Principal Place of Business. The Sponsor's principal place of
business is in California, and the Sponsor will not change its principal place
of business without prior written notice to the Trustee, the Rating Agencies,
Freddie Mac and to the Insurer.

         Section 2.07.    Removal of Mortgage Loans at Election of Issuer.
Subject to the conditions set forth below and Section 8.2 of the Pooling
Agreement, the Issuer may, but shall not be obligated to, require the removal of
Mortgage Loans from Pool I and/or Pool II, from time to time, as of the close of
business on a Payment Date (each, a "Removal Date"). On the tenth Business Day
(the "Removal Notice Date") prior to the Removal Date designated in such notice,
the Issuer shall give the Trustee, the Insurer, Freddie Mac (with respect to
Pool I only) and the Servicer a notice of the proposed removal that contains a
list of the Mortgage Loans to be removed. Such removal of Mortgage Loans in Pool
I or Pool II shall be permitted upon satisfaction of the following conditions:

                (i)      The applicable Rapid Amortization Period shall not have
         commenced;

                (ii)     On the Removal Date, the related Overcollateralization
         Amount (after giving effect to the removal from the applicable Pool of
         the Mortgage Loans proposed to be removed) exceeds the related
         Specified Overcollateralization Amount;

                (iii)    The transfer of such Mortgage Loans on any Removal Date
         during the related Managed Amortization Period shall not, in the
         reasonable belief of the Sponsor, cause a Rapid Amortization Event with
         respect to the related Class of Securities to occur or an event which
         with notice or lapse of time or both would constitute such a Rapid
         Amortization Event and a Rapid Amortization Event has not occurred;

                (iv)     On or before the Removal Date, the Issuer shall have
         delivered to the Trustee a revised Mortgage Loan Schedule, reflecting
         the proposed transfer and the Removal Date, and the Servicer shall have
         marked the Electronic Ledger to show that the Mortgage Loans removed to
         the Issuer are no longer included in the applicable Pool;

                (v)      The Issuer shall represent and warrant that no
         selection procedures reasonably believed by the Issuer to be adverse to
         the interests of the Securityholders or the Insurer or Freddie Mac
         (with respect to Pool I only) were utilized in selecting the Mortgage
         Loans to be removed from the Applicable Pool;

                (vi)     In connection with each such removal of Mortgage Loans
         pursuant to this Section, each Rating Agency shall have received on or
         prior to the related Removal Notice Date notice of such proposed
         removal of Mortgage Loans and, prior to the Removal Date, shall have
         notified the Trustee, the Insurer and Freddie Mac (with respect to Pool
         I only) in writing that such removal of Mortgage Loans would not result
         in a reduction or withdrawal of its then current ratings of the Class
         A-1 Certificates or of the Class A-2 Notes, in either case without
         regard to the Policy or Guarantee, as applicable; and

                (vii)    The Issuer shall have delivered to the Trustee, the
         Insurer and Freddie Mac an Officer's Certificate certifying that the
         items set forth in subparagraphs (i) through (vi), inclusive, have been
         performed or are true and correct, as the case may be.

                                       23
<PAGE>

         The Trustee may conclusively rely on such Officer's Certificate, shall
         have no duty to make inquiries with regard to the matters set forth
         therein and shall incur no liability in so relying.

         Upon receiving the requisite information from the Issuer, the Servicer
shall perform in a timely manner those acts required of it, as specified above.
Upon satisfaction of the above conditions, on the Removal Date the Trustee shall
deliver, or cause to be delivered, to the Issuer the Mortgage File for each
Mortgage Loan being so transferred, and the Trustee shall execute and deliver to
the Issuer such other documents prepared by the Issuer as shall be reasonably
necessary to remove such Mortgage Loans from the applicable Pool. Any such
removal of Mortgage Loans shall be without recourse, representation or warranty
by or of the Trustee or the Trust to the Issuer. Freddie Mac and the Insurer
shall have the right to review any Mortgage Loans proposed to be removed
pursuant to this Section 2.07. Such review must be completed prior to the
Removal Date.

         Section 2.08.    Execution and Authentication of Securities. The
Trustee, on behalf of the Trust, has caused to be executed, authenticated and
delivered to or upon the order of the Sponsor, in exchange for the Trust,
concurrently with the sale, assignment and conveyance to the Trustee of the
Trust, Securities representing indebtedness of the Trust in authorized
denominations and the Residual Certificates, evidencing the ownership of the
Trust.

         Section 2.09.    Tax Treatment. It is the intention of the Sponsor and
the Residual Certificateholders that the Securities will be indebtedness of the
Sponsor for federal, state and local income and franchise tax purposes and for
purposes of any other tax imposed on or measured by income. The Sponsor, the
Trustee and each Securityholder (or Security Owner) by acceptance of its
Security (or, in the case of a Security Owner, by virtue of such Security
Owner's acquisition of a beneficial interest therein) agrees to treat the
Securities (or beneficial interest therein), for purposes of federal, state and
local income or franchise taxes and any other tax imposed on or measured by
income, as indebtedness of the Sponsor secured by the assets of the Trust and to
report the transactions contemplated by this Agreement on all applicable tax
returns in a manner consistent with such treatment. Each Securityholder agrees
that it will cause any Security Owner acquiring an interest in a Security
through it to comply with this Agreement as to treatment of the Securities as
indebtedness for federal, state and local income and franchise tax purposes and
for purposes of any other tax imposed on or measured by income. The Trustee will
prepare and file all tax reports required hereunder consistent with this
Agreement except as may be required by or provided in Section 3.15.

                                  ARTICLE III

                          ADMINISTRATION AND SERVICING
                                OF MORTGAGE LOANS

         Section 3.01.    The Servicer.

         (a)    The Servicer is hereby authorized to act as agent for the Trust
and in such capacity shall manage, service, administer and make collections on
the Mortgage Loans and perform the other actions under this Agreement. The
Servicer shall service and administer the

                                       24
<PAGE>

Mortgage Loans in a manner consistent with the terms of this Agreement and with
general industry practice and shall have full power and authority, acting alone
or through a subservicer, to do any and all things in connection with such
servicing and administration which it may deem necessary or desirable, it being
understood, however, that the Servicer shall at all times remain responsible to
the Trustee, the Securityholders, the Residual Certificateholders, the Insurer
and Freddie Mac for the performance of its duties and obligations hereunder in
accordance with the terms hereof. Any amounts received by any subservicer in
respect of a Mortgage Loan shall be deemed to have been received by the Servicer
whether or not actually received by it. Without limiting the generality of the
foregoing, the Servicer shall continue, and is hereby authorized and empowered
by the Trust, to execute and deliver, on behalf of the Trust, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge and all other comparable instruments, with respect to the Mortgage
Loans and with respect to the Mortgaged Properties and to make deposits to and
withdrawals from the Collection Account. The Trustee and the Owner Trustee
shall, upon the written request of a Servicing Officer, furnish the Servicer
with any powers of attorney and other documents necessary or appropriate to
enable the Servicer to carry out its servicing and administrative duties
hereunder. The Servicer in such capacity may also consent to the placing of a
lien senior to that of any Mortgage on the related Mortgaged Property, provided
that

                (i)      such Mortgage succeeded to a first lien position after
         the related Mortgage Loan was conveyed to the Trust and, immediately
         following the placement of such senior lien, such Mortgage is in a
         second lien position and the outstanding principal amount of the
         mortgage loan secured by such subsequent senior lien is no greater than
         the outstanding principal amount of the senior mortgage loan secured by
         the Mortgaged Property as of the date the related Mortgage Loan was
         originated; or

                (ii)     the Mortgage relating to such Mortgage Loan was in a
         second lien position as of the Cut-Off Date and the new senior lien
         secures a mortgage loan that refinances an existing first mortgage loan
         and the outstanding principal amount of the replacement first mortgage
         loan immediately following such refinancing is not greater than the
         outstanding principal amount of such existing first mortgage loan at
         the date of origination of such Mortgage Loan;

provided, further, that such senior lien does not secure a note that provides
for negative amortization.

         The Servicer may also, without prior approval from the Rating Agencies,
Freddie Mac or the Insurer, increase the Credit Limits on HELOC Mortgage Loans
included in Pool II provided that (i) new appraisals are obtained and the
Combined Loan-to-Value Ratios of the HELOC Mortgage Loans after giving effect to
such increase are less than or equal to the Combined Loan-to-Value Ratios of the
Mortgage Loans as of the Cut-Off Date and (ii) such increases are consistent
with the Servicer's credit and collection policies. No material change or
departure from the Servicer's credit and collection policies with respect to any
Mortgage Loans as in effect as of the Closing Date shall be permitted without
the prior written consent of the Insurer and of Freddie Mac.

                                       25
<PAGE>

         In addition, the Servicer may agree to changes in the terms of a
Mortgage Loan at the request of the Mortgagor; provided that (i) such changes do
not materially and adversely affect the interests of Securityholders, Residual
Certificateholders, Freddie Mac or the Insurer, (ii) such changes are consistent
with prudent and customary business practice as evidenced by a certificate
signed by a Servicing Officer delivered to the Trustee, the Insurer and Freddie
Mac and (iii) the Rating Agencies and Freddie Mac are promptly notified of the
changes.

         In addition to the foregoing, the Servicer may solicit Mortgagors to
change any other terms of the related Mortgage Loans; provided that such changes
(i) do not materially and adversely affect the interest of Securityholders, the
Insurer or Freddie Mac and (ii) are consistent with prudent and customary
business practice as evidenced by a certificate signed by a Servicing Officer
delivered to the Trustee, the Insurer and Freddie Mac. Nothing herein shall
limit the right of the Servicer to solicit Mortgagors with respect to new loans
(including mortgage loans) that are not Mortgage Loans.

         The relationship of the Servicer (and of any successor to the Servicer
as servicer under this Agreement) to the Trustee under this Agreement is
intended by the parties to be that of an independent contractor and not that of
a joint venturer, partner or agent.

         (b)    In the event that the rights, duties and obligations of the
Servicer are terminated hereunder, any successor to the Servicer in its sole
discretion may, to the extent permitted by applicable law, terminate the
existing subservicer arrangements with any subservicer, without charge, or
assume the terminated Servicer's rights under such subservicing arrangements
which termination or assumption will not violate the terms of such arrangements.

         Section 3.02.    Collection of Certain Mortgage Loan Payments.

         (a)    Collection of Certain Mortgage Loan Payments. Servicer shall
make reasonable efforts to collect all payments called for under the terms and
provisions of the Mortgage Loans, and shall, to the extent such procedures shall
be consistent with this Agreement, follow such collection procedures as it
follows with respect to home equity loans in its servicing portfolio comparable
to the Mortgage Loans. Consistent with the foregoing, and without limiting the
generality of the foregoing, the Servicer may in its discretion (i) waive any
late payment charge or any assumption fees or other fees which may be collected
in the ordinary course of servicing such Mortgage Loans and (ii) arrange with a
Mortgagor a schedule for the payment of interest due and unpaid; provided that
such arrangement is consistent with the Servicer's policies with respect to the
Mortgage Loans it owns or services; provided, further, that notwithstanding such
arrangement such Mortgage Loans will be included in the information regarding
delinquent Mortgage Loans set forth in the Servicing Certificate and monthly
statement to Securityholders pursuant to Section 4.01.

         (b)    The Servicer shall on the Closing Date deposit into the
Collection Account any amounts representing payments on, and any collections in
respect of, the Mortgage Loans received after the related Cut-Off Date and prior
to the Closing Date (exclusive of payments in respect of accrued interest due on
or prior to such Cut-Off Date) and thereafter the Servicer, or the Sponsor, as
the case may be, shall deposit into the Collection Account within one Business

                                       26
<PAGE>

Day following receipt thereof the following payments and collections received or
made by it (without duplication):

                (i)      all collections on and in respect of the Mortgage
         Loans;

                (ii)     the amounts, if any, deposited to the Collection
         Account pursuant to Section 3.04;

                (iii)    Net Liquidation Proceeds;

                (iv)     Insurance Proceeds (including, for this purpose, any
         amount required to be credited by the Servicer pursuant to the last
         sentence of Section 3.04 and excluding the portion thereof, if any,
         that has been applied to the restoration or repair of the related
         Mortgaged Property or released to the related Mortgagor in accordance
         with the normal servicing procedures of the Servicer);

                (v)      any amounts required to be deposited therein pursuant
         to Section 7.01;

                (vi)     any amounts drawn under the Policy pursuant to Section
         8.4 of the Pooling Agreement; and

                (vii)    any amounts drawn pursuant to the Demand Note;

provided, however, that with respect to each Collection Period, the Servicer
shall be permitted to retain from payments in respect of interest on the
Mortgage Loans, the Servicing Fee for such Collection Period. The foregoing
requirements respecting deposits to the Collection Account are exclusive, it
being understood that, without limiting the generality of the foregoing, the
Servicer need not deposit in the Collection Account amounts representing
Foreclosure Profits, fees (including annual fees) or late charge penalties
payable by Mortgagors, or amounts received by the Servicer for the accounts of
Mortgagors for application towards the payment of taxes, insurance premiums,
assessments, excess pay off amounts and similar items. The Servicer shall remit
all Foreclosure Profits to the Sponsor.

