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                                                                    EXHIBIT 10.1

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.

               LEXVISION(TM) DATABASE AND COLLABORATION AGREEMENT

                                     BETWEEN

                          LEXICON GENETICS INCORPORATED

                                       AND

                          BRISTOL-MYERS SQUIBB COMPANY

                         DATED AS OF SEPTEMBER 26, 2000
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               LEXVISION(TM) DATABASE AND COLLABORATION AGREEMENT

         THIS LEXVISION(TM) DATABASE AND COLLABORATION AGREEMENT (this
"Agreement") is dated as of September 26, 2000 (the "Effective Date") and is
made by and between LEXICON GENETICS INCORPORATED, a Delaware corporation
("Lexicon"), and BRISTOL-MYERS SQUIBB COMPANY, a Delaware corporation ("BMS").
Lexicon and BMS are sometimes referred to herein individually as a "party" and
collectively as the "parties".

                                 R E C I T A L S

         WHEREAS, Lexicon has compiled and is continuing to compile the
LexVision(TM) and OmniBank(R) Databases (as hereinafter defined);

         WHEREAS, Lexicon owns or has rights to, and expertise in, certain
methods of producing Mutant Mice (as hereinafter defined);

         WHEREAS, BMS desires to obtain non-exclusive access to the LexVision
and OmniBank Databases during the Collaboration Term (as hereinafter defined)
for purposes of drug discovery research;

         WHEREAS, BMS desires that Lexicon develop, upon request, certain Mutant
Mice having Selected Mutations (as hereinafter defined) for use in such
research;

         WHEREAS, Lexicon is willing to grant BMS non-exclusive access to the
LexVision and OmniBank Databases during the Collaboration Term for purposes of
drug discovery research upon the terms and conditions set forth herein; and

         WHEREAS, Lexicon is willing to develop, upon request by BMS, Mutant
Mice having Selected Mutations for use in drug discovery research upon the terms
and conditions set forth herein;

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

                             ARTICLE 1. DEFINITIONS

         For purposes of this Agreement, the terms defined in this Article 1
shall have the respective meanings specified below:

         1.1 "Academic Collaborator" means a principal investigator, employed at
a university or other not-for-profit academic research institution that has
entered into a Material Transfer Agreement with BMS pursuant to Section 3.5, who
is performing collaborative research with BMS involving use of a Mutant Mouse or
Progeny.

         1.2 "Access Fee" has the meaning set forth in Section 7.1.

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         1.3 "Affiliate" means any corporation, company, partnership, joint
venture and/or firm which controls, is controlled by or is under common control
with a party to this Agreement. For purposes hereof, "control" means (a) in the
case of corporate entities, direct or indirect ownership at least fifty percent
(50%) of the stock or shares entitled to vote for the election of directors; and
(b) in the case of non-corporate entities, direct or indirect ownership of at
least fifty percent (50%) of the equity interest with the power to direct the
management and policies of such non-corporate entities.

         1.4 "BASF" means BASF Bioresearch Corporation.

         1.5 "Biotherapeutic" means any human therapeutic and/or prophylactic
that consists of or incorporates [**].

         1.6 [**]

         1.7 "Collaboration Term" means the period described in Section 12.1.1.

         1.8 "Commercialization Field" means the treatment and prevention of
human diseases and disorders.

         1.9 "Confidential Information" means any information and data received
by a party (the "Receiving Party") from the other party or its Affiliates (the
"Disclosing Party") in connection with this Agreement (which, in the case of BMS
as the Receiving Party, shall include without limitation the LexVision and
OmniBank Databases and all information contained therein and all documentation
related thereto; and which, in the case of Lexicon as the Receiving Party, shall
include without limitation any partial or complete gene sequences BMS may
provide to Lexicon in connection with this Agreement, any information and data
relating to BMS's research and development efforts using the LexVision and
OmniBank Databases, a Mutant Mouse, Progeny or any human ortholog of a mouse
gene contained in the OmniBank Database and discovered by BMS, and any research,
testing, clinical, regulatory, marketing or other scientific or business
information, plans, or data pertaining to any Product of BMS). Notwithstanding
the foregoing, Confidential Information shall not include any part of such
information or data that:

                  (a) is or becomes part of the public domain other than by
         unauthorized acts of the Receiving Party, its Affiliates or Corporate
         Partners;

                  (b) can be shown by written documents to have been already in
         the possession of the Receiving Party or its Affiliates or its
         Corporate Partners prior to disclosure under this Agreement, provided
         such Confidential Information was not obtained directly or indirectly
         from the Disclosing Party pursuant to a confidentiality agreement;

                  (c) can be shown by written documents to have been disclosed
         to the Receiving Party or its Affiliates or Corporate Partners by a
         Third Party, provided such Confidential Information was not obtained
         directly or indirectly from the Disclosing Party pursuant to a
         confidentiality agreement;

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                  (d) can be shown by written documents to have been
         independently developed by the Receiving Party or its Affiliates or its
         Corporate Partners without use of, or access to, Confidential
         Information of the Disclosing Party; or

                  (e) is disclosed by the Receiving Party pursuant to
         interrogatories, requests for information or documents, subpoena, civil
         investigative demand issued by a court or governmental agency or as
         otherwise required by law; provided, however, that the Receiving Party
         notifies the Disclosing Party promptly upon receipt thereof, giving
         (where practicable) the Disclosing Party sufficient advance notice to
         permit it to oppose, limit or seek confidential treatment for such
         disclosure; and provided, further, that the Receiving Party furnishes
         only that portion of the Confidential Information which it is advised
         by counsel is legally required whether or not a protective order or
         other similar order is obtained by the Disclosing Party.

Specific Confidential Information of a Disclosing Party shall not be deemed to
come under the foregoing exceptions merely because it is embraced by more
general information that is or becomes part of the public domain, or is known
by, disclosed to or independently developed by the Receiving Party. For example,
coding sequence of a gene disclosed by a Disclosing Party shall not be deemed to
come under the foregoing exceptions merely because genomic DNA sequence
information relating to such gene is or becomes part of the public domain, or is
known by, disclosed to or independently developed by the Receiving Party, unless
that genomic DNA sequence information has been specifically and materially
established as exon region(s) via standard molecular biology laboratory
techniques.

         1.10 "Corporate Partner" means any Third Party, other than an Academic
Collaborator, which enters into an agreement with BMS or its Affiliates
involving the grant to such Third Party of rights for the development,
commercialization and/or marketing of a Product, and which, if BMS has
transferred a Mutant Mouse or Progeny to such Third Party, has entered into a
Material Transfer Agreement with BMS pursuant to Section 3.5.

         1.11 "Cre-Lox Mouse" means any mouse cell or mouse containing a
Selected Mutation and which (i) has one or more lox sites in its genome and (ii)
contains DNA capable of expressing a Cre recombinase protein, and which is made
or produced by Lexicon and delivered to BMS.

         1.12 "Cre-Lox Patent Rights" means the United States and foreign
patents and patent applications listed on Exhibit 1.11, any
continuation-in-part, continuation or divisional applications thereof, any
patent granted on any aforesaid patent application and any extension, revival,
re-examination or reissue of any of such patent, and any continuations,
continuations-in-part, divisionals, reissues, extensions or foreign counterparts
of any of the foregoing, which Lexicon has the right to sublicense hereunder.
The terms "Cre" and "lox" (also referred to as "loxP") have the meanings as
described and embodied by the Cre-Lox Patent Rights.

         1.13 "Cre-Lox Technology" means all the inventions described, embodied
by and claimed in the Cre-Lox Patent Rights.

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         1.14 "Cre Mouse" means any mouse cell or mouse (i) having no lox sites
in its genome and (ii) containing DNA capable of expressing a Cre recombinase
protein.

         1.15 "Disclosing Party" has the meaning set forth in Section 1.8
hereof.

         1.16 "DPC" means DuPont Pharmaceuticals Company.

         1.17 "Drug Target" means [**].

         1.18 "Effective Date" means the date specified in the initial paragraph
of this Agreement.

         1.19 "Event of Default" means an event described in Section 12.3
hereof.

         1.20 "First Commercial Sale" means the first sale for use or
consumption by the general public of a Product in a country after all required
marketing and pricing or pricing reimbursement approvals to be granted by the
governing health authority of such country have been obtained. For the avoidance
of doubt, First Commercial Sale shall not include the sale of any Product for
use in clinical trials or for compassionate use prior to the approval of an NDA.

         1.21 "Homologous Recombination" means a method of making a Mutant Mouse
containing a Selected Mutation in a particular portion of a gene using the
standard homologous recombination techniques.

         1.22 "Humanized Mutant Mouse" means a mouse cell or mouse containing a
Selected Mutation (i) that may or may not have lox sites in its genome and (ii)
that contains DNA of a human gene replacing DNA from the homologous mouse gene,
and which is made or produced by Lexicon and delivered to BMS.

         1.23 "IND" means an Investigational New Drug application filed with the
U.S. Food and Drug Administration or a similar application for the clinical
testing of a Product in human subjects filed with a foreign regulatory
authority.

         1.24 "Invention" means any new and useful composition of matter,
process, product by process, machine or manufacture, including without
limitation, software or an arrangement or collection of data, or any new and
useful improvement thereof, whether or not patentable, which has been or is
discovered, conceived, developed or first reduced to practice by employees or
others acting on behalf of Lexicon or its Affiliates (either solely or jointly
with others), or by employees or others acting on behalf of BMS or its
Affiliates (either solely or jointly with others), through [**].

         1.25 "Joint Invention" means any new and useful composition of matter,
process, product by process, machine or manufacture, including without
limitation, software or an arrangement or collection of data, or any new and
useful improvement thereof, whether or not patentable, hereafter discovered,
conceived, made, developed or reduced to practice jointly by employees or others
acting on behalf of BMS or its Affiliates, together with employees or others
acting on behalf of Lexicon or its Affiliates, through [**].

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         1.26 "Joint Patent Rights" means (i) any United States and foreign
patent applications, including without limitation provisional patent
applications, hereafter owned, in whole or in part, by Lexicon or BMS or having
legal force in any country, which claim a Joint Invention, (ii) any United
States patents and foreign patents issuing from such patent applications and
(iii) any substitutions, renewals, continuations, continuations-in-part,
divisionals, reissues, reexaminations or extensions of any of the foregoing.

         1.27 "Lexicon Patent Rights" means (i) the United States and foreign
patents owned by or licensed (with rights to sublicense) to Lexicon which claim
a composition, method, or process relating to the Lexicon Technology, (ii) the
United States and foreign patent applications, including without limitation
provisional patent applications, heretofore or hereafter filed by Lexicon or
having legal force in any country, which claim a composition, method, or process
relating to the Lexicon Technology, (iii) any United States patents and foreign
patents issuing from such patent applications and (iv) any substitutions,
renewals, continuations, continuations-in-part, divisionals, reissues,
reexaminations or extensions of any of the foregoing; provided that the Lexicon
Patent Rights exclude any Joint Patent Rights, the Cre-Lox Patent Rights and the
TET-System Patent Rights.

         1.28 "Lexicon Technology" means all inventions (including Inventions
other than Joint Inventions), discoveries, improvements, know-how, technical
information, data or other technology relating to [**], in each such case as
have been heretofore or are hereafter discovered, conceived, made, developed
and/or reduced to practice solely or jointly by employees or others acting on
behalf of Lexicon or its Affiliates, or owned in whole or in part by or licensed
(with the right to sublicense) to Lexicon, but excluding the Cre-Lox Technology
and the TET-System Technology.

         1.29 "LexVision Database" means Lexicon's proprietary database
comprising phenotypic data and associated information, as more fully described
in Exhibit 1.29 hereto, and as may be supplemented from time to time as set
forth herein.

         1.30 "Lox Mutant Mouse" means a mouse cell or mouse containing a
Selected Mutation (i) having one or more lox sites in its genome and (ii) not
containing DNA capable of expressing a Cre recombinase protein, and which is
made or produced by Lexicon using either the OmniBank Method or Homologous
Recombination and delivered to BMS.

         1.31 "Major Market" means the United States, the European Union (under
the centralized process or any other process), Germany, the United Kingdom,
France, Italy, Spain or Japan.

         1.32 "Mutant Mouse" means collectively a Cre Mouse, a Cre-Lox Mouse, a
Lox Mutant Mouse, a Humanized Mutant Mouse or a Non-Cre-Lox Mutant Mouse having
a Selected Mutation that was made or produced by Lexicon and delivered to BMS
pursuant to Section 5.2. A "line of Mutant Mice" means Mutant Mice having the
same Selected Mutation.

         1.33 "NDA" means a New Drug Application filed with the U.S. Food and
Drug Administration or a similar application for marketing approval of a Product
filed with a foreign regulatory authority.

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         1.34 "Net Sales" means, with respect to a Royalty-Bearing Product, the
gross amount invoiced by BMS, its Affiliates or Corporate Partners for sales of
such Royalty-Bearing Product to a Third Party, less:

                  (a) trade, quantity and cash discounts actually allowed;

                  (b) discounts, refunds, rebates, chargebacks, retroactive
         price adjustments, billing errors and any other allowances (including,
         without limitation, government-mandated and managed health
         care-negotiated rebates) actually granted which effectively reduce the
         net selling price;

                  (c) product returns credits and allowances actually granted;

                  (d) any tax imposed on the production, sale, delivery or use
         of the product (excluding federal, state or local taxes based on
         income);

                  (e) freight, postage, shipping, customs duties, excises,
         tariffs, surcharges, other governmental charges (excluding federal,
         state or local taxes based on income) and insurance charges actually
         allowed or paid for delivery of Products;

                  (f) payments or rebates paid with respect to such Product in
         connection with state or federal Medicare, Medicaid or similar programs
         in the United States or in connection with similar programs in other
         countries in which there are sales; and

                  (g) adjustments for bad debts.

Such amounts shall be determined from the books and records of BMS, its
Affiliates or Corporate Partners, as the case may be, maintained in accordance
with the generally accepted accounting principles, consistently applied.

         In the event the Royalty-Bearing Product is sold as part of a
Combination Product (as defined below), the Net Sales from the Combination
Product, for the purposes of determining royalty payments, will be determined by
multiplying the Net Sales of the Combination Product by the fraction, A/A+B
where A is the average sale price of the Royalty-Bearing Product when sold
separately in finished form and B is the average sale price of the other active
compounds or ingredients in the Combination Product sold separately in finished
form.

         In the event that the average sale price of the Royalty-Bearing Product
can be determined but the average sale price of the other active compounds or
ingredients cannot be determined, Net Sales for purposes of determining royalty
payments will be calculated by multiplying the Net Sales of the Combination
Product by the fraction C/C+D where C is the selling party's average sales price
of the Royalty-Bearing Product and D is the difference between the average
selling price of the Combination Product and the average selling price of the
Royalty-Bearing Product. If the average sale price of the other active compounds
or ingredients can be determined but the average price of the Royalty-Bearing
Product cannot be determined, Net Sales for purposes of determining royalty
payments will be calculated by multiplying the Net Sales of the Combination
Product by the following formula: one minus C/C+D where C is the average selling

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price of the other product(s) and D is the difference between the average
selling price of the Combination Product and the average selling price of the
other active compounds or ingredients.

         In the event that the average sales price of both the Royalty-Bearing
Product and the other active compounds or ingredients in the Combination Product
cannot be determined, the Net Sales of the Royalty-Bearing Product shall be
negotiated in good faith by the parties.

         The Net Sales price for a Combination Product in a given country will
be calculated once each calendar year and such price will be used during all
applicable royalty reporting periods for the entire calendar year for such
country, absent extraordinary conditions or events. When determining the average
sale price of a Royalty-Bearing Product or the other active compounds or
ingredients in the Combination Product, the average sale price will be
calculated using data arising from the 12 months preceding the calculation of
the Net Sales price for the Combination Product. As used above, the term
"Combination Product" means any Royalty-Bearing Product sold in conjunction with
any other active component(s) (whether packaged together or in the same
therapeutic formulation).

         If BMS or any of its Affiliates or Corporate Partners sells any
Royalty-Bearing Product to a Third Party which also purchases other products or
services from such seller or any of its Affiliates in a bundled, combination or
capitated transaction (a "Bundled Transaction"), and such seller discounts the
sales price of the Royalty-Bearing Product to a greater degree than such seller
or its Affiliates generally discount the price of its other products to such
customer, then the aggregate amount received with respect to such Bundled
Transaction shall be allocated to Net Sales pursuant to the formula set forth in
Exhibit 1.34 hereto. For purposes of the foregoing, "discounting" includes
establishing the list price at lower than the seller's normal pricing level.

         Free samples of Royalty-Bearing Product and the disposition of
Royalty-Bearing Product for, or the use of Royalty-Bearing Product in,
pre-clinical or clinical (Phase 1 - 3) trials or other market-focused (Phase 4)
trials in which Royalty-Bearing Product is provided to patients without any
payment shall not result in any Net Sales.

         1.35 "Non-Cre-Lox Mutant Mouse" means a mouse cell or mouse containing
a Selected Mutation (i) having no lox sites in its genome and (ii) not
containing DNA capable of expressing a Cre recombinase protein, and which is
made or produced by Lexicon using either the OmniBank Method or Homologous
Recombination and delivered to BMS.

         1.36 "OmniBank Database" means Lexicon's proprietary database
comprising OmniBank Sequence Tags and all associated information, as more fully
described in Exhibit 1.36 hereto, and as may be supplemented from time to time
as set forth herein.

         1.37 "OmniBank" or "OmniBank Library" means Lexicon's proprietary
library of embryonic stem cell clones containing gene trap events in particular
mouse genes, which genes are identified by OmniBank Sequence Tags, and which
clones may or may not have lox sites, as more fully described in Exhibit 1.36
hereto.

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         1.38 "OmniBank Method" means the method of making or developing a mouse
containing a Selected Mutation using gene trap insertion techniques with
embryonic stem cells retrieved from the OmniBank Library.

         1.39 "OmniBank Sequence Tag" or "OST" means any DNA sequence that is
derived from a mouse gene using gene trap insertion techniques and contained in
the OmniBank Database.

         1.40 "Performance Year" has the meaning specified in Section 4.2
hereof.

         1.41 "Phase 3 Trial" means a pivotal human clinical trial in any
country the results of which could be used to establish safety and efficacy of a
Product as a basis for an NDA or that would otherwise satisfy the requirements
of 21 CFR 312.21(c) or its foreign equivalent. For purposes of this Agreement,
"commencement of a Phase 3 Trial" for a Product shall mean the introduction of
such Product into a human patient in a Phase 3 Trial.

         1.42 "Product" means any small molecule drug which [**], or which [**],
through use by BMS, its Affiliates, Academic Collaborators or Corporate Partners
of [**]; provided, however, that a Product shall not include any product, the
manufacture, use, sale or importation of which would infringe a Valid Claim of
the Cre-Lox Patent Rights.

         1.43 "Product Patent Rights" means (i) the United States and foreign
patent applications, hereafter filed by BMS, its Affiliates, Academic
Collaborators or Corporate Partners or having legal force in any country, which
claim a composition, method, or process relating to a Product, (ii) any United
States patents and foreign patents issuing from such patent applications and
(iii) any substitutions, renewals, continuations, continuations-in-part,
divisionals, reissues, reexaminations or extensions of any of the foregoing.

         1.44 "Progeny" means mice, including successive generations thereof,
that are produced or developed by BMS, its Affiliates, Academic Collaborators or
Corporate Partners by breeding a Mutant Mouse with any other mouse (including,
without limitation, any other Mutant Mouse); provided that Progeny shall not
include any mouse that does not contain at least one copy of an allele carrying
a Selected Mutation, or nucleotide sequence derived or descended from an
OmniBank vector, stably integrated into its genome.

         1.45 "Project Coordinator" has the meaning specified in Section 2.1
hereof.

         1.46 "Receiving Party" has the meaning set forth in Section 1.8 hereof.

         1.47 "Research Field" means use by BMS, its Affiliates, Academic
Collaborators and/or Corporate Partners, at the internal research facilities of
BMS, its Affiliates, Academic Collaborators and Corporate Partners, for research
directed toward the discovery, identification, selection, or characterization of
Products. The Research Field shall specifically exclude the development,
manufacture, use, lease, sale (or other transfer for consideration) or
importation of any product for sale (or lease or other transfer of a product for
consideration) wherein the manufacture, use, sale or importation of such product
would infringe a Valid Claim of the Cre-Lox Patent Rights, including but not
limited to wherein the product is manufactured using a composition or method
which would infringe a Valid Claim of the Cre-Lox Patent Rights.

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         1.48 "Royalty-Bearing Product" means any Product that [**]; provided
that, [**]. Without prejudice to any other provisions of this Agreement, Lexicon
shall, through the Steering Committee, regularly update BMS regarding [**].