         The Trustee shall hold amounts deposited in the Collection Account as
trustee for the Securityholders, the Insurer and Freddie Mac. The Servicer shall
notify the Trustee, the Insurer, and Freddie Mac in writing on each
Determination Date of the amount of payments and collections in the Collection
Account allocable to Interest Collections and Principal Collections for the
related Payment Date. Following such notification, the Servicer shall be
entitled to withdraw from the Collection Account and retain any amounts that
constitute income and gain realized from the investment of such payments and
collections.

         At the direction of the Servicer, the Trustee shall invest funds in the
Collection Account in Eligible Investments. All income and gain realized from
any investment in Eligible Investments of funds in the Collection Account shall
be for the benefit of the Servicer and shall be subject to its withdrawal from
time to time. The amount of any losses incurred in respect of the principal
amount of any such investments shall be deposited in the Collection Account by
the Servicer out of its own funds immediately as realized.

                                       27
<PAGE>

         Section 3.03.    Withdrawals from the Collection Account. From time to
time, withdrawals may be made from the Collection Account by the Servicer for
the following purposes:

                (i)      If not received by the Servicer pursuant to Section
         3.02(b), to the Servicer as payment for its Servicing Fee pursuant to
         Section 3.08;

                (ii)     To pay to the Servicer amounts on deposit in the
         Collection Account that are not to be included in the distributions and
         payments pursuant to Section 8.7 of the Pooling Agreement to the extent
         provided by the second to the last and the last paragraph of Section
         3.02(b);

                (iii)    To make or to permit the Paying Agent to make
         distributions and payments pursuant to Section 8.7 of the Pooling
         Agreement;

                (iv)     Prior to the Collection Period preceding the Rapid
         Amortization Commencement Date, to pay to the Sponsor the amount of any
         Additional Balances as and when created during the related Collection
         Period; provided, that the aggregate amount so paid to the Sponsor in
         respect of Additional Balances at any time during any Collection Period
         shall not exceed the amount of Principal Collections theretofore
         received for such Collection Period;

                (v)      To pay to the Servicer any Liquidation Expenses not
         reimbursed prior to the deposit of Net Liquidation Proceeds to the
         Collection Account;

                (vi)     Upon termination of the Trust, to make any payments
         required by Section 7.01.

         If the Servicer deposits in the Collection Account any amount not
required to be deposited therein or any amount in respect of payments by
Mortgagors made by checks subsequently returned for insufficient funds or other
reason for non-payment it may at any time withdraw such amount from the
Collection Account, and any such amounts shall not be included in the amounts to
be deposited in the Collection Account pursuant to Section 3.02(b), any
provision herein to the contrary notwithstanding.

         Section 3.04.    Maintenance of Hazard Insurance; Property Protection
Expenses. The Servicer shall cause to be maintained for each Mortgage Loan
hazard insurance naming the Servicer or the related subservicer as loss payee
thereunder providing extended coverage in an amount which is at least equal to
the lesser of (i) the maximum insurable value of the improvements securing such
Mortgage Loan from time to time or (ii) the combined principal balance owing on
such Mortgage Loan and any mortgage loan senior to such Mortgage Loan from time
to time. The Servicer shall also maintain on property acquired upon foreclosure,
or by deed in lieu of foreclosure, hazard insurance with extended coverage in an
amount which is at least equal to the lesser of (i) the maximum insurable value
from time to time of the improvements which are a part of such property or (ii)
the combined principal balance owing on such Mortgage Loan and any mortgage loan
senior to such Mortgage Loan at the time of such foreclosure or deed in lieu of
foreclosure plus accrued interest and the good-faith estimate of the Servicer of
related Liquidation Expenses to be incurred in connection therewith. Amounts

                                       28
<PAGE>

collected by the Servicer under any such policies shall be deposited in the
Collection Account to the extent called for by Section 3.02. In cases in which
any Mortgaged Property is located in a federally designated flood area, the
hazard insurance to be maintained for the related Mortgage Loan shall include
flood insurance. All such flood insurance shall be in such amounts as are
required under applicable guidelines of the Federal Flood Emergency Act. The
Servicer shall be under no obligation to require that any Mortgagor maintain
earthquake or other additional insurance and shall be under no obligation itself
to maintain any such additional insurance on property acquired in respect of a
Mortgage Loan, other than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance. If
the Servicer shall obtain and maintain a blanket policy consistent with prudent
industry standards insuring against hazard losses on all of the Mortgage Loans
in an aggregate amount prudent under industry standards, it shall conclusively
be deemed to have satisfied its obligations as set forth in the first sentence
of this Section 3.04 and if there shall have been a loss which would have been
covered by such policy, deposit in the Collection Account without right of
reimbursement, as the case may be, the amount not otherwise payable under the
blanket policy because of any deductible clause.

         Section 3.05.    Assumption and Modification Agreements. In any case in
which a Mortgaged Property has been or is about to be conveyed by the Mortgagor,
the Servicer shall exercise its right to accelerate the maturity of such
Mortgage Loan consistent with the then current practice of the Servicer and
without regard to the inclusion of such Mortgage Loan in the Trust. If it elects
not to enforce its right to accelerate or if it is prevented from doing so by
applicable law, the Servicer (so long as such action conforms with the
underwriting standards generally acceptable in the industry at the time for new
origination) is authorized to take or enter into an assumption and modification
agreement from or with the Person to whom such Mortgaged Property has been or is
about to be conveyed, pursuant to which such Person becomes liable under the
Loan Agreement and, to the extent permitted by applicable law, the Mortgagor
remains liable thereon. The Servicer shall notify the Trustee that any
assumption and modification agreement has been completed by delivering to the
Trustee an Officer's Certificate signed by a Servicing Officer certifying that
such agreement is in compliance with this Section 3.05 and by forwarding to the
Trustee the original copy of such assumption and modification agreement. Any
such assumption and modification agreement shall, for all purposes, be
considered a part of the related Mortgage File to the same extent as all other
documents and instruments constituting a part thereof. No change in the terms of
the related Loan Agreement may be made by the Servicer in connection with any
such assumption to the extent that such change would not be permitted to be made
in respect of the original Loan Agreement pursuant to the fourth paragraph of
Section 3.01(a). Any fee collected by the Servicer for entering into any such
agreement will be retained by the Servicer as additional servicing compensation.

         Section 3.06.    Realization Upon Defaulted Mortgage Loans; Repurchase
of Certain Mortgage Loans. The Servicer shall foreclose upon or otherwise
comparably convert to ownership Mortgaged Properties securing such of the
Mortgage Loans as come into and continue in default when, in the opinion of the
Servicer based upon the practices and procedures referred to in the following
sentence, no satisfactory arrangements can be made for collection of delinquent
payments pursuant to Section 3.02; provided, that if the Servicer has knowledge
or reasonably believes that any Mortgaged Property is affected by hazardous or
toxic wastes or substances and that the acquisition of such Mortgaged Property
would not be commercially

                                       29
<PAGE>

reasonable, then the Servicer will not cause the Trust to acquire title to such
Mortgaged Property in a foreclosure or similar proceeding. In connection with
such foreclosure or other conversion, the Servicer shall follow such practices
(including, in the case of any default on a related senior mortgage loan, the
advancing of funds to correct such default) and procedures as it shall deem
necessary or advisable and as shall be normal and usual in its general mortgage
servicing activities. The foregoing is subject to the proviso that the Servicer
shall not be required to incur any Liquidation Expenses or to otherwise expend
its own funds in connection with any foreclosure or towards the correction of
any default on a related senior mortgage loan or restoration of any property
unless it shall determine that such expenditure will increase Net Liquidation
Proceeds.

         In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Trustee, or to its nominee on behalf of the Trust.

         The Servicer, in its sole discretion, shall have the right but not the
obligation to purchase for its own account from the Trust any Mortgage Loan
which is 91 days or more delinquent. The Servicer shall notify Freddie Mac and
the Insurer in writing of any such purchase. The price for any Mortgage Loan
purchased hereunder (which shall be at a purchase price equal to the Loan
Purchase Price thereof), shall be deposited in the Collection Account and the
Trustee, upon receipt of a certificate from the Servicer in the form of Exhibit
C-1 hereto, shall release or cause to be released to the Servicer the related
Mortgage File and shall execute and deliver such instruments of transfer or
assignment prepared by the Servicer, in each case without recourse,
representation or warranty, as shall be necessary to vest in the purchaser of
such Mortgage Loans any Mortgage Loans released pursuant hereto and the Servicer
shall succeed to all the Trustee's right, title and interest in and to such
Mortgage Loans and all security and documents related thereto. Such assignment
shall be an assignment outright and not for security. The Servicer shall
thereupon own such Mortgage Loans, and all security and documents, free of any
further obligation to the Trustee, the Insurer, Freddie Mac, the Securityholders
or the Residual Certificateholders with respect thereto.

         Section 3.07.    Trustee to Cooperate. On or before each Payment Date,
the Servicer will notify the Trustee of the payment in full of the Principal
Balance of any Mortgage Loan during the preceding Collection Period, which
notification shall be by a certification (which certification shall include a
statement to the effect that all amounts received in connection with such
payment which are required to be deposited in the Collection Account pursuant to
Section 3.02 have been so deposited or credited) of a Servicing Officer. Upon
any such payment in full, the Servicer is authorized to execute, pursuant to the
authorization contained in Section 3.01, if the assignments of Mortgage have
been recorded as required hereunder, an instrument of satisfaction regarding the
related Mortgage, which instrument of satisfaction shall be recorded by the
Servicer if required by applicable law and be delivered to the Person entitled
thereto. It is understood and agreed that no expenses incurred in connection
with such instrument of satisfaction or transfer shall be reimbursed from
amounts deposited in the Collection Account. If the Trustee is holding the
Mortgage Files, from time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, or in connection with the payment in full of
the Principal Balance of any Mortgage Loan shall, upon request of the Servicer
and delivery to the Trustee of a Request for Release substantially in the form
attached hereto as Exhibit C signed by a

                                       30
<PAGE>

Servicing Officer, release the related Mortgage File to the Servicer and the
Trustee shall execute such documents, in the forms provided by the Servicer, as
shall be necessary to the prosecution of any such proceedings or the taking of
other servicing actions. Such trust receipt shall obligate the Servicer to
return the Mortgage File to the Trustee when the need therefor by the Servicer
no longer exists unless the Mortgage Loan shall be liquidated, in which case,
upon receipt of a certificate of a Servicing Officer similar to that hereinabove
specified, the trust receipt shall be released by the Trustee.

         In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the Assignments of
Mortgage in accordance with the provisions hereof, the Trustee shall, if so
requested in writing by the Servicer, execute an appropriate assignment in the
form provided to the Trustee by the Servicer to assign such Mortgage Loan for
the purpose of collection to the Servicer or to the related subservicer (any
such assignment shall unambiguously indicate that the assignment is for the
purpose of collection only), and, upon such assignment, the Servicer will
thereupon bring all required actions in its own name and otherwise enforce the
terms of the Mortgage Loan and deposit the Net Liquidation Proceeds, exclusive
of Foreclosure Profits, received with respect thereto in the Collection Account.
In the event that all delinquent payments due under any such Mortgage Loan are
paid by the Mortgagor and any other defaults are cured, then the Servicer shall,
within two Business Days, reassign such Mortgage Loan to the Trustee and return
the related Mortgage File to the place where it was being maintained. The
Residual Certificateholders shall be deemed to have repurchased the ownership
interest in any Liquidated Mortgage Loan in Pool I beneficially held by Holders
of the Class A-1 Certificates. After such repurchase, the Servicer, if requested
by such Residual Certificateholders and if offered suitable indemnification and
reimbursement for expenses, is authorized to seek a deficiency judgment if
permitted by law against the Mortgagor under such Liquidated Mortgage Loan on
behalf of the Residual Certificateholders to the extent of any Liquidation Loss
Amount.

         Section 3.08.    Servicing Compensation; Payment of Certain Expenses by
Servicer. The Servicer shall be entitled to receive the Servicing Fee pursuant
to Section 3.03 as compensation for its services in connection with servicing
the Mortgage Loans. Moreover, additional servicing compensation in the form of
late payment charges or other receipts not required to be deposited in the
Collection Account (other than Foreclosure Profits) shall be retained by the
Servicer. The Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder (including payment of all other fees
and expenses not expressly stated hereunder to be for the account of the
Securityholders and the Residual Certificateholders) and shall not be entitled
to reimbursement therefor except as specifically provided herein. Liquidation
Expenses are reimbursable to the Servicer solely from related Liquidation
Proceeds.

         Section 3.09.    Annual Statement as to Compliance.