         1.49 "Selected Mutation" means a specific mutation in a particular
portion of a gene of a mouse embryonic stem cell that is created using the
OmniBank Method or Homologous Recombination, which may or may not contain lox
sites.

         1.50 "Seek-Target-Validation Project" or "S-T-V Project" means
Lexicon's conduct of a Level 1, 2 or 3 S-T-V analysis pursuant to Section 6.1 or
6.2, as the case may be. A S-T-V Project may involve Level 1 analysis which
includes, as applicable, the tests and assays described in Exhibit 1.50-A, or
Level 2 or Level 3 analysis which may further include, as applicable, the tests
and assays described in Exhibit 1.50-B.

         1.51 "Steering Committee" has the meaning specified in Section 2.1
hereof.

         1.52 "Territory" means all countries and jurisdictions throughout the
world.

         1.53 "TET-System Patent Rights" means the patents and patent
applications listed on Exhibit 1.53, including any division, continuation,
continuation-in-part, substitute, renewal, reissue, extension, confirmation,
reexamination, registration or foreign counterpart thereof.

         1.54 "TET-System Technology" means the tetracycline (or tetracycline
analog) regulated gene expression technology, including both the overall system
and any of its individual components, as claimed in the TET-System Patent
Rights.

         1.55 "Third Party" means any person or entity other than Lexicon or BMS
and their respective Affiliates.

         1.56 "Valid Claim" means either (i) a claim of an issued and unexpired
patent which has not been held permanently revoked, unenforceable or invalid by
a decision of a court or other governmental agency of competent jurisdiction,
unappealable or unappealed within the time allowed for appeal and that is not
admitted to be invalid or unenforceable through reissue, disclaimer or
otherwise, or (ii) a claim of a pending patent application that [**] and that
has not been abandoned or finally rejected without the possibility of appeal or
refiling.

                          ARTICLE 2. STEERING COMMITTEE

         2.1 Members of Steering Committee; Project Coordinators. The parties
shall establish a steering committee (the "Steering Committee"), which shall
comprise three representatives designated by each party (or such other number as
the parties may agree). The initial members of the Steering Committee are set
forth on Exhibit 2.1. Members of the Steering Committee may be represented at
any meeting by a designee who is appointed by such member for such meeting and
who has authority to act on behalf of such member. The chairperson of the
Steering Committee shall be designated annually on an alternating basis between
the parties. The initial chairperson shall be selected by BMS and is designated
on Exhibit 2.1. The party not

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designating the chairperson shall designate one of its representative members as
secretary to the Steering Committee for such year. Each party shall designate an
individual (a "Project Coordinator"), who may, but need not, be a member of the
Steering Committee to coordinate, on its behalf, the day-to-day interaction of
and communication between the parties under this Agreement. Each Project
Coordinator shall possess the education, training and experience necessary to
make him or her reasonably technically qualified to serve as a Project
Coordinator. The initial Project Coordinators are set forth on Exhibit 2.1. Each
party shall be free to replace its representative members of the Steering
Committee and its Project Coordinator with new appointees who have authority to
act on behalf of such party, on notice to the other party.

        2.2 Responsibilities of Steering Committee. The Steering Committee shall
be responsible for overseeing and directing the parties' interaction and
performance of their respective obligations under this Agreement. Without
limiting the generality of the foregoing, its duties shall include:

                  (a) evaluating and modifying, from time to time, the tests and
         analytical methods to be used in Level 1 S-T-V analyses;

                  (b) evaluating and modifying, from time to time, the tests and
         analytical methods to be used in Level 2 and 3 S-T-V Projects conducted
         by Lexicon under this Agreement;

                  (c) determining whether various Third Party licensees of the
         Lexicon Technology constitute Reciprocal Rightsgivers for the purpose
         of Section 3.4 (which determination will be made promptly following
         Lexicon's submission of the final terms relevant to such determination
         pursuant to Section 3.4.5);

                  (d) prioritizing and setting goals for the updates to the
         LexVision and OmniBank Databases that Lexicon is required to make from
         time to time;

                  (e) establishing criteria for inclusion of data from Lexicon's
         Level 1 analyses in the LexVision Database;

                  (f) reviewing the results of Lexicon's Level 1 analyses from
         time to time in order to determine compliance with such criteria;

                  (g) coordinating BMS's designation of genes for inclusion in
         the LexVision Database pursuant to Section 4.4;

                  (h) prioritizing and reviewing Lexicon's efforts to develop
         and supply Mutant Mice pursuant to Article 5;

                  (i) establishing criteria and strategies for seeking patent
         protection for Joint Inventions;

                  (j) providing for the exchange of information between the
         parties; and

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                  (k) addressing issues and resolving differences that may arise
         between the parties.

         2.3 Meetings of Steering Committee. The Steering Committee shall meet
at least once every calendar quarter, and more frequently as the parties deem
appropriate, on such dates and at such times as the parties shall agree, on ten
(10) days' written notice to the other party unless such notice is waived by the
parties. The first meeting of the Steering Committee shall take place within
thirty (30) days after the Effective Date, at Lexicon's facility in The
Woodlands, Texas. The Steering Committee may convene or be polled or consulted
from time to time by means of telecommunications, video conferences or
correspondence, as deemed necessary or appropriate by the parties. To the extent
that meetings are held in person, they shall alternate between the offices of
the parties unless the parties otherwise agree. The chairperson shall be
responsible for sending notices of meetings to all members.

         2.4      Decisions.

                  2.4.1 Quorum; Voting. A quorum for a meeting of the Steering
         Committee shall require the presence of at least one Lexicon member (or
         designee) and at least one BMS member (or designee) in person or by
         telephone. All decisions made or actions taken by the Steering
         Committee shall be made unanimously by its members, with the Lexicon
         members cumulatively having one vote and the BMS members cumulatively
         having one vote.

                  2.4.2 Dispute Resolution. In the event that unanimity cannot
         be reached by the Steering Committee with respect to a matter that is a
         subject of its decision-making authority, then the matter shall be
         referred for further review and resolution to the Senior Vice
         President, Early Development and Applied Technology at BMS, or such
         other similar position designated by BMS from time to time, and the
         Chief Executive Officer at Lexicon, or such other similar position
         designated by Lexicon from time to time. The designated officers of
         each party shall use reasonable efforts to resolve the matter within
         [**] after the matter is referred to them. If the designated officers
         cannot resolve any matter described in Section [**] within such [**]
         period, the matter shall be decided by the designated officer of BMS in
         good faith, taking into account the reasonable commercial interests of
         Lexicon and the express provisions of this Agreement (as identified in
         further detail below); and, if the designated officers cannot resolve
         any matter described in Section [**] within such [**] period, the
         matter shall be decided by the designated officer of Lexicon in good
         faith, taking into account the reasonable commercial interests of BMS
         and the express provisions of this Agreement. All other matters shall
         be resolved only by the parties achieving consensus, which they shall
         continue to use all reasonable effort to achieve until same has been
         achieved. In resolving any dispute under this Section 2.4.2, the
         parties shall consider, in good faith, Lexicon's and its Third Party
         licensees' and collaborators' commercial interests, including, without
         limitation, the need to maintain high throughput, cost effectiveness
         and the relevance of the matter in question to Lexicon's and such other
         persons' overall business activities.

                                       11
<PAGE>   13

         2.5 Minutes. Within fifteen (15) days after each Steering Committee
meeting, the secretary of the Steering Committee shall prepare and distribute
minutes of the meeting, which shall provide a description in reasonable detail
of the discussions had at the meeting and a list of any actions, decisions or
determinations approved by the Steering Committee. The secretary shall be
responsible for circulation of all draft and final minutes. Draft minutes shall
be first circulated to the chairperson, edited by the chairperson and then
circulated in final draft form to all members of the Steering Committee
sufficiently in advance of the next meeting to allow adequate review and comment
prior to the meeting. Minutes shall be approved or disapproved, and revised as
necessary, at the next meeting. Final minutes shall be distributed to the
members of the Steering Committee.

         2.6 Term. The Steering Committee shall exist until the termination or
expiration of the Collaboration Term and for such longer period as necessary to
perform the responsibilities assigned to it under this Agreement.

         2.7 Expenses. Each party shall be responsible for all travel and
related costs for its representatives to attend meetings of, and otherwise
participate on, the Steering Committee.

                           ARTICLE 3. GRANTS OF RIGHTS

         3.1 Grant of Rights and Licenses by Lexicon to BMS.

                  3.1.1 Non-Exclusive Grant of Access to LexVision and OmniBank
         Databases. Subject to the terms of this Agreement, Lexicon hereby
         grants to BMS and its Affiliates, during the Collaboration Term, the
         non-exclusive right under the Lexicon Technology of access, without the
         right to permit Third Parties any right of access, to the LexVision and
         OmniBank Databases for use in the Research Field only. BMS and its
         Affiliates may make copies of information contained in the LexVision
         and OmniBank Databases only to the extent reasonably necessary to
         exercise BMS's rights under this Agreement, and BMS agrees that all
         such copies will be treated as Confidential Information of Lexicon and
         further agrees to establish, and to cause its Affiliates to establish,
         reasonable security measures to prevent copies of the information
         contained in the LexVision and OmniBank Databases from being made
         available to Third Parties (except as provided in Section 3.5), all to
         the same extent required for the protection of Lexicon's other
         Confidential Information under Section 9.1.

                  3.1.2 Non-Exclusive Research License Grant under the Lexicon
         Technology to Mutant Mice and Progeny. Subject to the terms of this
         Agreement, and subject to Lexicon's pre-existing obligations pursuant
         to its agreement with the Merck Genome Research Institute, Lexicon
         hereby grants to BMS and its Affiliates within the Territory, a
         non-exclusive right and license under the Lexicon Technology to use,
         breed, cross-breed and have bred and cross-bred Mutant Mice and Progeny
         for use in the Research Field only. Except as provided in Sections
         3.1.5 and 3.5, BMS agrees to use the Mutant Mice and Progeny solely for
         Research Field purposes of BMS and its Affiliates in accordance with
         the terms and conditions of this Agreement, and not to use the Mutant

                                       12
<PAGE>   14

         Mice or Progeny for any purposes for Third Parties, or to transfer,
         license the use of or make available to Third Parties Mutant Mice or
         Progeny.

                  3.1.3 Non-Exclusive Research License Grant under the Cre-Lox
         Technology to Lox Mutant Mice, Cre-Lox Mice, Cre Mice and Progeny.