         (a)    The Servicer will deliver to the Trustee, the Insurer, Freddie
Mac and the Rating Agencies, on or before March 31 of each year, beginning March
31, 2001, an Officer's Certificate stating that (i) a review of the activities
of the Servicer during the preceding fiscal year (or such shorter period as is
applicable in the case of the first report) and of its performance under this
Agreement has been made under such officer's supervision and (ii) to the best of
such

                                       31
<PAGE>

officer's knowledge, based on such review, the Servicer has fulfilled all of its
material obligations under this Agreement throughout such fiscal year, or, if
there has been a default in the fulfillment of any such obligation, specifying
each such default known to such officer and the nature and status thereof.

         (b)    The Servicer shall deliver to the Trustee, the Insurer, Freddie
Mac and each of the Rating Agencies, promptly after having obtained knowledge
thereof, but in no event later than five Business Days thereafter, written
notice by means of an Officer's Certificate of any event which with the giving
of notice or the lapse of time or both, would become an Event of Servicing
Termination.

         Section 3.10.    Annual Servicing Report. On or before March 31 of each
year, beginning March 31, 2001, the Servicer, at its expense, shall cause a firm
of nationally recognized independent public accountants (who may also render
other services to the Servicer) to furnish a report to the Trustee, the Insurer,
Freddie Mac and each Rating Agency to the effect that such firm has examined
certain documents and records relating to the servicing of mortgage loans during
the most recent fiscal year then ended under pooling and servicing agreements
(substantially similar to this Agreement, including this Agreement), that such
examination was conducted substantially in compliance with the audit guide for
audits of non-supervised mortgagees approved by the Department of Housing and
Urban Development for use by independent public accountants (to the extent that
the procedures in such audit guide are applicable to the servicing obligations
set forth in such agreements) and that such examination has disclosed no items
of noncompliance with the provisions of this Agreement which, in the opinion of
such firm, are material, except for such items of noncompliance as shall be set
forth in such report.

         Section 3.11.    Annual Opinion of Counsel. On or before March 31 of
each year, beginning March 31, 2001, the Sponsor, at its expense, shall deliver
to the Trustee, the Insurer and Freddie Mac the applicable Opinion of Counsel
specified in Exhibit B hereto.

         Section 3.12.    Access to Certain Documentation and Information
Regarding the Mortgage Loans.

         (a)    Servicer shall provide to the Trustee, the Insurer, Freddie Mac,
any Securityholders that are federally insured savings and loan associations,
the Office of Thrift Supervision, successor to the Federal Home Loan Bank Board,
the FDIC and the supervisory agents and examiners of the Office of Thrift
Supervision access to the documentation regarding the Mortgage Loans required by
applicable regulations of the Office of Thrift Supervision and the FDIC (acting
as operator of the SAIF or the BIF), such access being afforded without charge
but only upon reasonable request and during normal business hours at the offices
of the Servicer. Nothing in this Section 3.12 shall derogate from the obligation
of the Servicer to observe any applicable law prohibiting disclosure of
information regarding the Mortgagors and the failure of the Servicer to provide
access as provided in this Section 3.12 as a result of such obligation shall not
constitute a breach of this Section 3.12.

         (b)    The Servicer shall supply information in such form as the
Trustee shall reasonably request to the Trustee and the Paying Agent, on or
before the start of the Determination Date

                                       32
<PAGE>

preceding the related Payment Date, as is required in the Trustee's reasonable
judgment to enable the Paying Agent or the Trustee, as the case may be, to make
required distributions and to furnish the required reports to Securityholders
and to make any claim under the Policy.

         Section 3.13.    Maintenance of Certain Servicing Insurance Policies.
The Servicer shall maintain, at its own expense, a blanket fidelity bond (the
"Fidelity Bond") and an errors and omissions insurance policy, with broad
coverage with financially responsible companies on all officers, employees, or
other persons acting in any capacity with regard to the Mortgage Loans to handle
funds, money, documents and papers relating to the Mortgage Loans. The Fidelity
Bond and errors and omissions insurance policy shall be in the form of the
Mortgage Banker's Blanket Bond and shall protect and insure the Servicer against
losses, including forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts of such persons. Such Fidelity Bond shall also protect and insure
the Servicer against losses in connection with the failure to maintain any
insurance policies required pursuant to this Agreement and the release or
satisfaction of a Mortgage Loan without having obtained payment in full of the
indebtedness secured thereby. No provision of this Section 3.13 requiring the
Fidelity Bond and errors and omissions insurance policy shall diminish or
relieve the Servicer from its duties and obligations as set forth in this
Agreement. The minimum coverage under any such bond and insurance policy shall
be at least equal to the corresponding amounts required by Freddie Mac in
Freddie Mac's Seller/Servicer's Guide. Upon request of the Trustee, the Servicer
shall cause to be delivered to the Trustee a certified true copy of the Fidelity
Bond and errors and omissions insurance policy and a statement from the surety
and the insurer that such Fidelity Bond and errors and omissions insurance
policy shall in no event be terminated or materially modified without thirty
days' prior written notice to the Trustee.

         Section 3.14.    Reports to the Securities and Exchange Commission. The
Trustee shall, on behalf of the Trust, cause to be filed with the Securities and
Exchange Commission any periodic reports required to be filed under the
provisions of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission thereunder. Upon the
request of the Trustee, each of the Servicer and the Sponsor shall cooperate
with the Trustee in the preparation of any such report and shall provide to the
Trustee in a timely manner all such information or documentation as the Trustee
may reasonably request in connection with the performance of its duties and
obligations under this Section.

         Section 3.15.    Tax Returns. In accordance with Section 2.09 hereof,
the Servicer shall prepare and file any Federal, State or local income and
franchise tax return for the Trust as well as any other applicable return and
apply for a taxpayer identification number on behalf of the Trust as provided in
Article V of the Trust Agreement, including, without limitation, forms 1099 and
1065. The Sponsor shall treat the Mortgage Loans as its property for all
Federal, State or local tax purposes and shall report all income earned thereon
(including amounts payable as fees to the Servicer) as its income for income tax
purposes. In the event the Trust shall be required pursuant to an audit or
administrative proceeding or change in applicable regulations to file Federal,
State or local tax returns, the Servicer shall prepare and file or shall cause
to be prepared and filed any tax returns required to be filed by the Trust; the
Trustee shall promptly sign such returns and deliver such returns after
signature to the Servicer and such returns shall be filed by the Servicer. The
Trustee shall also prepare or shall cause to be prepared all tax information
required by law to be distributed to Securityholders. In no event shall the
Trustee or the

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<PAGE>

Servicer be liable for any liabilities, costs or expenses of the Trust, the
Securityholders, the Residual Certificateholders or the Security Owners arising
under any tax law, including, without limitation, Federal, state or local income
and franchise or excise taxes or any other tax imposed on or measured by income
(or any interest or penalty with respect thereto or arising from a failure to
comply therewith). The Trustee shall represent the Trust in any administrative
or judicial proceedings relating to an examination or audit by any governmental
taxing authority or otherwise act on behalf of the Trust in relation to any tax
matter involving the Trust, provided, that to the extent that such
representation affects Freddie Mac's obligations under the Guarantee, the
Trustee agrees to consult with Freddie Mac and accommodate Freddie Mac's
reasonable requests.

         Section 3.16.    Information Required by the Internal Revenue Service
Generally and Reports of Foreclosures and Abandonments of Mortgaged Property.
The Servicer shall prepare and deliver all federal and state information reports
when and as required by all applicable state and federal income tax laws. In
particular, with respect to the requirement under Section 6050J of the Code to
the effect that the Servicer shall make reports of foreclosures and abandonments
of any mortgaged property for each year beginning in 2000, the Servicer shall
file reports relating to each instance occurring during the previous calendar
year in which the Servicer (i) on behalf of the Trustee acquires an interest in
any Mortgaged Property through foreclosure or other comparable conversion in
full or partial satisfaction of a Mortgage Loan, or (ii) knows or has reason to
know that any Mortgaged Property has been abandoned. The reports from the
Servicer shall be in form and substance sufficient to meet the reporting
requirements imposed by Section 6050J.

         Section 3.17.    Inspection Rights; Miscellaneous. (a) Within 90
days of the Closing Date, Freddie Mac will have the right to review up to 500 of
the Mortgage Files and the related underwriting documentation in order to
ascertain whether each Mortgage Loan was originated generally in accordance with
the Servicer's underwriting criteria.If Freddie Mac determines that more than
20% (by number) of the 500 Mortgage Loans in such sample were not so originated
in accordance with such the Servicer's underwriting criteria, Freddie Mac will
have the right to review additional Mortgage Loans until Freddie Mac has
reviewed a sample of Mortgage Loans less than 20% (by number) of which were not
so originated.

         With respect to any Mortgage Loan for which the value of the related
Mortgaged Property at the time of origination did not adequately support the
original loan amount of the Mortgage Loan due to the value, condition,
marketability or adverse environmental conditions of such Mortgaged Property,
the Sponsor shall repurchase such Mortgage Loan or replace such Mortgage Loan
with a substitute Mortgage Loan acceptable to Freddie Mac. In addition, Freddie
Mac shall have the right to collect data on an additional 1,200 Mortgage Loans
over and above the Mortgage Loans reviewed as described in the first paragraph
of this Section 3.17(a).

         Freddie Mac has the right to review any Mortgage Loan at any time. With
respect to any Mortgage Loan that goes into foreclosure, Freddie Mac will have
the right to request that the Servicer deliver a copy of the related Mortgage
File to Freddie Mac.

         (b)    Freddie Mac, for a period of two years from the Closing Date,
may contact the Servicer to confirm that the Servicer continues actively to
engage in a business to originate

                                       34
<PAGE>

mortgage loans to low-income families and to obtain other non-proprietary
information about the Sponsor's activities that may assist Freddie Mac in
completing its own regulatory requirements. The Servicer will use its best
efforts to provide such information to Freddie Mac.

         (c)    For each Mortgage Loan, the Servicer will accurately and fully
report its borrower credit files to each of Equifax Credit Information Services,
Inc., TransUnion, LLC and Experion Information Solution, Inc. in a timely manner
on a monthly basis.

         (d)    Freddie Mac, from time to time, shall have the right to audit
the Servicer's servicing practices and to review the Mortgage Files. The
Servicer shall forward to Freddie Mac all of its financial statements.

         (e)    The Servicer will not increase the applicable Credit Limit on
any HELOC Mortgage Loan included in Pool I.

         (f)    The Servicer will not allow any further draws on any HELOC
Mortgage Loan if the related borrower is (i) 90 days delinquent in payment of
principal and interest on such HELOC Mortgage Loan or (ii) 60 days delinquent in
payment of principal and interest on such HELOC Mortgage Loan, unless a payment
has been made by the borrower in the last 30 days on that HELOC Mortgage Loan.

                                   ARTICLE IV

                              SERVICING CERTIFICATE

         Section 4.01.    Servicing Certificate. Not later than seven (7)
Business Days prior to the Payment Date, the Servicer shall deliver (a) to the
Trustee, the Statement to each Class of Securityholders required to be prepared
pursuant to Section 8.8 of the Pooling Agreement and (b) to the Trustee, the
Sponsor, the Paying Agent, the Insurer, Freddie Mac and each Rating Agency a
Servicing Certificate (in written form or the form of computer readable media or
such other form as may be agreed to by the Trustee and the Servicer), together
with an Officer's Certificate to the effect that such Servicing Certificate is
true and correct in all material respects, stating the related Collection
Period, Payment Date, the series number of the Securities, the date of this
Agreement, and:

                (i)      the aggregate amount of collections received on the
         Mortgage Loans on or prior to the Determination Date in respect of such
         Collection Period;

                (ii)     the aggregate amount of (a) Interest Collections and
         (b) Principal Collections for such Collection Period;

                (iii)    the Class A-1 Certificate Rate and the Class A-2 Note
         Rate;

                (iv)     the amount, if any, of such Class A-1 Interest Payment
         Amount or Class A-2 Interest Payment Amount that is not payable on
         account of insufficient Securityholders' Interest Collections;

                                       35
<PAGE>

                (v)      the Accelerated Principal Payments to be distributed
         pursuant to Section 8.7(d)(viii) of the Pooling Agreement;

                (vi)     the Principal Collections for such Payment Date,
         separately stating the components thereof;

                (vii)    any accrued and unpaid Servicing Fees for previous
         Collection Periods and the Servicing Fee for such Collection Period;

                (viii)   the related Pool Balance for each Pool as of the end of
         the preceding Collection Period and as of the end of the second
         preceding Collection Period;

                (ix)     the Class A-1 Certificate Principal Balance and the
         Class A-2 Note Principal Balance and related Pool Factor after giving
         effect to the distribution on such Payment Date;

                (x)      the aggregate amount of Additional Balances created
         during the previous Collection Period;

                (xi)     by Pool and in the aggregate, the number and aggregate
         Principal Balances of Mortgage Loans (A) as to which the Minimum
         Monthly Payment is delinquent for 30-59 days, 60-89 days, 90-119 days,
         120-149 days, 150-179 days and 180 or more days respectively and (B)
         that have become REO, in each case as of the end of the preceding
         Collection Period; (C) as to which foreclosure proceedings have been
         commenced, and (D) in bankruptcy and delinquent as of the close of
         business on the last day of the calendar month preceding such
         Distribution Date;

                (xii)    whether a Rapid Amortization Event has occurred since
         the prior Determination Date, specifying each such Rapid Amortization
         Event if one has occurred;

                (xiii)   whether an Event of Servicing Termination has occurred
         since the prior Determination Date, specifying each such Event of
         Servicing Termination if one has occurred;

                (xiv)    the amount to be distributed to the Insurer or Freddie
         Mac pursuant to Section 8.7(d)(ii) and Section 8.7(d)(vii) of the
         Pooling Agreement, stated separately;

                (xv)     the amount to be distributed to the Reserve Fund
         pursuant to Section 8.7(d)(x) of the Pooling Agreement;

                (xvi)    Insured Payments, if any, for such Payment Date
         including any related Deficiency Amount and any related Preference
         Amount;

                (xvii)   the amount to be distributed to the related Residual
         Certificateholders pursuant to Section 8.7(d)(xiv) of the Pooling
         Agreement;

                (xviii)  the amount to be paid to the Servicer pursuant to
         Section 8.7(d)(xi) of the Pooling Agreement;

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<PAGE>

                (xix)    the total amount of funds on deposit in the Reserve
         Fund;

                (xx)     the related Overcollateralization Amount after giving
         effect to the distribution to be made on such Payment Date; and

                (xxi)    the number and Principal Balances of any Mortgage Loans
         removed to the Sponsor pursuant to Section 2.07;

                (xxii)   the amount to be drawn under the Demand Note;

                (xxiii)  the Six Month Rolling Pool Delinquency Rate for each
         Pool; and

                (xxiv)   the cumulative Liquidation Loss Amounts with respect to
         Pool I as a percentage of both the Initial Pool I Balance and the
         current Pool Balance with respect to Pool I and the cumulative
         Liquidation Loss Amounts with respect to Pool II as a percentage of
         both the Initial Pool II Balance and the current Pool Balance with
         respect to Pool II.