                           (a) Subject to the terms of this Agreement, Lexicon
                  hereby grants to BMS and its Affiliates the non-transferable
                  (except to Academic Collaborators and Corporate Partners as
                  provided in Section 3.1.3(b)), non-exclusive right under the
                  Cre-Lox Technology to use, breed and cross-breed Lox Mutant
                  Mice solely in the Research Field; provided however, that BMS
                  and its Affiliates shall not manipulate the genetic
                  information at any lox site of a Lox Mutant Mouse by using the
                  Cre-Lox Technology (including without limitation
                  cross-breeding a Lox Mutant Mouse with a Cre Mouse) or
                  otherwise further practice under the Cre-Lox Patents, except
                  as permitted under [**].

                           (b) BMS and its Affiliates shall not transfer any Lox
                  Mutant Mice or any Progeny or material in any way derived from
                  such Lox Mutant Mice to any Third Party, except as follows:
                  BMS may transfer Lox Mutant Mice (or any Progeny or material
                  in any way derived from such Lox Mutant Mice) to Academic
                  Collaborators and Corporate Partners, provided that each such
                  Academic Collaborator or Corporate Partner has first entered
                  into a Material Transfer Agreement with BMS substantially in
                  the form and containing the terms as set forth in Exhibit
                  3.5-B hereto.

                           (c) No right is granted to BMS or its Affiliates to
                  sell (or lease or otherwise transfer for consideration) or
                  develop or manufacture for sale (or lease or other transfer
                  for consideration) any product, the manufacture, use, sale or
                  importation of which would infringe a Valid Claim of the
                  Cre-Lox Patents, including but not limited to any product
                  which is manufactured using a composition or method which
                  would infringe a Valid Claim of the Cre-Lox Patents, but this
                  Section 3.1.3(c) shall be without prejudice to any rights
                  granted to BMS under [**].

                           (d) Subject to the restricted non-exclusive rights
                  granted to BMS, Lexicon (and its licensors, as applicable)
                  shall retain all rights under the Cre-Lox Technology to Lox
                  Mutant Mice (and any Progeny or material in any way derived
                  from such Lox Mutant Mice).

                  3.1.4 Non-Exclusive Research Rights under the TET-System
         Patent Rights to Mutant Mice Incorporating TET-System Technology. At
         such time as BMS orders any Mutant Mouse that incorporates TET-System
         Technology, BMS shall execute and deliver to BASF the Notice and
         Acknowledgment attached hereto as Exhibit 3.1.4 with respect thereto.
         BMS's rights under the TET-System Patent Rights and the TET-System
         Technology with respect to such Mutant Mice and Progeny shall be
         subject to the terms of such Notice and Acknowledgment or such other
         terms as may be set forth in a separate agreement between BASF and BMS.

                                       13
<PAGE>   15

                  3.1.5 Non-Exclusive Product Rights under the Lexicon
         Technology. Subject to the terms of this Agreement, Lexicon hereby
         grants to BMS and its Affiliates under the Lexicon Technology and
         within the Territory, during the term of this Agreement and thereafter,
         the non-exclusive (except as otherwise provided in Section 6.2) right
         and license to develop, have developed, manufacture, have manufactured,
         market, have marketed, sell and have sold Products in the
         Commercialization Field. Without limiting the generality of the
         foregoing, such right shall include the right for BMS, any of its
         Affiliates, and, subject to Section 3.5, any of its Academic
         Collaborators or Corporate Partners to further develop any information
         or data provided by Lexicon in connection with any S-T-V Project
         performed for BMS under this Agreement.

                  3.1.6 [**].

         3.2 Reservation of Rights. Notwithstanding the rights granted to BMS
under this Article 3, Lexicon at all times reserves (i) its rights to the
sequence information, including without limitation all information relating to
OSTs, contained in the OmniBank Database and partial sequences thereof; (ii) its
right to use and to permit others to use the LexVision or OmniBank Databases or
any OST, and to use and have used and to breed and have bred Mutant Mice and
successive generations thereof, to research, develop, have developed, use,
manufacture, have manufactured, sell and have sold products, including the right
to grant licenses with respect to any applicable intellectual property rights
for such purpose; and (iii) its rights to all embryonic stem cell clones and
other biological materials contained in the OmniBank Library.

         3.3 No Grant of Other Technology or Patent Rights. Except as otherwise
expressly provided in this Agreement, under no circumstances shall a party
hereto, as a result of this Agreement, obtain any ownership interest in or other
right to any technology, know-how, patents, patent applications, gene or genomic
sequence data or information, products, or biological materials of the other
party, including items owned, controlled or developed by, or licensed to, the
other party, or transferred by the other party to said party, at any time
pursuant to this Agreement.

         3.4 Grant of Non-Blocking Rights Among BMS, Lexicon and Reciprocal
Rightsgivers.

                  3.4.1 Rights to Use the LexVision Database, OmniBank Database
         and Mutant Mice.

                           3.4.1.1 BMS and its Affiliates shall not assert or
                  enforce, and shall use good faith efforts to obtain the
                  written agreement of its Academic Collaborators and Corporate
                  Partners not to assert or enforce, against Lexicon, its
                  Affiliates or any Reciprocal Rightsgiver (as defined below)
                  any claims of an issued patent arising from the use by BMS,
                  its Affiliates, Academic Collaborators or Corporate Partners
                  of the LexVision or OmniBank Databases or any information
                  therein, or arising from the use by BMS, its Affiliates,
                  Academic Collaborators or Corporate Partners of an OST, a
                  Mutant Mouse or Progeny, including, without limitation, any
                  claims of an issued patent to an Invention made

                                       14
<PAGE>   16

                  by BMS, its Affiliates, Academic Collaborators or Corporate
                  Partners, to the extent, but only to the extent, any such
                  assertion or enforcement would, absent a license from BMS,
                  prevent Lexicon, any of its Affiliates or any Reciprocal
                  Rightsgiver from using (and/or, in the case of Lexicon and its
                  Affiliates, permitting others to use), for research purposes
                  only (including, without limitation, research directed toward
                  the discovery, identification, selection, or characterization
                  of human therapeutic and diagnostic products), (i) the
                  LexVision or OmniBank Databases, any information therein or
                  any OST; (ii) any Mutant Mice or Progeny or other mice having
                  a Selected Mutation; or (iii) any embryonic stem cell clones
                  or other biological materials contained in the OmniBank
                  Library.

                           3.4.1.2 Lexicon and its Affiliates shall not assert
                  or enforce, and shall use good faith efforts to obtain the
                  written agreement of its academic collaborators and corporate
                  partners not to assert or enforce, against BMS or its
                  Affiliates any claims of an issued patent arising from the use
                  by Lexicon, its Affiliates, academic collaborators or
                  corporate partners of the LexVision or OmniBank Databases or
                  any information therein, or arising from the use by Lexicon,
                  its Affiliates, academic collaborators or corporate partners
                  of an OST, a Mutant Mouse or Progeny, including, without
                  limitation, any claims of an issued patent to an Invention
                  made by Lexicon, its Affiliates, academic collaborators or
                  corporate partners, to the extent, but only to the extent, any
                  such assertion or enforcement would, absent a license from
                  Lexicon, prevent BMS or any of its Affiliates from using, for
                  research purposes only (including, without limitation,
                  research directed toward the discovery, identification,
                  selection, or characterization of human therapeutic and
                  diagnostic products), (i) the LexVision or OmniBank Databases,
                  any information therein or any OST; (ii) any Mutant Mice or
                  Progeny or other mice having a Selected Mutation; or (iii) any
                  embryonic stem cell clones or other biological materials
                  contained in the OmniBank Library.

                  3.4.2 Rights Relating to Drug Targets and Products.

                           3.4.2.1 BMS and its Affiliates shall not assert or
                  enforce, and shall use good faith efforts to obtain the
                  written agreement of its Academic Collaborators and Corporate
                  Partners not to assert or enforce, against Lexicon or its
                  Affiliates any claims of an issued patent arising from the use
                  by BMS, its Affiliates, Academic Collaborators or Corporate
                  Partners of the LexVision or OmniBank Databases or any
                  information therein, or arising from the use by BMS, its
                  Affiliates, Academic Collaborators or Corporate Partners of an
                  OST, a Mutant Mouse or Progeny (or any claims of any other
                  issued patent owned or controlled by BMS or its Affiliates to
                  the composition of matter or use of the gene to which such
                  patent relates), including, without limitation, any claims of
                  an issued patent to an Invention made by BMS, its Affiliates,
                  Academic Collaborators or Corporate Partners, to the extent,
                  but only to the extent, any such assertion or enforcement
                  would, absent a license from BMS, prevent Lexicon or any of
                  its Affiliates (i) from using or permitting others to use, for
                  research purposes only (including, without limitation,
                  research directed toward the discovery, identification,
                  selection, or characterization of human therapeutic and
                  diagnostic

                                       15
<PAGE>   17

                  products), any Drug Target or (ii) developing, having
                  developed, manufacturing, having manufactured, marketing,
                  having marketed, selling and having sold human therapeutic and
                  diagnostic products discovered, identified, selected or
                  characterized in the course, or using the results, of such
                  research; provided that such rights granted to Lexicon and its
                  Affiliates hereunder shall not extend to the claims of any
                  patent (A) to the composition of matter of any small molecule
                  drug or any Biotherapeutic, or (B) to the use of any small
                  molecule drug or Biotherapeutic whose composition of matter is
                  specified in such patent, whether or not such composition of
                  matter is claimed therein. Lexicon may extend the rights
                  granted under this Section 3.4.2.1 to Third Parties (x) with
                  respect to the use of Drug Targets in fields other than the
                  discovery, identification, selection, or characterization of
                  small molecule drugs, and (y) with respect to the development,
                  manufacture, marketing and sale of human therapeutic and
                  diagnostic products, other than small molecule drugs, that are
                  discovered, identified, selected or characterized by Lexicon,
                  its Affiliates or such Third Parties.

                           3.4.2.2 BMS and its Affiliates shall not assert or
                  enforce, and shall use good faith efforts to obtain the
                  written agreement of its Academic Collaborators and Corporate
                  Partners not to assert or enforce, against any Reciprocal
                  Rightsgiver any claims of an issued patent arising from the
                  use by BMS, its Affiliates, Academic Collaborators or
                  Corporate Partners of the LexVision or OmniBank Databases or
                  any information therein, or arising from the use by BMS, its
                  Affiliates, Academic Collaborators or Corporate Partners of an
                  OST, a Mutant Mouse or Progeny (but expressly excluding any
                  claims of any other issued patent owned or controlled by BMS
                  or its Affiliates to the composition of matter or use of the
                  gene to which such patent relates), including, without
                  limitation, any claims of an issued patent to an Invention
                  made by BMS, its Affiliates, Academic Collaborators or
                  Corporate Partners, to the extent, but only to the extent, any
                  such assertion or enforcement would, absent a license from
                  BMS, prevent any Reciprocal Rightsgiver (i) from using, for
                  research purposes only (including, without limitation,
                  research directed toward the discovery, identification,
                  selection, or characterization of small molecule drugs), any
                  Drug Target to which such Reciprocal Rightsgiver holds a
                  license under the Lexicon Technology or (ii) developing,
                  having developed, manufacturing, having manufactured,
                  marketing, having marketed, selling and having sold small
                  molecule drugs discovered, identified, selected or
                  characterized in the course, or using the results, of such
                  research; provided that such rights granted to Reciprocal
                  Rightsgivers hereunder shall not extend to the claims of any
                  patent (A) to the composition of matter of any small molecule
                  drug or any Biotherapeutic, or (B) to the use of any small
                  molecule drug or Biotherapeutic whose composition of matter is
                  specified in such patent, whether or not such composition of
                  matter is claimed therein.

                           3.4.2.3 Lexicon and its Affiliates shall not assert
                  or enforce, and shall use good faith efforts to obtain the
                  written agreement of its academic collaborators and corporate
                  partners not to assert or enforce, against BMS or its
                  Affiliates any claims of an issued patent arising from the use
                  by Lexicon, its

                                       16
<PAGE>   18

                  Affiliates, academic collaborators or corporate partners of
                  the LexVision or OmniBank Databases or any information
                  therein, or arising from the use by Lexicon, its Affiliates,
                  academic collaborators or corporate partners of an OST, a
                  Mutant Mouse or Progeny, including, without limitation, any
                  claims of an issued patent to an Invention made by Lexicon,
                  its Affiliates, academic collaborators or corporate partners,
                  to the extent, but only to the extent, any such assertion or
                  enforcement would, absent a license from Lexicon, prevent BMS
                  or any of its Affiliates (i) from using, for research purposes
                  only (including, without limitation, research directed toward
                  the discovery, identification, selection, or characterization
                  of small molecule drugs), any Drug Target to which BMS holds a
                  license under the Lexicon Technology or (ii) developing,
                  having developed, manufacturing, having manufactured,
                  marketing, having marketed, selling and having sold small
                  molecule drugs discovered, identified, selected or
                  characterized in the course, or using the results, of such
                  research; provided that such rights granted to BMS hereunder
                  shall not extend to the claims of any patent (A) to the
                  composition of matter of any small molecule drug or any
                  Biotherapeutic, or (B) to the use of any small molecule drug
                  or Biotherapeutic whose composition of matter is specified in
                  such patent, whether or not such composition of matter is
                  claimed therein.

                  3.4.3 "Reciprocal Rightsgiver," for purposes of Section 3.4.1
         or 3.4.2, respectively, means a Third Party licensee under the Lexicon
         Technology which has agreed, in writing, to terms and conditions
         concerning the subject matter of such section that are at least as
         advantageous to BMS and Lexicon and their respective Affiliates
         (including, without limitation, with respect to assignment, as provided
         below) in the Research Field or with respect to Products in the
         Commercialization Field, respectively, as the terms and conditions
         under Section 3.4.1 or 3.4.2, as applicable, are to such Third Party;
         provided, however, that unless a Third Party licensee is already a
         Reciprocal Rightsgiver at the time the very first patent application
         covering the issued patent in question is published in any country or
         jurisdiction in the Territory, such Third Party licensee shall not have
         any rights under Section 3.4.2 with respect to such issued patent.
         Furthermore, except to the extent expressly provided herein, neither
         BMS nor Lexicon nor any Reciprocal Rightsgiver shall have the right to
         assign, transfer or otherwise dispose of (with or without
         consideration), in whole or in part, any of its rights under this
         Section 3.4 (or, in the case of BMS, under the equivalent provisions of
         Lexicon's agreements with Reciprocal Rightsgivers) except in connection
         with a merger, consolidation or sale with or to any unrelated Third
         Party of such portion of BMS's, Lexicon's or such Reciprocal
         Rightsgiver's assets that include such rights; that is to say, BMS's,
         Lexicon's or such Reciprocal Rightsgiver's rights under this Section
         3.4 (or, in the case of BMS, under the equivalent provisions of
         Lexicon's agreements with Reciprocal Rightsgivers) shall be assumed by
         such person's successor in interest in any such transaction and shall
         not be transferred separate from all or substantially all of its other
         business assets. Any purported assignment of rights under this Section
         3.4 in violation of the preceding sentence shall be void.

                  3.4.4 BMS, Lexicon and each Reciprocal Rightsgiver shall
         provide Lexicon's Project Coordinator with a copy of any patent
         application that such person reasonably

                                       17
<PAGE>   19

         believes will be implicated under this Section 3.4, promptly after such
         application is first published anywhere in the Territory. Lexicon's
         Project Coordinator shall distribute copies of such patent application
         to BMS, Lexicon and each Reciprocal Rightsgiver (other than the person
         which filed the application) and shall indicate the applicability of
         Section 3.4 thereto. The parties acknowledge and agree that initial
         determination of whether a patent application is implicated under this
         Section 3.4 may be difficult. Therefore, no person shall be held liable
         for failure to comply with this Section 3.4.4 (or under the equivalent
         provisions of Lexicon's agreements with Reciprocal Rightsgivers) with
         regard to any particular patent application, so long as such failure
         was reasonable and in good faith and is promptly rectified when
         realized.

                  3.4.5 Lexicon shall use good faith efforts to obtain from each
         Third Party that becomes a subscriber to the LexVision Database during
         the Collaboration Term agreements on the same terms as those set forth
         in this Section 3.4, so that such subscriber becomes a Reciprocal
         Rightsgiver. To the extent permitted, Lexicon shall periodically
         disclose to the Steering Committee, for action under Section 2.2(c),
         the identity of any such Reciprocal Rightsgivers and the terms and
         conditions agreed to by such Reciprocal Rightsgivers under which BMS
         receives rights reciprocal to those specified in this Section 3.4.

                  3.4.6 BMS and each Reciprocal Rightsgiver shall have the right
         to enforce the provisions of this Section 3.4 or the equivalent
         provisions of Lexicon's agreements with such Reciprocal Rightsgiver, as
         the case may be, as if each were a party to the agreements containing
         such provisions.

         3.5 Transfers to or Use for the Benefit of Corporate Partners and
Academic Collaborators. BMS and its Affiliates shall have the right to transfer
a Mutant Mouse or Progeny to a Corporate Partner or an Academic Collaborator,
provided that such Corporate Partner or Academic Collaborator shall have entered
into (i) a Material Transfer Agreement with BMS substantially in the form and
containing the terms as set forth in Exhibit 3.5-A or 3.5-B, whichever is
applicable, and (ii) any additional agreement required for such transfer under
[**]. Within [**] entering into any such Material Transfer Agreement, BMS shall
provide Lexicon with a copy thereof. [**].

              ARTICLE 4. ACCESS TO LEXVISION AND OMNIBANK DATABASES

         4.1 Access to the LexVision and OmniBank Databases. Within 30 days
after the Effective Date, Lexicon shall provide BMS with [**] access, using [*],
to the LexVision and OmniBank Databases in their most current versions as of the
access activation date. BMS shall access the LexVision and OmniBank Databases
through one or more servers in secure locations at its principal research
facilities in Princeton and Hopewell, New Jersey and Wallingford, Connecticut;
provided, however, BMS shall be entitled to access the LexVision and OmniBank
Databases remotely from computers which are part of a BMS intranet system. [**].
Up to [**] concurrent BMS users (and [**] total users) at BMS's principal
research facilities in Princeton and Hopewell, New Jersey, and Wallingford,
Connecticut, shall be permitted to access the LexVision and OmniBank Databases
through such servers at any given time. BMS shall take

                                       18
<PAGE>   20

reasonable precautions to restrict access to the LexVision and OmniBank
Databases to the scientists and other employees of BMS and its Affiliates who
have access to BMS's own proprietary gene databases, including without
limitation all precautions BMS employs with respect to its own proprietary gene
databases. BMS shall not provide any Academic Collaborator, Corporate Partner or
other Third Party with direct access to the LexVision or OmniBank Databases and,
except as provided in Section 3.5, shall not disclose any OST or other
information contained therein to any Academic Collaborator, Corporate Partner or
other Third Party.

         4.2 Updates to the LexVision and OmniBank Databases. During the
Collaboration Term, Lexicon will use commercially reasonable efforts to update
the LexVision and OmniBank Database, [**] at least once every two months, and
Lexicon shall, in all events, make such updates for BMS at least as frequently
and promptly as Lexicon makes updates available to other subscribers to the
LexVision or OmniBank Databases, as the case may be. Without limiting the
foregoing, Lexicon will use commercially reasonable efforts to include in the
LexVision Database Level 1 S-T-V phenotypic data (as described on Exhibit
1.50-A, as may be modified from time to time) for the following numbers of
murine genes upon the following schedule:

             Deadline                             Number of Genes (Total)
             --------                             -----------------------
             [**]

[**].

         4.3 Support for the LexVision and OmniBank Databases.

                  4.3.1 During the Collaboration Term, Lexicon will provide
         reasonable technical support for the LexVision and OmniBank Databases
         during normal business hours (9:00 a.m. to 5:00 p.m. Central time).
         Requests for support shall be coordinated by the Project Coordinator
         designated by each party.

                  4.3.2 If the LexVision Database and/or OmniBank Database
         malfunctions or for some reason becomes nonoperational, BMS shall
         notify Lexicon within [**] of such occurrence. Lexicon shall respond to
         all such notices within [**] of receipt and shall use reasonable
         efforts to correct defects in the LexVision Database and/or OmniBank
         Database within time frames corresponding to the severity of the
         defects, as agreed upon by Lexicon and BMS.

                  4.3.3 Lexicon shall provide BMS with any update, enhancements,
         modifications or "bug fixes" made by Lexicon that it makes available to
         its Third Party licensees generally. Furthermore, BMS shall have the
         right to purchase, lease or license from Lexicon improvements to the
         LexVision Database and/or OmniBank Database (or any component thereof)
         that Lexicon makes available for sale, lease or license to any other
         Third Party licensee, all at Lexicon's standard or list prices
         therefor.