         The Trustee shall conclusively rely upon the information contained in a
Servicing Certificate for purposes of making distributions pursuant to Section
8.7 of the Pooling Agreement, shall have no duty to inquire into such
information and shall have no liability in so relying. The format and content of
the Servicing Certificate may be modified by the mutual agreement of the
Servicer, the Trustee, the Insurer and Freddie Mac. The Servicer shall give
notice of any such change to the Rating Agencies.

         Section 4.02.    Freddie Mac Certificate. On the Determination Date
prior to each Payment Date, the Trustee shall complete and deliver to Freddie
Mac, in an electronic format reasonably acceptable to Freddie Mac, certificates
as to each Payment Date in the form of the Freddie Mac Certificates attached
hereto as Exhibit F-1 hereto.

         Section 4.03.    The Trustee Remittance Report.

         (a)    On each Determination Date by noon Pacific coast time, the
Trustee shall furnish a report (the "Trustee Remittance Report") in the form
attached as Exhibit F-1 to this Agreement (together with a statement containing
the information that is required to be included in the statement to be prepared
by the Trustee pursuant to Section 4.03) to the Guarantor by electronic medium
as agreed to by the Trustee and the Guarantor.

         (b)    Subject to paragraph (d) below, if in any month the Trustee
fails to deliver the Trustee Remittance Report by 5:00 p.m. Pacific coast time
on the related Determination Date, the Guarantor shall use its best efforts to
determine the amount of any required Guarantor Payment. If on any Distribution
Date the Guarantor makes any Guarantor Payment as a result of the failure of the
Trustee to distribute any remittance, the Trustee shall pay the Guarantor from
its own funds (not from the proceeds of the Trust Fund), not later than the
fourth Business Day following such Distribution Date, a $100 fee plus an amount
equal to the product of (i) the principal portion of such Guarantor Payment,
(ii) a percentage equal to (A) the Prime Rate plus 2.00% divided by (B) 365 and
(iii) the number of days between the Determination Date and the date on which
the Guarantor received the Trustee Remittance Report.

                                       37
<PAGE>

         (c)    Subject to paragraph (d) below, if in any month the Trustee
fails to provide the Guarantor the Trustee Remittance Report on or prior to the
Determination Date, the Trustee shall pay to the Guarantor the following
amounts: (i) upon the first such failure, $500; (ii) upon the second such
failure, $750; and (iii) upon the third such failure, $1,000; provided, however,
that the Trustee shall not be required to make any such payment upon the first
such failure during each successive two year period following the Closing Date.
The fourth consecutive such failure to provide a Trustee Remittance Report to
the Guarantor pursuant to Section 4.05 (a) shall constitute an event of default
and permit the Guarantor to remove the Trustee for cause.

         (d)    The Trustee shall have no responsibility or liability (including
removal as Trustee) under paragraphs (b) and (c) of this Section 4.03 if the
Trustee's failure to timely deliver the Trustee Remittance Report is due to the
failure of the Servicer to furnish the Trustee with a report in accordance with
Section 4.03(a). If the Trustee's failure to timely deliver the Trustee
Remittance Report is due to the failure of the Servicer to furnish the Trustee
with a report in accordance with Section 4.03(a), the Servicer shall pay to the
Guarantor the amount set forth in Section 4.03(b) above (i.e., the product of
the amounts described in clauses (i), (ii) and (iii) of Section 4.03(b) above)
and the following additional amounts: (i) upon the first such failure, $500;
(ii) upon the second such failure, $750; and (iii) upon the third such failure,
$1,000; provided, however, that the Servicer shall not be required to make any
such payment upon the first such failure during each successive two year period
following the Closing Date. The fourth consecutive such failure to provide the
Trustee with a report to accordance with Section 4.04(a) and thereby causing the
Trustee's failure to timely deliver a Trustee Remittance Report to the Guarantor
pursuant to Section 4.03(a) shall constitute an Event of Servicing Termination
and permit the Guarantor to remove the Servicer for cause.

         (e)    On each Determination Date by 5:00 p.m. Pacific coast time, the
Trustee shall forward to the Guarantor by electronic medium as agreed to by the
Trustee and the Guarantor a report describing each Mortgage Loan that became a
Liquidated Mortgage Loan during the related Collection Period, any Liquidation
Proceeds received or Liquidation Loss Amounts incurred with respect to each such
Liquidated Mortgage Loan and Liquidation Expenses incurred in the liquidation of
any such Liquidated Mortgage Loan, in each case to the extent that the Trustee
has received from the Servicer a report providing such information.

         Section 4.04.    Loan Data Remittance Report.

         (a)    On the seventh Business Day before each Payment Date (the "Loan
Data Remittance Date") by 5:00 p.m. Pacific coast time, the Servicer shall
furnish a report (the "Loan Data Remittance Report") in the form attached as
Exhibit F-2 to this Agreement to the Guarantor by electronic medium as agreed to
by the Servicer and the Guarantor.

         (b)    If in any month the Servicer fails to provide the Guarantor the
Loan Data Remittance Report on or prior to the Loan Data Remittance Date, the
Servicer shall pay to the Guarantor the following amounts: (i) upon the first
such failure, $500; (ii) upon the second such failure, $750; and (iii) upon the
third such failure, $1,000; provided, however, that the Servicer shall not be
required to make any such payment upon the first such failure during each
successive two year period following the Closing Date. The fourth consecutive
such failure to

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<PAGE>

provide a Loan Data Remittance Report to the Guarantor pursuant to Section
4.04(a) shall constitute an event of default and permit the Guarantor to remove
the Servicer for cause.

         Section 4.05.    Reserve Fund.

         (a)    Amounts on deposit in the Reserve Fund will, at the direction of
the Servicer, be invested in Eligible Investments maturing no later than the day
before the next Payment Date.

         All income and gain realized from any investment of funds in the
Reserve Fund shall be considered part of the Reserve Fund until released
pursuant to the Pooling Agreement. Following that point all earnings shall go to
the Sponsor. The Sponsor will report for Federal, state and local income tax
purposes the income, if any, represented by the Reserve Fund.

         (b)    Following the termination of the Trust pursuant to Section 7.01
hereof, the Trustee shall withdraw all amounts then on deposit in the Reserve
Fund pursuant to the Pooling Agreement.

                                   ARTICLE V

                          THE SERVICER AND THE SPONSOR

         Section 5.01.    Liability of the Servicer and the Sponsor. The
Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically imposed upon and undertaken by the Servicer herein. The
Sponsor shall be liable in accordance herewith only to the extent of the
obligations specifically imposed upon and undertaken by the Sponsor.

         Section 5.02.    Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or the Sponsor. Any corporation into which the
Servicer or the Sponsor may be merged or consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Servicer or
the Sponsor shall be a party, or any corporation succeeding to the business of
the Servicer or the Sponsor, shall be the successor of the Servicer or the
Sponsor, as the case may be, hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.

         Section 5.03.    Limitation on Liability of the Servicer and Others.
Neither the Servicer nor any of the directors or officers or employees or agents
of the Servicer shall be under any liability to the Trust or the Securityholders
or Residual Certificateholders for any action taken or for refraining from the
taking of any action by the Servicer in good faith pursuant to this Agreement,
or for errors in judgment; provided, however, that this provision shall not
protect the Servicer or any such Person against any breach of representations
and warranties made herein, or against any specific liability imposed on the
Servicer for a breach of its servicing under this Agreement or against liability
which would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of duties of the Servicer or by reason of reckless
disregard of obligations and duties of the Servicer hereunder. The Servicer and
any director or officer or employee or agent of the Servicer may rely in good
faith on any document of any kind prima facie properly executed and submitted by
any Person respecting any matters arising hereunder. The Servicer and any
director or officer or employee or agent of the Servicer

                                       39
<PAGE>

shall be indemnified by the Trust and held harmless against any loss, liability
or expense incurred in connection with any legal action relating to this
Agreement or the Securities, other than any loss, liability or expense related
to any specific Mortgage Loan (except as any such loss, liability or expense
shall be otherwise reimbursable pursuant to this Agreement) and any loss,
liability or expense incurred by reason of its willful misfeasance, bad faith or
negligence, breach of representations and warranties made herein, or against any
specific liability imposed on the Servicer for a breach of its servicing under
this Agreement or against in the performance of duties hereunder or by reason of
its reckless disregard of obligations and duties hereunder. The Servicer shall
not be under any obligation to appear in, prosecute or defend any legal action
which is not incidental to duties to service the Mortgage Loans in accordance
with this Agreement, and which in its opinion may involve it in any expense or
liability; provided, however, that the Servicer may in its sole discretion
undertake any such action which it may deem necessary or desirable in respect of
this Agreement, and the rights and duties of the parties hereto and the
interests of the Securityholders and Residual Certificateholders hereunder. In
such event, the reasonable legal expenses and costs of such action and any
liability resulting therefrom shall be expenses, costs and liabilities of the
Trust and the Servicer shall only be entitled to be reimbursed therefor pursuant
to Section 8.7(d)(xi) of the Pooling Agreement. The Servicer's right to
indemnity or reimbursement pursuant to this Section 5.03 shall survive any
resignation or termination of the Servicer pursuant to Section 5.04 or 6.01 with
respect to any losses, expenses, costs or liabilities arising prior to such
resignation or termination (or arising from events that occurred prior to such
resignation or termination).

         Section 5.04.    Servicer Not to Resign. Subject to the provisions of
Section 5.02, the Servicer shall not resign from the obligations and duties
hereby imposed on it except (i) upon determination that the performance of its
obligations or duties hereunder are no longer permissible under applicable law
or are in material conflict by reason of applicable law with any other
activities carried on by it or its subsidiaries or Affiliates, the other
activities of the Servicer so causing such a conflict being of a type and nature
carried on by the Servicer or its subsidiaries or Affiliates at the date of this
Agreement or (ii) upon satisfaction of the following conditions: (a) the
Servicer has proposed a successor servicer to the Trustee, the Insurer and
Freddie Mac in writing and such proposed successor servicer is reasonably
acceptable to the Trustee; (b) each Rating Agency shall have delivered a letter
to the Trustee and the Controlling Party prior to the appointment of the
successor servicer stating that the proposed appointment of such successor
servicer as Servicer hereunder will not result in the qualification, reduction
or withdrawal of the then current rating of the Securities without regard to the
Policy; and (c) such proposed successor servicer is reasonably acceptable to the
Insurer and Freddie Mac, as evidenced by a letter from each to the Trustee;
provided, however, that no such resignation by the Servicer shall become
effective until the Trustee or successor servicer designated by the Servicer as
provided above shall have assumed the Servicer's responsibilities and
obligations hereunder or the Trustee shall have designated a successor servicer
in accordance with Section 6.02. Any such resignation shall not relieve the
Servicer of responsibility for any of the obligations specified in Sections 6.01
and 6.02 as obligations that survive the resignation or termination of the
Servicer. Any such determination permitting the resignation of the Servicer
pursuant to clause (i) above shall be evidenced by an Opinion of Counsel to such
effect delivered to the Trustee, the Insurer and Freddie Mac. The Servicer shall
have no claim (whether by subrogation or otherwise) or other action against any
Securityholder or Residual

                                       40
<PAGE>

Certificateholder for any amounts paid by the Servicer pursuant to any provision
of this Agreement.

         Section 5.05.    Delegation of Duties. In the ordinary course of
business, the Servicer at any time may delegate any of its duties hereunder to
any Person, including any of its Affiliates, or any subservicer referred to in
Section 3.01, who agrees to conduct such duties in accordance with standards
comparable to those with which the Servicer complies pursuant to Section 3.01.
Such delegation shall not relieve the Servicer of its liabilities and
responsibilities with respect to such duties and shall not constitute a
resignation within the meaning of Section 5.04. The Servicer's delegation of any
of its duties hereunder to any subservicer shall be subject to the prior
approval of the Controlling Party.

         Section 5.06.    Indemnification of the Trust by the Servicer. The
Servicer shall indemnify and hold harmless the Trust, the Owner Trustee and the
Trustee from and against any loss, liability, expense, damage or injury suffered
or sustained by reason of the Servicer's activities or omissions in servicing or
administering the Mortgage Loans that are not in accordance with this Agreement,
including, but not limited to, any judgment, award, settlement, reasonable
attorneys' fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim. Any such
indemnification shall not be payable from the assets of the Trust. The
provisions of this indemnity shall run directly to and be enforceable by an
injured party subject to the limitations hereof. The provisions of this Section
5.06 shall survive termination of this Agreement.

         Section 5.07.    Indemnification of the Trust by the Sponsor.
Notwithstanding anything to the contrary contained herein, the Sponsor (i)
agrees to be liable directly to the injured party for the entire amount of any
losses, claims, damages, liabilities and expenses of the Trust (other than those
attributable to a Securityholder as a result of defaults on the Mortgage Loans)
to the extent that the Sponsor would be liable if the Trust were a partnership
under the Delaware Revised Uniform Limited Partnership Act in which the Sponsor
was a general partner and (ii) shall indemnify and hold harmless the Trust, the
Owner Trustee and the Trustee from and against any loss, liability, expense,
damage, claim or injury (other than those attributable to a Securityholder as a
result of defaults on the Mortgage Loans) arising out of or based on this
Agreement by reason of any acts, omissions, or alleged acts or omissions arising
out of activities of the Trust, the Owner Trustee or the Trustee, or the actions
of the Servicer, including, but not limited to, amounts payable to the Servicer
pursuant to Section 5.03, any judgment, award, settlement, reasonable attorneys'
fees and other costs or expenses incurred in connection with the defense of any
actual or threatened action, proceeding or claim; provided that the Sponsor
shall not indemnify the Owner Trustee or the Trustee (but shall indemnify any
other injured party) if such loss, liability, expense, damage or injury is due
to the Owner Trustee's or the Trustee's willful malfeasance, bad faith or
negligence, breach of representations and warranties made herein, or against any
specific liability imposed on the Owner Trustee or Trustee for a breach of its
obligations hereunder. The provisions of this indemnity shall run directly to
and be enforceable by an injured party subject to the limitations hereof.

         Section 5.08.    Limitation on Liability of the Sponsor. None of the
directors or officers or employees or agents of the Sponsor shall be under any
liability to the Trust, the Owner Trustee or the Trustee, the Securityholders or
the Residual Certificateholders, it being

                                       41
<PAGE>

expressly understood that all such liability is expressly waived and released as
a condition of, and as consideration for, the execution of this Agreement and
the issuance of the Securities; provided, however, that this provision shall not
protect any such Person against any liability which would otherwise be imposed
by reason of willful misfeasance, bad faith, negligence or breach of
representations and warranties made herein, or against any specific liability
imposed on such Person in the performance of the duties hereunder. Except as
provided in Section 5.07, the Sponsor shall not be under any liability to the
Trust, the Owner Trustee or the Trustee or the Securityholders or Residual
Certificateholders for any action taken or for refraining from the taking of any
action in its capacity as Sponsor pursuant to this Agreement whether arising
from express or implied duties under this Agreement; provided, however, that
this provision shall not protect the Sponsor against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
in the performance of its duties or by reason of reckless disregard of its
obligations and duties hereunder. The Sponsor and any director or officer or
employee or agent of the Sponsor may rely in good faith on any document of any
kind prima facie properly executed and submitted by any Person respecting any
matters arising hereunder.

                                   ARTICLE VI

                              SERVICING TERMINATION

         Section 6.01.    Events of Servicing Termination. If any one of the
following events ("Events of Servicing Termination") shall occur and be
continuing:

                (i)      Any failure by the Servicer to deposit in the
         Collection Account any deposit required to be made under the terms of
         this Agreement which continues unremedied for a period of one Business
         Day after the date upon which written notice of such failure shall have
         been given to the Servicer by the Trustee or to the Servicer and the
         Trustee by the Insurer or Freddie Mac or Holders of Securities
         evidencing more than 25% of the Principal Balance of the Securities
         instruct otherwise; or

                (ii)     Failure on the part of the Servicer duly to observe or
         perform in any material respect any other covenants or agreements of
         the Servicer set forth in the Securities or in this Agreement, which
         failure continues unremedied for a period of 15 days after the date on
         which written notice of such failure, requiring the same to be
         remedied, and stating that such notice is a "Notice of Default"
         hereunder, shall have been given to the Servicer by the Trustee or to
         the Servicer and the Trustee by the Insurer or Freddie Mac or the
         Holders of Securities evidencing Percentage Interests aggregating not
         less than 25%; or

                (iii)    The entry against the Servicer of a decree or order by
         a court or agency or supervisory authority having jurisdiction in the
         premises for the appointment of a trustee, conservator, receiver or
         liquidator in any insolvency, conservatorship, receivership,
         readjustment of debt, marshalling of assets and liabilities or similar
         proceedings, or for the winding up or liquidation of its affairs, and
         the continuance of any such decree or order unstayed and in effect for
         a period of 60 consecutive days; or

                                       42
<PAGE>

                (iv)     The consent by the Servicer to the appointment of a
         trustee, conservator, receiver or liquidator in any insolvency,
         conservatorship, receivership, readjustment of debt, marshalling of
         assets and liabilities or similar proceedings of or relating to the
         Servicer or of or relating to substantially all of its property; or the
         Servicer shall admit in writing its inability to pay its debts
         generally as they become due, file a petition to take advantage of any
         applicable insolvency or reorganization statute, make an assignment for
         the benefit of its creditors, or voluntarily suspend payment of its
         obligations;

                (v)      the occurrence of an Event of Servicer Termination
         under the Insurance Agreement;

                (vi)     the Servicer is no longer an "approved servicer" of
         Freddie Mac

then, and in each and every such case, so long as an Event of Servicing
Termination shall not have been remedied by the Servicer, either the Trustee,
the Controlling Party or the Holders of Securities evidencing more than 50% of
the Outstanding Amount of the Securities instruct otherwise, in each case with
the consent of the Controlling Party, by notice then given in writing to the
Servicer (and to the Trustee if given by the Insurer or the Holders of
Securities) may terminate all of the rights and obligations of the Servicer as
servicer under this Agreement. Upon the occurrence of a Servicer Termination
Delinquency Rate Trigger or Servicer Termination Loss Trigger as those terms are
defined in the Insurance Agreement, the Insurer may, in its reasonable
discretion, terminate all of the rights and obligations of the Servicer pursuant
to the terms hereof. Any such notice to the Servicer shall also be given to each
Rating Agency, Freddie Mac and the Insurer. On or after the receipt by the
Servicer of such written notice, all authority and power of the Servicer under
this Agreement, whether with respect to the Securities or the Mortgage Loans or
otherwise, shall pass to and be vested in the Trustee pursuant to and under this
Section 6.01; and, without limitation, the Trustee is hereby authorized and
empowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement of each Mortgage Loan and related documents, or otherwise. The
Servicer agrees to cooperate with the Trustee in effecting the termination of
the responsibilities and rights of the Servicer hereunder, including, without
limitation, the transfer to the Trustee for the administration by it of all cash
amounts that shall at the time be held by the Servicer and to be deposited by it
in the Collection Account, or that have been deposited by the Servicer in the
Collection Account or thereafter received by the Servicer with respect to the
Mortgage Loans. All reasonable costs and expenses (including attorneys' fees)
incurred in connection with amending this Agreement to reflect such succession
as Servicer pursuant to this Section 6.01 shall be paid by the predecessor
Servicer (or if the predecessor Servicer is the Trustee, the initial Servicer)
upon presentation of reasonable documentation of such costs and expenses.

         Notwithstanding the foregoing, a delay in or failure of performance
under Section 6.01(i) for a period of one Business Day or under Section 6.01(ii)
for a period of 15 days, shall not constitute an Event of Servicing Termination
if such delay or failure could not be prevented by the exercise of reasonable
diligence by the Servicer and such delay or failure was caused by an

                                       43
<PAGE>

act of God or the public enemy, acts of declared or undeclared war, public
disorder, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes or floods. The preceding sentence shall not relieve the
Servicer from using its best efforts to perform its respective obligations in a
timely manner in accordance with the terms of this Agreement and the Servicer
shall provide the Trustee, the Sponsor, Freddie Mac, the Insurer and the
Securityholders and Residual Certificateholders with an Officer's Certificate
giving prompt notice of such failure or delay by it, together with a description
of its efforts to so perform its obligations. The Servicer shall immediately
notify the Trustee, the Insurer and Freddie Mac in writing of any Events of
Servicing Termination.

         Section 6.02.    Trustee to Act; Appointment of Successor.

         (a)    On and after the time the Servicer receives a notice of
termination pursuant to Section 6.01 or resigns pursuant to Section 5.04, the
Trustee shall be the successor in all respects to the Servicer in its capacity
as servicer under this Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions hereof.
Notwithstanding the above, if the Trustee becomes the Servicer hereunder, it
shall have no responsibility or obligation (i) of repurchase or substitution
with respect to any Mortgage Loan, (ii) with respect to any representation or
warranty of the Servicer, and (iii) for any act or omission of either a
predecessor or successor Servicer other than the Trustee. As compensation
therefor, the Trustee shall be entitled to such compensation as the Servicer
would have been entitled to hereunder if no such notice of termination had been
given. In addition, the Trustee will be entitled to compensation with respect to
its expenses in connection with conversion of certain information, documents and
record keeping, as provided in Section 6.7 and 6.8 of the Pooling Agreement.
Notwithstanding the above, (i) if the Trustee is unwilling to act as successor
Servicer, or (ii) if the Trustee is legally unable so to act, the Trustee may
with the consent of the Controlling Party (in the situation described in clause
(i)) or shall (in the situation described in clause (ii)) appoint or petition a
court of competent jurisdiction to appoint, any established housing and home
finance institution, bank or other mortgage loan or home equity loan servicer
with all licenses and permits required to perform its obligations under this
Agreement and having a net worth of not less than $15,000,000 as the successor
to the Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer hereunder; provided that
any such successor Servicer shall be acceptable to the Controlling Party, as
evidenced by the prior written consent of each of them, which consent shall not
be unreasonably withheld; and provided, further, that the appointment of any
such successor Servicer will not result in the qualification, reduction or
withdrawal of the ratings assigned to the Securities by the Rating Agencies
without regard to the Policy. Pending appointment of a successor to the Servicer
hereunder, unless the Trustee is prohibited by law from so acting, the Trustee
shall act in such capacity as hereinabove provided. In connection with such
appointment and assumption, the successor shall be entitled to receive
compensation out of payments on Mortgage Loans in an amount equal to the
compensation which the Servicer would otherwise have received pursuant to
Section 3.08 (or such lesser compensation as the Trustee and such successor
shall agree). The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.

                                       44
<PAGE>

         (b)    Any successor, including the Trustee, to the Servicer as
servicer shall during the term of its service as servicer (i) continue to
service and administer the Mortgage Loans for the benefit of the Securityholders
and Residual Certificateholders, the Insurer and Freddie Mac and (ii) maintain
in force a policy or policies of insurance covering errors and omissions in the
performance of its obligations as Servicer hereunder and a fidelity bond in
respect of its officers, employees and agents to the same extent as the Servicer
is so required pursuant to Section 3.13. The appointment of a successor Servicer
shall not affect any liability of the predecessor Servicer which may have arisen
under this Agreement prior to its termination as Servicer (including, without
limitation, any deductible under an Insurance Policy pursuant to Section 3.04),
nor shall any successor Servicer be liable for any acts or omissions of the
predecessor Servicer or for any breach by such Servicer of any of its
representations or warranties contained herein.

         Section 6.03.    Notification to Securityholders and Residual
Certificateholders. Upon any termination or appointment of a successor to the
Servicer pursuant to this Article VI or Section 5.04, the Trustee shall give
prompt written notice thereof to the Securityholders and Residual
Certificateholders (at their respective addresses appearing in the Security
Register and in the Residual Certificate Register), the Insurer, Freddie Mac and
each Rating Agency.

                                   ARTICLE VII

                                   TERMINATION

         Section 7.01.    Termination.