                  4.3.4 Both parties shall use all reasonable efforts to
         minimize any the downtime of the LexVision Database and OmniBank
         Database and shall discuss, in good faith,

                                       19
<PAGE>   21

         equitable adjustment of the parties' respective obligations under this
         Agreement as a result of any extraordinary period of downtime.

         4.4 BMS Designation of Genes for Inclusion in LexVision Database.

                  4.4.1 In each year of the Collaboration Term, BMS will have
         the right to designate for inclusion in the LexVision Database up to
         [**] of the murine genes to be included in the LexVision Database
         during each Performance Year pursuant to Section 4.2. BMS shall
         designate such genes by written notice in the form attached hereto as
         Exhibit 4.4.1 delivered to Lexicon (i) within [**] of the Effective
         Date for the murine genes designated by BMS for the first Performance
         Year and (ii) no fewer than [**] prior to each anniversary of the
         Effective Date for the murine genes designated by BMS for each
         subsequent Performance Year. [**].

                  4.4.2 [**].

                  4.4.3 If BMS does not provide Lexicon with the murine DNA
         sequence for the gene for which it desires a Selected Mutation (e.g.,
         BMS provides only a human DNA expressed sequence tag or full-length
         coding region for which it desires Lexicon to obtain the murine
         homolog), Lexicon will use commercially reasonable efforts in
         performing the following activities in the following order: [**].

                  4.4.4 In the event (i) Lexicon has already initiated a project
         for the generation of a mouse with a Selected Mutation in any murine
         gene designated by BMS pursuant to Section 4.4.1, (ii) a Third Party
         licensee of Lexicon has already designated such murine gene for
         inclusion in the LexVision Database, or (iii) Lexicon is unsuccessful
         in identifying the murine homolog of a human expressed sequence tag or
         full-length coding region provided by BMS pursuant to Section 4.4.3,
         Lexicon shall, within [**] after receipt of BMS's designation of such
         gene or such failure by Lexicon, as the case may be, notify BMS, and
         BMS shall thereafter be entitled, but not required, to designate a
         replacement gene. BMS shall designate any such replacement gene no
         later than [**] after receiving such notice from Lexicon.

                  4.4.5 [**].

                ARTICLE 5. DEVELOPMENT AND SUPPLY OF MUTANT MICE

         5.1 General. Subject to the terms of this Agreement, and subject to
Lexicon's pre-existing obligations pursuant to its agreement with the Merck
Genome Research Institute, upon the written request of BMS, Lexicon shall
develop and deliver Mutant Mice containing a particular Selected Mutation as may
be specifically requested by BMS.

         5.2 Requests for Mutant Mice, Clones by BMS. During each year of the
Collaboration Term, BMS shall have the option, subject to the provisions of
Exhibit 5.2-A and the other terms and conditions of this Agreement, to request
that Lexicon develop and deliver to BMS:

                  (a) up to [**] lines of Mutant Mice [**];

                                       20
<PAGE>   22

                  (b) up to [**] lines of Mutant Mice [**]; and

                  (c) up to [**] lines of Mutant Mice [**].

BMS shall make such requests in writing, in the form attached hereto as Exhibit
5.2-B or Exhibit 5.2-C that is appropriate for such request. BMS acknowledges
that Lexicon cannot predict the precise effect, if any, on gene function
resulting from any Selected Mutation, and that Mutant Mice may or may not have
one or more lox sites in their genomes, depending on the Selected Mutation
requested. Notwithstanding any other provision of this Agreement, (i) BMS's
right to request the delivery under Section 5.2(a) or (b) of any line of Mutant
Mice shall survive until [**]. BMS's right to request the delivery of any line
of Mutant Mice under Section 5.2(c) shall expire on the termination or
expiration of the Collaboration Term.

[**].

         5.3 Development of Mutant Mice by Lexicon. Following a request by BMS
that Lexicon develop and deliver a particular line of Mutant Mice, Lexicon shall
provide BMS with quarterly reports regarding Lexicon's efforts in developing
such Mutant Mouse and shall permit BMS scientists to confer with the Lexicon
scientists who are developing such lines of Mutant Mice, from time to time, at
mutually convenient times coordinated by the Project Coordinator for each party.
Development of a Mutant Mouse for BMS pursuant to this Agreement shall be deemed
complete, and the Mutant Mouse deemed ready for shipment under Section 5.5, when
Lexicon has [**]. Notwithstanding the foregoing, BMS may request shipment of
heterozygous mice prior to the time Lexicon has [**], in which case Lexicon will
ship such Mutant Mouse under Section 5.5 as promptly as practicable following
such request; provided that Lexicon shall have no obligation to ship such Mutant
Mice unless Lexicon determines, in its sole discretion, that it will have
sufficient heterozygous mice following such shipment to complete the development
of such line of Mutant Mice without delay. It is understood by the parties that
Lox Mutant Mice, Cre-Lox Mice and Non-Cre-Lox Mutant Mice delivered by Lexicon
will be heterozygous at the Selected Mutation.

         5.4 Maintenance of Back-Up Colonies. For a period of [**], Lexicon
shall retain a small back-up colony of approximately two cages of such mice
(approximately five mice per cage), for breeding of mice from such colony, if
requested by BMS, for delivery as Mutant Mice. Thereafter, Lexicon shall [**].
For a period of [**], Lexicon shall retain a small back-up colony of
approximately two cages of such Mutant Mice (approximately five mice per cage),
for the purpose of replacing mice shipped to BMS under this Article 5 which die
during or within [**] after shipment to BMS hereunder. Thereafter [**], Lexicon
shall [**]. In the event BMS requests that Lexicon maintain any such colony for
a period of more than [**], BMS shall pay Lexicon a storage and maintenance
charge of [**] for such requested line of Mutant Mice for each additional month
that Lexicon maintains such colony at BMS's request.

         5.5 Delivery Terms and Conditions. BMS shall be responsible for making
shipping arrangements for all Mutant Mice to be shipped to BMS from Lexicon. BMS
shall also be responsible for complying with all customs, regulations,
veterinary handling procedures and protocols, and obtaining any and all permits,
forms or permissions that may be required for BMS to accept shipment of Mutant
Mice from Lexicon. To facilitate timely compliance with such

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<PAGE>   23

requirements, a copy of a standard Lexicon mutant mouse shipping and transfer
report is attached in Exhibit 5.5. Lexicon will specify a reputable, experienced
shipping company located in the same metropolitan area as Lexicon with which BMS
may make arrangements for shipping and delivery of such Mutant Mice. Lexicon
shall ship to BMS at least one female and one male Mutant Mouse with the
Selected Mutation, each of breeding age (i.e., a "breeding pair"), promptly
following its receipt of payment and written notice that BMS has completed the
necessary shipping arrangements. Risk of loss with respect to any Mutant Mice to
be transferred under this Section 5.5 shall pass to BMS upon delivery thereof to
the shipping company designated as specified herein. If BMS fails to complete
the necessary shipping arrangements and provide such notice within [**] after
Lexicon's delivery of a notice pursuant to Section 5.3, BMS shall pay Lexicon a
storage and maintenance charge of [**] for such requested line of Mutant Mice
for each month thereafter until Lexicon receives notice of the completion of
such shipping arrangements. All out-of-pocket transportation and transfer costs
associated with the transfer and delivery of Mutant Mice requested by BMS under
Section 5.2(a) or (b) from Lexicon to BMS shall be paid by Lexicon. All
out-of-pocket transportation and transfer costs associated with the transfer and
delivery of Mutant Mice requested by BMS under Section 5.2(c) from Lexicon to
BMS shall be paid by BMS.

         5.6 Reasonable Efforts. Lexicon shall use commercially reasonable
efforts to complete the generation [**] of (i) Mutant Mice made by the OmniBank
Method within [**] of the date of BMS's request, (ii) Lox Mutant Mice and
Non-Cre-Lox Mutant Mice made by Homologous Recombination within [**] of the date
of BMS's request, and (iii) Cre-Lox Mice made by Homologous Recombination within
[**] of the date of BMS's request. Lexicon shall use commercially reasonable
efforts to complete the development of Mutant Mice, in accordance with the
criteria specified in Section 5.3, within [**] thereafter. BMS recognizes that
the production of Mutant Mice involves a number of technologically complex steps
and that technical obstacles may prevent Lexicon from producing Mutant Mice on
the schedule provided for herein. Lexicon shall immediately notify BMS of any
such technical obstacle encountered and its analysis of whether the obstacle can
be overcome and the time required to do so. If, after consultation with BMS,
Lexicon determines that production of such Mutant Mice within the time periods
provided for herein is not feasible using commercially reasonable efforts,
Lexicon may notify BMS in writing that it is extending the relevant delivery
date to a date that can be accomplished using commercially reasonable efforts;
provided that BMS may [**].

         5.7 No Infringement of Third Party Rights. Lexicon shall not be
obligated to develop, produce or deliver a Mutant Mouse where Lexicon reasonably
believes, with the advice of its counsel and the Steering Committee, that such
action would infringe upon the intellectual property rights of a Third Party. In
such event, the Steering Committee shall adopt an acceptable solution including,
but not limited to, the identification by BMS of an alternative Mutant Mouse
and, subject to Section 7.2, the production, development and analysis by Lexicon
of non-infringing Mutant Mice. [**].

         5.8 [**].

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<PAGE>   24

                      ARTICLE 6. S-T-V PHENOTYPIC ANALYSIS

         6.1 Level 1 S-T-V Phenotypic Screens.

                  6.1.1 Lexicon shall conduct Level 1 S-T-V phenotypic analysis
         for each line of Mutant Mice (excluding Cre Mice) developed under
         Section 5.2(c) and deliver data and results from such analysis to BMS.
         BMS shall have the non-exclusive right to use the data and results from
         such analysis (and the right to provide same to any of BMS' Corporate
         Partners and Academic Collaborators in accordance with Section 3.5), as
         well as a non-exclusive right and license, as provided in Section 3.1
         (with the right to sublicense same to any of BMS' Corporate Partners
         and Academic Collaborators in accordance with Section 3.5) under the
         Lexicon Technology to use any Invention owned by Lexicon under Section
         8.1.3 that arises directly from such analysis.