         (a)    The respective obligations and responsibilities of the Servicer,
the Sponsor and the Trustee created hereby (other than the obligation of the
Trustee to make certain payments to Securityholders after the final Payment Date
and the obligation of the Servicer to send certain notices as hereinafter set
forth) shall terminate upon the last action required to be taken by the Trustee
on the final Payment Date pursuant to this Article VII following the later of
(A) the Payment Date following payment in full of all amounts owing to the
Insurer and Guarantor and (B) the earliest of (i) the transfer, under the
conditions specified in Section 7.01(b), to the Sponsor of the Securityholders'
interest in each Mortgage Loan and all property acquired in respect of any
Mortgage Loans remaining in the Trust for an amount equal to the sum of (v) the
sum of the Class A-1 Certificate Principal Balance and the Class A-2 Note
Principal Balance, (w) the sum of accrued and unpaid Class A-1 Interest Payment
Amount and Class A-2 Interest Payment Amount through the day preceding the final
Payment Date, and (x) Class A-1 Deferred Interest and Class A-2 Deferred
Interest and any interest accrued on any Class A-1 Deferred Interest or Class
A-2 Deferred Interest to the extent legally permissible, and (y) all amounts due
and owing the Insurer pursuant to the Insurance Agreement and Section 8.7 of the
Pooling Agreement and (z) all amounts due and owing Freddie Mac under the
Pooling Agreement, (ii) the day following the Payment Date on which the
distribution made to Securityholders has reduced the Class A-1 Certificate
Principal Balance and the Class A-2 Note Principal Balance to zero and no other
amounts are owed to the Securityholders hereunder pursuant to the Insurance
Agreement and Section 8.7 of the Pooling Agreement, (iii) the final payment or
other liquidation of the last Mortgage Loan remaining in the Trust (including,
without limitation, the disposition of the Mortgage Loans pursuant to Section
5.4 of the Pooling Agreement) or the disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and

                                       45
<PAGE>

(iv) the Payment Date in January, 2027; provided, however, that in no event
shall the trust created hereby continue beyond the expiration of 21 years from
the date of death of the last surviving descendants of Joseph P. Kennedy, the
late ambassador of the United States to the Court of St. James, living on the
date hereof. Upon termination in accordance with clause (a)(B)(i) of this
Section 7.01, the Trustee shall execute such documents and instruments of
transfer presented by the Sponsor, in each case without recourse, representation
or warranty, and take such other actions as the Sponsor may reasonably request
to effect the transfer of the Mortgage Loans to the Sponsor.

         (b)    (i)      The Sponsor shall have the right to exercise the
         option to effect the transfer to the Sponsor of each Pool I Mortgage
         Loan pursuant to Section 7.01(a)(B) above on any Payment Date on or
         after the Payment Date immediately prior to which the Class A-1
         Certificate Principal Balance is less than or equal to ten percent
         (10%) of the Original Class A-1 Certificate Principal Balance and all
         amounts due and owing to the Insurer for unpaid premiums and
         unreimbursed draws on the Policy (in each case, related to the Class
         A-1 Certificates) and all other amounts due and owing to the Insurer
         pursuant to the Insurance Agreement, together with interest thereon as
         provided under the Insurance Agreement, and all amounts due and owing
         to Freddie Mac under the Pooling Agreement, have been paid.

                (ii)     The Sponsor shall have the right to exercise the option
         to effect the transfer to the Sponsor of each Pool II Mortgage Loan
         pursuant to Section 7.01(a)(B) above on any Payment Date on or after
         the Payment Date immediately prior to which the Class A-2 Note
         Principal Balance is less than or equal to ten percent (10%) of the
         Original Class A-2 Note Principal Balance and all amounts due and owing
         to the Insurer for unpaid premiums and unreimbursed draws on the Policy
         (in each case, related to the Class A-2 Notes) and all other amounts
         due and owing to the Insurer for unpaid premiums and unreimbursed draws
         on the Policy and all other amounts due and owing to the Insurer
         pursuant to the Insurance Agreement, together with interest thereon as
         provided under the Insurance Agreement, have been paid.

         (c)    The Sponsor, at its expense, shall prepare and deliver to the
Trustee for execution, at the time the related Mortgage Loans are to be released
to the Sponsor, appropriate documents assigning each such Mortgage Loan from the
Trustee to the Sponsor and shall promptly record such assignments.

         (d)    The Sponsor shall not exercise its right to repurchase the
Mortgage Loans pursuant to Section 7.01(b) hereof if such repurchase would
result in a draw on the Policy, without the consent of the Insurer, which
consent shall not be unreasonably withheld.

                                       46
<PAGE>

                                  ARTICLE VIII

                      ADMINISTRATIVE DUTIES OF THE SERVICER

         Section 8.01.    Administrative Duties.

         (a)    Duties with Respect to the Pooling Agreement. The Servicer shall
perform all its duties and the duties of the Issuer under the Pooling Agreement.
In addition, the Servicer shall consult with the Owner Trustee as the Servicer
deems appropriate regarding the duties of the Issuer under the Pooling
Agreement. The Servicer shall monitor the performance of the Issuer and shall
advise the Owner Trustee when action is necessary to comply with the Issuer's
duties under the Pooling Agreement. The Servicer shall prepare for execution by
the Issuer or shall cause the preparation by other appropriate Persons of all
such documents, reports, filings, instruments, certificates and opinions as it
shall be the duty of the Issuer to prepare, file or deliver pursuant to the
Pooling Agreement. In furtherance of the foregoing, the Servicer shall take all
necessary action that is the duty of the Issuer to take pursuant to the Pooling
Agreement.

         (b)    Duties with Respect to the Issuer.

                (i)      In addition to the duties of the Servicer set forth in
         this Agreement or any of the Basic Documents, the Servicer shall
         perform such calculations and shall prepare for execution by the Issuer
         or the Owner Trustee or shall cause the preparation by other
         appropriate Persons of all such documents, reports, filings,
         instruments, certificates and opinions as it shall be the duty of the
         Issuer or the Owner Trustee to prepare, file or deliver pursuant to
         this Agreement or any of the Basic Documents or under state and federal
         tax and securities laws, and at the request of the Owner Trustee shall
         take all appropriate action that it is the duty of the Issuer to take
         pursuant to this Agreement or any of the Basic Documents, including,
         without limitation, pursuant to Sections 2.6 and 2.11 of the Trust
         Agreement. In accordance with the directions of the Issuer or the Owner
         Trustee, the Servicer shall administer, perform or supervise the
         performance of such other activities in connection with the Mortgage
         Loans (including the Basic Documents) as are not covered by any of the
         foregoing provisions and as are expressly requested by the Issuer or
         the Owner Trustee and are reasonably within the capability of the
         Servicer.

                (ii)     Notwithstanding anything in this Agreement or any of
         the Basic Documents to the contrary, the Servicer shall be responsible
         for promptly notifying the Owner Trustee and the Trustee, the Insurer
         and Freddie Mac in the event that any withholding tax is imposed on the
         Issuer's payments (or allocations of income) to a Residual
         Certificateholder (as defined in the Trust Agreement) as contemplated
         by this Agreement. Any such notice shall be in writing and specify the
         amount of any withholding tax required to be withheld by the Owner
         Trustee or the Trustee pursuant to such provision.

                (iii)    Notwithstanding anything in this Agreement or the Basic
         Documents to the contrary, the Servicer shall be responsible for
         performance of the duties of the Issuer or the Sponsor set forth in
         Section 5.1(a), (b), (c) and (d) of the Trust Agreement

                                       47
<PAGE>

         with respect to, among other things, accounting and reports to Residual
         Certificateholders (as defined in the Trust Agreement).

                (iv)     The Servicer shall perform the duties of the Sponsor
         specified in Section 10.2 of the Trust Agreement required to be
         performed in connection with the resignation or removal of the Owner
         Trustee, and any other duties expressly required to be performed by the
         Servicer under this Agreement or any of the Basic Documents.

                (v)      In carrying out the foregoing duties or any of its
         other obligations under this Agreement, the Servicer may enter into
         transactions with or otherwise deal with any of its Affiliates;
         provided, however, that the terms of any such transactions or dealings
         shall be in accordance with any directions received from the Issuer and
         shall be, in the Servicer's opinion, no less favorable to the Issuer in
         any material respect.

         (c)    Non-Ministerial Matters. With respect to matters that in the
reasonable judgment of the Servicer are non-ministerial, the Servicer shall not
take any action pursuant to this Article VIII unless within a reasonable time
before the taking of such action, the Servicer shall have notified the Owner
Trustee, the Insurer and Freddie Mac of the proposed action and the Owner
Trustee, the Insurer and Freddie Mac shall not have withheld consent or provided
an alternative direction. For the purpose of the preceding sentence,
"non-ministerial matters" shall include:

                (A)      the amendment of or any supplement to the Pooling
         Agreement;

                (B)      the initiation of any claim or lawsuit by the Issuer
         and the compromise of any action, claim or lawsuit brought by or
         against the Issuer (other than in connection with the collection of the
         Mortgage Loans);

                (C)      the amendment, change or modification of this Agreement
         or any of the Basic Documents;

                (D)      the appointment of successor Security Registrars,
         successor Paying Agents and successor Trustees pursuant to the Pooling
         Agreement or the appointment of Successor Servicers or the consent to
         the assignment by the Security Registrar, Paying Agent or Trustee of
         its obligations under the Pooling Agreement; and

                (E)      the removal of the Trustee.

         (d)    Exceptions. Notwithstanding anything to the contrary in this
Agreement, except as expressly provided herein or in the other Basic Documents,
the Servicer, in its capacity hereunder, shall not be obligated to, and shall
not, (1) make any payments to the Securityholders or Residual Certificateholders
under the Basic Documents, (2) sell the Trust Property pursuant to Section 5.4
of the Pooling Agreement, (3) take any other action that the Issuer directs the
Servicer not to take on its behalf or (4) in connection with its duties
hereunder assume any indemnification obligation of any other Person.

         (e)    The Trustee or any successor Servicer shall not be responsible
for any obligations or duties of the Servicer under Section 8.01.

                                       48
<PAGE>

         Section 8.02.    Records. The Servicer shall maintain appropriate books
of account and records relating to services performed under this Agreement,
which books of account and records shall be accessible for inspection by the
Issuer and the Trustee at any time during normal business hours.

         Section 8.03.    Additional Information to be Furnished to the Issuer.
The Servicer shall furnish to the Issuer and the Trustee from time to time such
additional information regarding the Mortgage Loans as the Issuer and the
Trustee shall reasonably request.

                                   ARTICLE IX

                            MISCELLANEOUS PROVISIONS

         Section 9.01.    Amendment. This Agreement may be amended from time to
time by agreement among the Sponsor, the Servicer, and the Trustee, in each case
without notice to or the consent of any of the Securityholders or Residual
Certificateholders, but only with the consent of the Insurer and of Freddie Mac
(which consent shall not be unreasonably withheld), (i) to cure any ambiguity,
(ii) to correct any defective provisions or to correct or supplement any
provisions herein that may be inconsistent with any other provisions herein,
(iii) to add to the duties of the Sponsor or the Servicer, (iv) to add any other
provisions with respect to matters or questions arising under this Agreement or
the Policy, as the case may be, which shall not be inconsistent with the
provisions of this Agreement, (v) to add or amend any provisions of this
Agreement as required by any Rating Agency or any other nationally recognized
statistical rating organization in order to maintain or improve any rating of
the Securities (it being understood that, after obtaining the ratings in effect
on the Closing Date, neither the Trustee, the Sponsor nor the Servicer is
obligated to obtain, maintain or improve any such rating) or (vi) to comply with
any requirement imposed by the Code; provided, however, that such action shall
not, as evidenced by an Opinion of Counsel, materially and adversely affect the
interests of any Securityholder or any Residual Certificateholder, the Insurer
or Freddie Mac; and provided, further, that the amendment shall be deemed not to
adversely affect in any material respect the interests of the Securityholders
and the Residual Certificateholders and no opinion referred to in the preceding
proviso shall be required to be delivered if the Person requesting the amendment
obtains a letter from each Rating Agency stating that the amendment would not
result in the downgrading or withdrawal of the respective ratings then assigned
to the Securities without regard to the Policy.

         This Agreement also may be amended from time to time by agreement among
the Servicer, the Sponsor and the Trustee, with the consent of the Insurer,
Freddie Mac and the Holders of the Securities evidencing more than 50% of the
Outstanding Amount of the Securities instruct otherwise and the Holders of the
Residual Certificates evidencing more than 50% of the percentage interest in the
Residual Certificates (which consent of such Holders of Securities and Residual
Certificates given pursuant to this Section 9.01 or pursuant to any other
provision of this Agreement shall be conclusive and binding on such Holder and
all future Holders of such securities and of any security issued upon the
transfer thereof or in exchange thereof or in lieu thereof whether or not
notation of such consent is made upon the security) for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of modifying in any manner the rights of the
Securityholders or the Residual

                                       49
<PAGE>

Certificateholders; provided, however, that no such amendment shall (i) reduce
in any manner the amount of, or delay the timing of, payments on the Securities
or distributions or payments under the Policy which are required to be made on
any Security without the consent of the Holder of such Security or (ii) reduce
the aforesaid percentage required to consent to any such amendment, without the
consent of the Holders of all then outstanding Securities and Residual
Certificates or (iii) adversely effect in any material respect the interests of
the Insurer or the interests of Freddie Mac.