                  6.1.2 Lexicon shall not make any data, results or Inventions
         from an S-T-V Project performed for BMS under Section 6.1.1 accessible
         to Third Party licensees of the Lexicon Technology until [**] from the
         date same is provided to BMS, provided that Lexicon may disclose such
         data, results and Inventions (i) [**] or (ii) to Third Parties
         generally if Lexicon can demonstrate to BMS's reasonable satisfaction
         that Lexicon had already initiated a project for the development of a
         mouse with a Selected Mutation in the same gene prior to BMS's
         disclosure of such gene to Lexicon.

         6.2 Level 2 and Level 3 S-T-V Projects.

                  6.2.1 Terms for Level 2 and Level 3 S-T-V Projects shall be
         negotiated in good faith between the parties on a target-specific
         basis. Unless otherwise mutually agreed, the consideration to Lexicon
         for the conduct of any Level 2 or Level 3 S-T-V Project shall include
         payments for project costs, and, [**]. Unless otherwise mutually
         agreed, BMS and Lexicon exclusively shall have the right to use the
         data and results from each Level 2 and Level 3 S-T-V Project (and BMS
         shall have the right to provide same to any of BMS' Corporate Partners
         and Academic Collaborators in accordance with Section 3.5), and BMS
         shall have a right and license (with the right to sublicense same to
         any of BMS' Corporate Partners and Academic Collaborators in accordance
         with Section 3.5) under the Lexicon Technology to use any Invention
         owned by Lexicon under Section 8.1.4 that arises directly from such
         analysis. [**].

                  6.2.2 Neither party will have the right to disclose any data,
         results or Inventions from an S-T-V Project performed for BMS under
         Section 6.2.1 to any Third Party, except that BMS will have the right
         to disclose such data, results and Inventions to Academic Collaborators
         and Corporate Partners who need to know same for purposes of their
         collaborations with BMS; provided that, [**].

                               ARTICLE 7. PAYMENTS

         7.1 Access Fees.

                  7.1.1 Subject to the remainder of this Section 7.1, in
         consideration of the rights and licenses granted to BMS during the
         Collaboration Term hereunder, BMS agrees to pay Lexicon, during the
         Collaboration Term, access fees (each, an "Access Fee") in the

                                       23
<PAGE>   25

         aggregate amount of [**] per Performance Year, payable as provided
         herein. The Access Fee for any Performance Year will be payable in
         increments of [**], each increment to be payable upon Lexicon's
         inclusion in the LexVision Database of Level 1 S-T-V phenotypic data
         for each [**] new murine genes (each, a "Data Set"); provided, however,
         that [**]. Payments shall be made within [**] after the first day of
         each calendar quarter after the Effective Date (each, a "Payment Date")
         with respect to the increments of the annual Access Fee payable as a
         result of the Data Set(s) included in the LexVision Database during the
         preceding calendar quarter, until the full amount of the Access Fee for
         such Performance Year has been paid, provided that (i) the first
         increment of the Access Fee payable for the first Performance Year
         shall be payable within [**] and (ii) once BMS has paid the full amount
         of the Access Fee for a given year, no further Payment Dates shall
         occur until the beginning of the next Performance Year. Payments shall
         be made only with respect to complete Data Sets. Partial Data Sets
         delivered during a calendar quarter shall be carried over; when any
         such partial Data Set is subsequently completed, the entire completed
         Data Set shall deemed to be included in the LexVision Database in the
         quarter in which it is completed. Any Data Set delivered after the full
         amount of the Access Fee for the then-current Performance Year has
         become payable will be carried over and credited, for purposes of this
         Section 7.1.1, as having been delivered in the first quarter of the
         next Performance Year.

                  7.1.2 In the event that Lexicon has not included at least one
         complete Data Set in the LexVision Database during the calendar quarter
         preceding a Payment Date, such Payment Date automatically shall be
         postponed until Lexicon has included the next complete Data Set. For
         the avoidance of doubt, more than one Payment Date may be in
         postponement at any given time.

                  7.1.3 [**].

                  7.1.4 [**].

                  7.1.5 [**].

                  7.1.6 [**].

         7.2 Fees for Development of Mutant Mice. The following fees shall be
payable for Mutant Mice made and delivered to BMS pursuant to Section 5 and/or
genes designated by BMS under 4.4 for which BMS has requested that Lexicon
generate Mutant Mice with Selected Mutations containing lox sites:

                  (a) [**] for each line of Mutant Mice, for the first [**]
         lines of Mutant Mice requested by BMS during any year of the
         Collaboration Term pursuant to Section 5.2(a) and delivered by Lexicon,
         and [**] for each such line of Mutant Mice in excess of the first [**]
         requested by BMS during any year of the Collaboration Term, which shall
         be payable within [**];

                                       24
<PAGE>   26

                  (b) [**] for each line of [**] requested by BMS pursuant to
         Section 5.2(b) and delivered by Lexicon to BMS, which shall be payable
         within [**];

                  (c) The amounts specified below for each line of Mutant Mice
         requested by BMS pursuant to Section 5.2(c) and delivered by Lexicon to
         BMS, [**]:

                  Homologous Recombination "standard knockout allele"  [**]
                  OmniBank Mutant Mouse                                [**]
                  Lox Mutant Mouse                                     [**]
                  Humanized Mutant Mouse                               [**]
                  TET-System Mouse                                     [**]

                  (d) An additional license fee of [**] for each line of Mutant
         Mice with a conditional allele incorporating Cre-Lox Technology, which
         shall be payable [**];

                  (e) An additional license fee of [**] for each Mutant Mouse
         line incorporating TET-System Technology, which shall be payable within
         [**];

                  (f) An additional license fee of [**] for each Mutant Mouse
         line incorporating green fluorescent protein technology (the "GFP
         Technology"), which shall be payable within [**]; and

[**] for each gene designated by BMS under Section 4.4 for which BMS has
requested that Lexicon generate Mutant Mice with a Selected Mutation containing
lox sites, which fee shall be payable [**].

         7.3 Milestone Payments Payable by BMS.

                  7.3.1 BMS shall pay Lexicon the following milestone payments
         for each Product:

                  Milestone                     Amount of Milestone Payment
                  ---------                     ---------------------------
                  [**]

                  7.3.2 BMS shall promptly notify Lexicon of the first
         occurrence of any milestone with respect to each Product, and milestone
         payments shall be made within [**] days after such occurrence.
         Milestone payments shall be made only once with respect to any given
         Product, regardless of the number of indications sought (or approvals
         obtained) for such Product, whether alone or in combination with other
         products, and regardless of any new dosage strengths, preparations or
         forms of administration for such Product.

                  7.3.3 If BMS develops as a back-up Product that inhibits or
         otherwise modulates the activity of a particular molecular target of a
         Product on which BMS is already making milestone payments, then BMS may
         conduct clinical development on such back-up or follow-on Products and
         shall not be obligated to make any milestone

                                       25
<PAGE>   27

         payments with respect to any such back-up or follow-on Product, except
         as otherwise provided below. In the event that a particular Product is
         dropped from active clinical development work or marketing for safety
         or efficacy reasons and is specifically replaced with a different
         Product targeting the same molecular target as such dropped Product,
         such new Product shall be deemed a "Replacement Product." BMS shall not
         be obligated to make milestone payments that were earlier made with
         respect to a dropped Product and replaced by a Replacement Product,
         but, subject to Section 7.3.2, BMS shall pay all milestone payments for
         milestone events achieved by such Replacement Product that had not been
         achieved by such dropped Product.

         7.4 Royalties Payable by BMS.

                  7.4.1 Royalties on Net Sales. In consideration of the licenses
         granted to BMS under Section 3.1, BMS shall pay to Lexicon a royalty of
         [**] on cumulative Net Sales of each Royalty-Bearing Product by BMS,
         its Affiliates and its Corporate Partners.

                  7.4.2 Royalty Reports; Exchange Rates. During the term of this
         Agreement following the First Commercial Sale of any Royalty-Bearing
         Product, BMS shall, within [**] after each calendar quarter, furnish to
         Lexicon a written quarterly report showing: (i) the gross sales and Net
         Sales of Royalty-Bearing Products sold by BMS and its Affiliates and
         Corporate Partners during the reporting period and the calculation of
         Net Sales from such gross sales; (ii) the royalties payable in United
         States dollars which shall have accrued hereunder in respect of such
         Net Sales; (iii) withholding taxes, if any, required by law to be
         deducted in respect of such royalties; (iv) the dates of the First
         Commercial Sales of Royalty-Bearing Products in any country during the
         reporting period; and (v) the exchange rates used in determining the
         amount of United States dollars payable hereunder. Royalties payable on
         sales in countries other than the United States shall be calculated in
         accordance with the standard exchange rate conversion practices used by
         BMS for financial accounting purposes. If no royalty or payment is due
         for any royalty period hereunder, BMS shall so report. BMS shall keep,
         and shall require its Corporate Partners to keep (all in accordance
         with generally accepted accounting principles, consistently applied),
         complete and accurate records in sufficient detail to properly reflect
         all gross sales and Net Sales and to enable the royalties payable
         hereunder to be determined.

                  7.4.3 Audits. Upon the written request of Lexicon, BMS shall
         permit an independent certified public accountant selected by Lexicon
         and acceptable to BMS, which acceptance shall not be unreasonably
         withheld, to have access, at reasonable times and during normal
         business hours, to such records of BMS as may be reasonably necessary
         to verify the accuracy of the royalty reports described herein, in
         respect of any fiscal year ending not more than [**] prior to the date
         of such request. Lexicon and BMS shall use commercially reasonable
         efforts to schedule all such verifications within [**] after Lexicon
         makes its written request. All such verifications shall be conducted
         not more than once in, or with respect to, each calendar year. The
         report of Lexicon's independent certified public accountant shall be
         made available to both parties. Subject to BMS's rights under Section
         13.6, in the event Lexicon's independent certified public accountant
         concludes that additional royalties were owed to Lexicon for such
         period, the

                                       26
<PAGE>   28

         additional royalty shall be paid by BMS within [**] of the date Lexicon
         delivers to BMS such independent certified public accountant's written
         report so concluding, unless such report contains manifest error. In
         the event Lexicon's independent certified public accountant concludes
         that there was an overpayment of royalties to Lexicon during such
         period, the overpayment shall be repaid by Lexicon within [**] of the
         date Lexicon received such independent certified public accountant's
         written report so concluding, unless such report contains manifest
         error. The fees charged by such independent certified public accountant
         shall be paid by Lexicon unless such audit discloses an underpayment of
         more than [**] of the amount due under this Agreement for the period in
         question, in which case BMS will bear the full cost of such audit. BMS
         shall include in each agreement with each applicable Corporate Partner
         a provision requiring the Corporate Partner to make reports to BMS, to
         keep and maintain records of sales made pursuant to such agreement and
         to grant access to such records by Lexicon's independent certified
         public accountant to the same extent required of BMS under this
         Agreement. Lexicon agrees that all information subject to review under
         this Section 7.4.3 or under any agreement with a Corporate Partner of
         BMS is confidential and that Lexicon shall cause its independent
         certified public accountant to retain all such information in
         confidence. Lexicon's independent certified public accountant shall
         only report to Lexicon as to the computation of the royalties and other
         payments due to Lexicon under this Agreement and shall not disclose to
         Lexicon any other information of BMS or its Corporate Partner.