         Following the execution and delivery of any such amendment hereto or to
the Policy, either the Sponsor, if the Sponsor requested the amendment, or the
Servicer, if the Servicer requested the amendment, shall reimburse the Insurer
and Freddie Mac for the reasonable out-of-pocket costs and expenses incurred by
each in connection with such amendment.

         Prior to the execution of any such amendment, the party hereto
requesting any such amendment shall furnish written notification of the
substance of such amendment to each Rating Agency. In addition, promptly after
the execution of any such amendment made with the consent of the
Securityholders, the Trustee shall furnish written notification of the substance
of such amendment to each Securityholder and fully executed original
counterparts of the instruments effecting such amendment to the Insurer and
Freddie Mac.

         It shall not be necessary for the consent of Securityholders under this
Section 9.01 to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Securityholders and Residual
Certificateholders shall be subject to such reasonable requirements as the
Trustee may prescribe.

         In executing any amendment permitted by this Section 9.01, the Trustee
shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that such amendment is authorized or permitted hereby
and that all conditions precedent to the execution and delivery of such
amendment have been satisfied. The Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Trustee's own rights, duties or
immunities under this Agreement or otherwise.

         Section 9.02.    Recordation of Agreement. This Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Trustee, but only upon direction of Securityholders accompanied by an Opinion of
Counsel to the effect that such recordation materially and beneficially affects
the interests of Securityholders. The Securityholders requesting such
recordation shall bear all costs and expenses of such recordation. The Trustee
shall have no obligation to ascertain whether such recordation so affects the
interests of the Securityholders.

         For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.

                                       50
<PAGE>

         Section 9.03.    Limitation on Rights of Securityholders. No
Securityholder shall have any right to vote (except as provided in Sections
6.01, 7.01, and 9.01 herein and Section 5.4 of the Pooling Agreement) or in any
manner otherwise control the operation and management of the Trust, or the
obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Securities, be construed so as to constitute the
Securityholders from time to time as partners or members of an association; nor
shall any Securityholder be under any liability to any third person by reason of
any action taken by the parties to this Agreement pursuant to any provision
hereof.

         No Securityholder shall have any right by virtue or by availing itself
of any provisions of this Agreement to institute any suit, action or proceeding
in equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as hereinbefore provided, and unless also the
Holders of Securities evidencing more than 50% of the Outstanding Amount of the
Securities shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee hereunder and shall have
offered to the Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee, for 60 days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit or
proceeding; it being understood and intended, and being expressly covenanted by
each Securityholder with every other Securityholder and the Trustee, that no one
or more Holders of Securities shall have any right in any manner whatever by
virtue or by availing itself or themselves of any provisions of this Agreement
to affect, disturb or prejudice the rights of the Holders of any other of the
Securities, or to obtain or seek to obtain priority over or preference to any
other such Holder, or to enforce any right under this Agreement, except in the
manner herein provided and for the equal, ratable and common benefit of all
Securityholders. For the protection and enforcement of the provisions of this
Section 9.03, each and every Securityholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.

         By accepting its Certificate, each Securityholder agrees that unless a
Insurer Default exists, the Insurer shall have the right to exercise all rights
of the Securityholder under this Agreement without any further consent of the
Securityholder.

         Section 9.04.    Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.

         Section 9.05.    Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by certified mail, return receipt requested,
to (a) in the case of the Sponsor, GreenPoint Mortgage Securities Inc., 700
Larkspur Landing Circle, Suite 250, Larkspur, California 94939, Attention: Peter
T. Paul, (b) in the case of the Servicer, GreenPoint Mortgage Funding, Inc.,
1100 Larkspur Landing Circle, Suite 101, Larkspur, California 94939, Attention:
Gilbert MacQuarrie, (c) in the case of the Trustee, at the Corporate Trust
Office, (d) in the case of the Insurer, Ambac Assurance Structured Finance, One
State Street Plaza, New York, NY 10022-4834, Attention: Managing Director
(telecopy number (212) 891-1456 or (212) 755-5477), (e) in the case of

                                       51
<PAGE>

Freddie Mac, Federal Home Loan Mortgage Corporation, 8200 Jones Branch Drive,
McLean, Virginia 22102, Attention Vice-President, Structured Finance (telecopy
number (703) 903-3029), (f) Moody's, Residential Loan Monitoring Group, 4th
Floor, 99 Church Street, New York, New York 10007, and (g) in the case of
Standard & Poor's, 55 Water Street, New York, New York 10041, or, as to each
party, at such other address as shall be designated by such party in a written
notice to each other party. Any notice required or permitted to be mailed to a
Securityholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Security Register. Any notice so mailed
within the time prescribed in this Agreement shall be conclusively presumed to
have been duly given, whether or not the Securityholder or Residual
Certificateholder receives such notice. Any notice or other document required to
be delivered or mailed by the Trustee to any Rating Agency shall be given on a
best efforts basis and only as a matter of courtesy and accommodation and the
Trustee shall have no liability for failure to deliver such notice or document
to any Rating Agency.

         Section 9.06.    Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Securities or
the rights of the Holders thereof.

         Section 9.07.    Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 5.02 and 5.04, this Agreement
may not be assigned by the Sponsor or the Servicer without the prior written
consent of the Controlling Party and Holders of the Securities evidencing
Percentage Interests aggregating not less than 66%.

         Section 9.08.    Third-Party Beneficiaries. This Agreement will inure
to the benefit of and be binding upon the parties hereto, the Residual
Certificateholders, the Security Owners, the Insurer, Freddie Mac and their
respective successors and permitted assigns. Except as otherwise provided in
this Agreement, no other Person will have any right or obligation hereunder.

         Section 9.09.    Counterparts. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.

         Section 9.10.    Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.

         Section 9.11.    Insurance Agreement. The Trustee is authorized and
directed to execute and deliver the Insurance Agreement and to perform the
obligations of the Trustee thereunder.

         Section 9.12.    Nonpetition Covenant. Until one year plus one day
shall have elapsed since the termination of the Trust in accordance with Section
7.01, none of the Sponsor, the Company, the Servicer, nor the Trustee shall
petition or otherwise invoke the process of any court or government authority
for the purpose of commencing or sustaining a case against the

                                       52
<PAGE>

Sponsor or the Trust under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Sponsor or the Trust or any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Sponsor or the Trust.

                                       53
<PAGE>

         IN WITNESS WHEREOF, the Sponsor, the Servicer and the Trustee have
caused this Agreement to be duly executed by their respective officers all as of
the day and year first above written.

                                       GREENPOINT MORTGAGE SECURITIES INC.,
                                          as Sponsor

                                       By:  /s/ Becky Poisson
                                          -------------------------------------
                                          Name:   Becky Poisson
                                          Title:  Vice President

                                       GREENPOINT MORTGAGE FUNDING, INC.,
                                          as Company and Servicer

                                       By:  /s/ Becky Poisson
                                          -------------------------------------
                                          Name:   Becky Poisson
                                          Title:  Vice President

                                       BANKERS TRUST COMPANY,
                                          as Trustee

                                       By:  /s/ Barbara J. Campbell
                                          -------------------------------------
                                          Name:   Barbara J. Campbell
                                          Title:  Assistant Secretary

                                       GREENPOINT HOME EQUITY LOAN TRUST
                                          2000-1, as Issuer
                                          By: Wilmington Trust Company, not in
                                          its individual capacity but solely as
                                          Owner Trustee

                                       By:  /s/ Chris Sponenberg
                                          -------------------------------------
                                          Name:   Chris Sponenberg
                                          Title:  Assistant Vice President

                         [Sale and Servicing Agreement]
<PAGE>

State of  California       )
                           ) ss.:
County of Marin            )

On the 29th day of June, 2000 before me, a notary public in and for the State
of California, personally appeared Becky Poisson, known to me who, being by me
duly sworn, did depose and say that he resides at Larkspur, California; that
he is the Vice President of GreenPoint Mortgage Securities Inc., a
Delaware corporation, one of the parties that executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of said corporation; and that he signed his name thereto by like
order.

                                  /s/ Melissa S. Farley
                                  ----------------------------------------------
                                  Notary Public

[Notarial Seal]
<PAGE>

State of New York          )
                           ) ss.:
County of New York         )

On the 29th day of June, 2000 before me, a notary public in and for the State of
New York, personally appeared W. Chris Sponenberg, known to me who, being by me
duly sworn, did depose and say that he resides at Wilmington, Delaware; that he
is the Assistant Vice President of Wilmington Trust Corporation, a Delaware
corporation, one of the parties that executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the Board of Directors
of said corporation; and that he signed his name thereto by like order.

                                  /s/ Erick C. Lane
                                  ----------------------------------------------
                                  Notary Public

[Notarial Seal]

<PAGE>

State of California        )
                           ) ss.:
County of Marin            )

On the 29th day of June, 2000 before me, a notary public in and for the State of
California, personally appeared Becky Poisson, known to me who, being by me duly
sworn, did depose and say that he resides at Larkspur, California; that he is
the Vice President of GreenPoint Mortgage Funding, Inc., a closely-held
California corporation, one of the parties that executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order of the
Board of Directors of said corporation; and that he signed his name thereto by
like order.

                                  /s/ Melissa S. Farley
                                  ----------------------------------------------
                                  Notary Public

[Notarial Seal]

<PAGE>

State of New York          )
                           ) ss.:
County of New York         )

On the 29th day of June, 2000 before me, a notary public in and for the State of
New York, personally appeared Barbara J. Campbell, known to me who, being by me
duly sworn, did depose and say that he resides at Santa Ana, California; that he
is the Assistant Secretary of Bankers Trust Company, a New York banking
corporation, one of the parties that executed the foregoing instrument; and that
he signed his name thereto by order of the Board of Directors of said
corporation.

                                  /s/ Eric C. Lane
                                  ----------------------------------------------
                                  Notary Public

[Notarial Seal]

<PAGE>

                                                                       EXHIBIT A

                             MORTGAGE LOAN SCHEDULE

                             [On file with Trustee]

                                      A-1
<PAGE>

                                                                       EXHIBIT B

                           FORM OF OPINION OF COUNSEL
                       WITH RESPECT TO SECTION 3.11 OF THE
                          SALE AND SERVICING AGREEMENT

The opinions set forth below may be subject to all the qualifications,
assumptions, limitations and exceptions taken or made in the opinions of counsel
to the Company delivered on the Closing Date. Unless otherwise indicated, all
capitalized terms used herein shall have the meanings ascribed to them in the
Sale and Servicing Agreement dated as of June 1, 2000 among GreenPoint Mortgage
Funding, Inc. (the "Company" and the "Servicer"), GreenPoint Mortgage Securities
Inc. (the "Sponsor") and Bankers Trust Company, as Trustee. Terms used but not
defined herein shall have the meaning given to such terms in the
above-referenced Sale and Servicing Agreement.

         The Trustee has a valid perfected first priority security interest with
respect to the Sponsor's right, title and interest in and to the Mortgage Loans
(including all Eligible Substitute Mortgage Loans).

                                      B-1
<PAGE>

                                                                     EXHIBIT C-1

                              OFFICER'S CERTIFICATE

                      REQUEST BY THE SERVICER FOR PERMANENT
                   RELEASE OF MORTGAGE LOANS AND MORTGAGE FILE

TO:      Bankers Trust Company,
           as Trustee
         123 Washington Street
         New York, New York 10006
         Attention: Corporate Trust Office

Gentlemen:

In connection with the payment in full of the Mortgage Loans held by you as
Trustee, under the Sale and Servicing Agreement dated as of June 1, 2000 among
GreenPoint Mortgage Funding, Inc., as Servicer, GreenPoint Mortgage Securities
Inc., as Sponsor, and you, as Trustee, the undersigned requests the release of
the Mortgage Loans and the Mortgage Files for the Mortgage Loans identified in
the schedule attached to this Request.

The undersigned hereby certifies that any and all payments received on the
Mortgage Loans identified in the schedule attached to this Request which are
required to be deposited in the Collection Account pursuant to Section 3.02 of
such Sale and Servicing Agreement have been so deposited.

                                        GREENPOINT MORTGAGE FUNDING, INC.,
                                            as Servicer

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

ACKNOWLEDGED BY:

BANKERS TRUST COMPANY,
  as Trustee

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

                                     C-1-1
<PAGE>

                                                                     EXHIBIT C-2

                              OFFICER'S CERTIFICATE

                      REQUEST BY THE SERVICER FOR TEMPORARY
                  RELEASE OF MORTGAGE LOANS AND MORTGAGE FILES

TO:      Bankers Trust Company
           as Trustee
         123 Washington Street
         New York, New York 10006
         Attention:  Corporate Trust Office

Gentlemen:

In connection with the administration of the Mortgage Loans held by you as
Trustee, under the Sale and Servicing Agreement dated as of June 1, 2000 among
GreenPoint Mortgage Funding, Inc., as Servicer, GreenPoint Mortgage Securities
Inc., as Sponsor, and you, as Trustee, the undersigned requests the temporary
release of the Mortgage Loans and the related Mortgage Files for the Mortgage
Loans identified in the schedule attached to this Request.

                                        GREENPOINT MORTGAGE FUNDING, INC.,
                                            as Servicer

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

ACKNOWLEDGED BY:

BANKERS TRUST COMPANY,
  as Trustee

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

                                     C-2-1
<PAGE>

                                                                       EXHIBIT D

                          FORM OF CREDIT LINE AGREEMENT

                                      D-1
<PAGE>

                                                                       EXHIBIT E

                            FORM OF MORTGAGE NOTE FOR
                           SECOND LIEN MORTGAGE LOANS

                                      E-1
<PAGE>

                                                                    EXHIBIT F-1

                        FORM OF FREDDIE MAC CERTIFICATE:
                             BOND SUMMARY REPORTING

<TABLE>
<CAPTION>
DETAIL RECORD FIELDS:                                                                         File Name:  T0nnMMYY.BND

-----------------------------------------------------------------------------------------------------------------------------
      Field Name         Fld         Format          Field                              Definition
                         Nbr                       Position
-----------------------------------------------------------------------------------------------------------------------------
<S>                      <C>    <C>              <C>           <C>
Series #  (Deal          1      10 (x)           001-010       As defined by issuer or as assigned - T0nn
Identifier)
-----------------------------------------------------------------------------------------------------------------------------
Blank                            1 (x)           011
-----------------------------------------------------------------------------------------------------------------------------
Class #                  2       2 (x)           012-013       As assigned or determined by issuer.  Input default value if
                                                               not applicable.
-----------------------------------------------------------------------------------------------------------------------------
Blank                            5 (x)           014-018
------------------------------------------------------------------------------------------------------------------------------
CUSIP #                  3       9 (x)           019-027       If not available, Input default value.  Freddie Mac may
                                                               provide dummy numbers, if CUSIP numbers are not assigned by
                                                               the issuer.
-----------------------------------------------------------------------------------------------------------------------------
Blank                            1 (x)           028
-----------------------------------------------------------------------------------------------------------------------------
Coupon - Current         4       6.3             029-034       Bond Coupon Rate
Pass-through Rate
-----------------------------------------------------------------------------------------------------------------------------
Blank                            1 (x)           035
-----------------------------------------------------------------------------------------------------------------------------
Original Face Value      5      13.2             036-048       Par Value, original issue amount, of Class
-----------------------------------------------------------------------------------------------------------------------------
Blank                            1 (x)           049
-----------------------------------------------------------------------------------------------------------------------------
Beginning Unpaid         6      13.2             050-062       Beginning Class UPB as of beginning of cycle
Principal Balance
-----------------------------------------------------------------------------------------------------------------------------
Blank                            1 (x)           063
-----------------------------------------------------------------------------------------------------------------------------
Principal payment        7      13.2             064-076       Dollar amount of class principal payment
amount
-----------------------------------------------------------------------------------------------------------------------------
Blank                            1 (x)           077
-----------------------------------------------------------------------------------------------------------------------------
Interest payment amount  8      13.2             078-090       Dollar amount of class interest payment
-----------------------------------------------------------------------------------------------------------------------------
Blank                            1 (x)           091
-----------------------------------------------------------------------------------------------------------------------------
Total Distribution       9      13.2             092-104       Dollar amount of principal & interest payment
-----------------------------------------------------------------------------------------------------------------------------
Blank                             1 (x)          105
-----------------------------------------------------------------------------------------------------------------------------
Deferred Interest        10     13.2             106-118       Dollar amount of overcollateralization  (Difference between
                                                               security principal and mortgage principal balances applied
                                                               this period.  This can include non-cash allocations)
-----------------------------------------------------------------------------------------------------------------------------
Blank                            1 (x)           119
-----------------------------------------------------------------------------------------------------------------------------
Principal Loss           11     13.2             120-132       Dollar amount of principal losses applied this period
-----------------------------------------------------------------------------------------------------------------------------
Blank                            1 (x)           133
-----------------------------------------------------------------------------------------------------------------------------
Interest Loss            12     13.2             134-146       Dollar amount of interest losses applied this period
-----------------------------------------------------------------------------------------------------------------------------
Blank                            1 (x)           147
-----------------------------------------------------------------------------------------------------------------------------
Ending Unpaid            13     13.2             148-160       Ending Class UPB as of beginning of cycle
Principal Balance
-----------------------------------------------------------------------------------------------------------------------------
Blank                            1 (x)           161
-----------------------------------------------------------------------------------------------------------------------------
Principal Distribution   14      9.7             162-170       Factor representing the principal payment divided by the
Factor                                                         Original UPB of the class.
-----------------------------------------------------------------------------------------------------------------------------
Blank                            1 (x)           171
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      F-1-1
<PAGE>

<TABLE>
<S>                      <C>    <C>              <C>           <C>
-----------------------------------------------------------------------------------------------------------------------------
Interest Distribution    15      9.7             172-180       Factor representing the interest payment divided by the
Factor                                                         Beginning UPB of the class.
-----------------------------------------------------------------------------------------------------------------------------
Blank                            1 (x)           181
-----------------------------------------------------------------------------------------------------------------------------
Prepayment Interest      16      9.7             182-190       If loans were prepaid and an interest shortfall arose in
Shortfall                                                      this period, it should be entered in this field.  If not
                                                               applicable, a zero should be used.
-----------------------------------------------------------------------------------------------------------------------------
Blank                            1 (x)           191
-----------------------------------------------------------------------------------------------------------------------------
Total Distribution       17      9.7             192-200       Factor representing the combined principal and interest
Factor                                                         payment divided by the Original UPB of the class.
-----------------------------------------------------------------------------------------------------------------------------
Blank                            1 (x)           201
-----------------------------------------------------------------------------------------------------------------------------
Deferred Interest        18      9.7             202-210       Factor representing any increase in residual class due to
Factor                                                         credit enhancement requirements.  This is determined by
                                                               dividing the increase amount by the original UPB.
-----------------------------------------------------------------------------------------------------------------------------
Blank                            1 (x)           211
-----------------------------------------------------------------------------------------------------------------------------
Ending Principal         19      9.7             212-220       Ending UPB divided by original UPB.
Balance Factor
-----------------------------------------------------------------------------------------------------------------------------
Blank                            1 (x)           221
-----------------------------------------------------------------------------------------------------------------------------
Remaining Unpaid         20     13.2             222-234       If interest should be due, but not received on a given
Interest                                                       amount, then that amount should be entered.

-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                     F-1-2
<PAGE>

                                                                    EXHIBIT F-2

                        FORM OF FREDDIE MAC CERTIFICATE:
                              LOAN LEVEL REPORTING

DETAIL RECORD FIELDS:                                   File Name: T0##MMYY.LNS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
   Data: T0nnMMYY.LNS     Field         Format       Definition
                            Nbr
-----------------------------------------------------------------------------------------------------------------------------
<S>                      <C>            <C>          <C>
Servicer Loan No.         1        13(X)             Unique loan number assigned to the mortgage by the Seller/Servicer
------------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Due Date of Last Paid     2        YYYYMMDD          Due Date of last full payment received from the borrower.
Installment  (DDLPI)
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Last Payment Received     3        YYYYMMDD          Receipt Date of the last fully paid monthly installment of principal,
Date (LPRD)                                          interest, and escrow  (if any) that was received from the borrower.
                                                     Note: Dates of partial payments should not be entered here. {Data is when
                                                     payment was actually received from the borrower) If this information is
                                                     not available, then populate the field with the default value of
                                                     19000101.
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Unpaid Principal          4        13.2              Unpaid Principal balance as of the end of the current period
Balance (UPB) 100%
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Interest Paid             5        13.2              Gross / Coupon Interest payment amount
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Principal Paid            6        13.2              Total principal paid down on the mortgage balance.  This amount will be
                                                     net of any draws made on the credit line for the current payment cycle.
                                                     Draws will be reported in field #7.
                                                     *  For approved payment reversals or principal applied incorrectly in a
                                                     prior cycle the amount of negative principal to bring the mortgage
                                                     balance in line with the correct UPB reported.
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------

Draw Amount               7        13.2              Total draws made against the line of credit for the current month
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------

</TABLE>

                                      F-2-1
<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
   Data: T0nnMMYY.LNS     Field         Format       Definition
                            Nbr
<S>                      <C>            <C>          <C>
Exception Code            8             2(x)         This field should contain an exception code only when exception activity
                                                     occurs for that period, otherwise this field should contain a 0.
                                                     DEFAULT VALUE IS 0.
                                                     40 Inactivate loan, deemed the loan non-recoverable
                                                     60 Payoff - mortgage matured
                                                     61 Payoff - mortgage prepaid
                                                     65 Payoff - mortgage repurchased
                                                     69 Payoff - mortgage liquidated
                                                     70 Transfer to REO (status change exception)
                                                     72 Foreclosure (change of status from Active to Foreclosure)
                                                     80 Substituted Loan - Loan is added as a substitute for
                                                        another loan
                                                     81 Reinstated Loan - Loan was previously delinquent, but the
                                                        borrower has brought it current.
                                                     90 Loan Modified - This is an exceptional activity code
                                                        which is reserved for future use. Modifications
                                                        typically require repurchase from the trust prior to
                                                        modifying the loan.
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Exception Date            9        YYYYMMDD          Date the exception occurred.  If an exception has not occurred, this
                                                     field should contain the default value of 19000101.
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------

Mortgage Note Rate        10       6.3               Rate associated with the borrower's scheduled payment
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Mortgage P&I Amount       11       13.2              Principal and interest portion of the borrowers scheduled installment.
                                                     Note:  100% of the principal and interest amount should be entered in
                                                     this field, including servicing and guarantee fees.
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------

Realized Losses           12       13.2              Amount of realized losses for that period.  This field will also include
                                                     any supplemental claims or proceeds for loans liquidated in a previous
                                                     cycle.
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Cumulative Principal      13       13.2              Total principal payments advanced by the Servicer and not repaid by the
Advances                                             borrower.
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Interest Advances         14       13.2              Amount of interest payment advanced by the Servicer for that period.
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Loan Status               15       1(X)              Pertains to activity in the prior reporting cycle.
                                                     0 - Active
                                                     4 - Foreclosure
                                                     5 - REO
                                                     6 - Closed  (PAYOFFS & REPURCHASES)
                                                     9 - Bankruptcy (OVERRIDES Active Status)
                                                     Note: 30,60 & 90 day delinquency status will be derived from the DDLPI
                                                     field.
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Subservicer No.           16        6                Subservicer ID# - S/S# assigned by Freddie Mac - 6 digits
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Actual Loan Balance       17       13.2              Actual loan balance outstanding from the borrower and does not include
                                                     advances made by the servicer.
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Next Interest Rate        18       YYYYMMDD          Applies only to ARM loans and reflects the next pending interest rate
Change Date                                          adjustment date. Default is 19000101.
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                     F-2-2
<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
   Data: T0nnMMYY.LNS     Field         Format       Definition
                            Nbr
-----------------------------------------------------------------------------------------------------------------------------
<S>                      <C>            <C>          <C>
Next Interest Payment     19       YYYYMMDD          Applies only to payment capped ARM loans and reflects the next pending
Change Date                                          payment adjustment date. Default is 19000101.
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Index Value at Reset      20       6.3               The index rate used in determining the ARM coupon.
Date                                                 Default value is 0 for an ARM loan if the index is not changing in the
                                                     current period.  Also populate 0 if the loan is a fixed rate loan.
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Next Mortgage Rate        21       6.3               Should be populated in advance of the rate adjustment.. Default value is
expected at reset date                               0 for an ARM loan if the rate is not changing.  Default value is 0 if
                                                     the loan is a fixed rate loan.
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------

Collateral Group No. #    22       2                 This is a collateral grouping number for whole loan directed collateral
                                                     deals. Default value is 0.
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Current Arrearage Paid    23       13.2              The current amount of cashflow applied to the arrearage balance.
                                                     Applies to loans that have been or are currently in default. Default value
                                                     is 0.
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Outstanding Arrearage     24       13.2              The total amount of outstanding interest accrued under forbearance
Balance                                              period, after current arrearage payment. Default value is 0.
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Freddie Mac Loan Number   25       13(X)             Unique & permanent loan number assigned to the mortgage by Freddie Mac.
                                                     Used for disclosure.
-----------------------------------------------------------------------------------------------------------------------------
Blank                              1(x)
-----------------------------------------------------------------------------------------------------------------------------
Prepayment Premium        26       13.2              The borrowers penalty payment for prepaying his mortgage.  This amount
Amount                                               is allocated  in aggregate as a directed collateral amount to a specific
                                                     bond.  Default value is 0.
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

The Notes:
o  File must be a text file (either space or tab delimited).
o  Any dates should be in YYYYMMDD format.  They should not contain slashes (/)
   or dashes (-).
o  Number fields should NOT include commas.
o  Any negative number should be denoted by a "-" in front of the number, do
   not put the "-" after the number or use parentheses.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00011-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00011-of-00352.parquet"}]]