                  7.4.4 Royalty Payment Terms. Royalty payments for each
         calendar quarter shall be due at the time BMS's report under Section
         7.4.3 for such calendar quarter shall be due.

         7.5 Withholding Taxes. In the event that any royalties or other
payments due to Lexicon are subject to withholding tax required by law to be
paid to the taxing authority of any foreign country, the amount of such tax may
be withheld from the applicable royalties or other payment due Lexicon. BMS
shall promptly pay such tax on behalf of Lexicon and shall furnish Lexicon with
a certificate of withholding tax so deducted for Lexicon's avoidance of
duplicate taxation in United States. BMS may not deduct any other withholding or
any other governmental charges from the payments agreed upon under this
Agreement, except to the extent same are paid on behalf of, or for the benefit
of, Lexicon. BMS shall maintain official receipts of payment of any such
withholding taxes and shall forward such receipts to Lexicon.

         7.6 Blocked Currency. If by law, regulation, or fiscal policy of a
particular country, conversion into United States dollars or transfer of funds
of a convertible currency to the United States is restricted or forbidden, BMS
shall give Lexicon prompt written notice and shall pay the royalty due under
this Article 7 through such means or methods as are lawful in such country as
Lexicon may reasonably designate. Failing the designation by Lexicon of such
lawful means or methods within [**] after such written notice is given to
Lexicon, BMS shall deposit such royalty payment in local currency to the credit
of Lexicon in a recognized banking institution designated by Lexicon, or if none
is designated by Lexicon within the [**] period described above, in a recognized
banking institution selected by BMS and identified in a written notice to
Lexicon by BMS, and such deposit shall fulfill all obligations of BMS to Lexicon
with respect to such royalties.

                                       27
<PAGE>   29

         7.7 Interest on Late Payments. Lexicon shall have the right to seek to
collect interest on any payments that are not paid on or before [**] after the
date such payments are due under this Agreement at a rate of [**] per month,
calculated on the total number of days payment is delinquent; provided, however,
that interest shall not accrue pursuant to this Section 7.7 on any amounts
payable under this Agreement with respect to which payment is disputed in good
faith; provided, further that interest shall accrue pursuant to this Section 7.7
in the event such dispute has been resolved in Lexicon's favor if payment is not
made promptly thereafter.

         7.8 Manner of Payment. Except as provided in Section 7.6, payments to
be made by BMS to Lexicon under this Agreement shall be payable in United States
dollars and shall be paid by check delivered to Lexicon at its principal office
at The Woodlands, Texas or bank wire transfer in immediately available funds to
such bank account in the State of Texas as is designated in writing by Lexicon
from time to time.

                        ARTICLE 8. INTELLECTUAL PROPERTY

         8.1 Ownership of Intellectual Property.

                  8.1.1 Ownership by Lexicon of the LexVision and OmniBank
         Databases and the OmniBank Library. Subject to the rights and licenses
         granted under this Agreement, Lexicon (and its licensors, as
         applicable) shall own and retain all rights to: (i) the LexVision and
         OmniBank Databases and all information contained therein; and (ii) the
         OmniBank Library, and all embryonic stem cells, genes and mutated
         genes, lox sites and other biological materials contained therein.

                  8.1.2 Ownership of Mutant Mice and Progeny. Subject to the
         rights and licenses granted under this Agreement, Lexicon shall own and
         retain all rights to the Mutant Mice and any successive generations
         thereof, including without limitation the right to use, produce, breed,
         sell or license the Mutant Mice or any successive generations thereof,
         to use any cells or genes derived by Lexicon from the Mutant Mice or
         any successive generations thereof, and to use the Lexicon Technology.

                  8.1.3 Ownership of Inventions Arising from S-T-V Projects.
         Subject to the rights and licenses granted under this Agreement,
         Lexicon shall own and retain all rights to any Invention that is
         conceived or first reduced to practice by Lexicon or any of its
         Affiliates during the course of any S-T-V Project performed under this
         Agreement.

                  8.1.4 Ownership of Inventions Arising from Further BMS
         Development. As between the parties, and subject to the provisions of
         Section 3.4, BMS shall own and retain all rights to any Invention that
         is conceived or first reduced to practice by BMS or any of its
         Affiliates, Academic Collaborators or Corporate Partners during the
         course of any further development by any of them of, or based upon, any
         data or results included in the LexVision or OmniBank Databases and/or
         provided by Lexicon in connection with any S-T-V Project performed
         under this Agreement.

                  8.1.5 Ownership of Inventions Arising from Further Lexicon
         Development; Disclosure. In the event Lexicon chooses to engage in
         further development of Level 1

                                       28
<PAGE>   30

         S-T-V analytical data or results other than as part of a Level 2 and/or
         Level 3 S-T-V Project in collaboration with BMS, then, subject to the
         provisions of Section 3.4, Lexicon shall own and retain all rights to
         any Invention that is conceived or first reduced to practice during the
         course of such further development; provided, however, that if Lexicon
         chooses to engage in any such further development during the
         Collaboration Term or the twelve (12) months thereafter relating
         specifically to any gene that BMS has designated pursuant to Section
         4.4, Lexicon shall so notify BMS, and the parties shall negotiate,
         diligently and in good faith, regarding terms for a Level 2 or Level 3
         S-T-V Project under Section 6.2 relating to such gene if BMS notifies
         Lexicon within [**] of Lexicon's notice that BMS wishes to participate
         in such further development.

                  8.1.6 Ownership of Other Intellectual Property. Subject to
         Article 3 and Sections 8.1.1 through 8.1.5, (i) each party shall own
         and retain all rights to all Inventions which are not Joint Inventions
         and which are conceived or reduced to practice solely by its employees,
         Affiliates or agents, and (ii) the parties shall jointly own all Joint
         Inventions, and each owner of a Joint Invention shall have and retain
         sole and exclusive title to its interest in such Joint Invention;
         provided, that, the responsibility for patent filing with respect to
         each Joint Invention developed hereunder shall be as set forth in
         Section 8.2; and provided, further, that each party shall have a right
         of first negotiation with respect to any interest of the other party in
         any Joint Invention that such other party wishes to dispose of. A party
         that wishes to dispose of its interest in a Joint Invention shall
         notify the other party. If the other party wishes to exercise its right
         of first negotiation, it shall so notify the first party within [**]
         after receiving such notice. Thereafter, the parties shall negotiate,
         diligently and in good faith, the terms upon which the other party
         shall succeed to the first party's interest in such Joint Invention.
         Such negotiations shall continue for a period of at least [**].
         Thereafter, unless the parties agree to continue such negotiations, the
         first party shall be free to dispose of its interest in such Joint
         Invention without any further obligation to the other party. In no
         event, however, shall a party transfer its interest in a Joint
         Invention to a Third Party unless such Third Party agrees in writing to
         be bound by the terms of this Agreement with respect to the interest so
         transferred.

         8.2 Responsibility for Patents.

                  8.2.1 Solely Owned Inventions. Each party shall have the
         right, but not the obligation, at its sole expense, to prepare, file,
         prosecute and maintain any patent applications, patents, registration
         of copyrights or other intellectual property rights directed to any
         Invention owned solely by such party.

                  8.2.2 Jointly Owned Inventions. The Steering Committee shall
         determine whether, and in what jurisdictions, to seek patent protection
         with respect to any Joint Invention. Lexicon shall have the first right
         to assume responsibility at its sole expense for the preparation,
         filing, prosecution and maintenance of any patent applications and
         patents, or registration of copyright or other intellectual property
         rights directed to Joint Inventions, keeping BMS reasonably informed
         of, and consulting with BMS with respect to, all significant actions
         relating thereto. If Lexicon elects not to assume such responsibility,
         BMS shall have the right to do so at its sole expense.

                                       29
<PAGE>   31

         8.3 Patent Enforcement; Infringement. Each party shall have the right,
but not the obligation, to take action against any Third Party who is, or is
allegedly, infringing any patent contemplated by this Agreement that such party
owns hereunder. Each party shall promptly inform the other party of any such
infringement or alleged infringement of such other party's patents, to the
extent the first party is aware of same. In the event a party's exercise of any
of the rights granted to it hereunder gives rise to a claim of infringement of a
patent owned by a Third Party, the Steering Committee (or, if no Steering
Committee is then in existence, the Senior Vice President, Early Development and
Applied Technology at BMS, or such other appropriate officer of BMS, and the
Chief Executive Officer at Lexicon, or such other appropriate officer of
Lexicon) shall confer and agree upon the best method for responding to and/or
defending against such claim and how the costs thereof and the payment of any
damages (and, in the event of any counterclaims, the receipt of any damages)
with respect thereto shall be allocated between the parties. Any such
determination shall take into account each party's significant interest in
controlling any defense of a claim made against itself and the respective
parties' indemnification obligations under Article 11.

                           ARTICLE 9. CONFIDENTIALITY

         9.1 Nondisclosure Obligations.

                  9.1.1 General. Except as otherwise provided in this Article 9,
         during the term of this Agreement and for a period of five years
         thereafter, each Receiving Party shall maintain the Confidential
         Information of each Disclosing Party in confidence and use it only for
         purposes specifically authorized under this Agreement.

                  9.1.2 Limitations. To the extent it is reasonably necessary or
         appropriate to fulfill its obligations or exercise its rights under
         this Agreement and subject to advance written notification to the
         Disclosing Party: (i) a party may disclose to Third Parties
         Confidential Information it is otherwise obligated not to disclose
         under this Section 9.1, to its Affiliates, Corporate Partners,
         consultants, outside contractors and clinical investigators, on a
         strict need-to-know basis for the purposes contemplated by this
         Agreement and on condition that such entities or persons agree to keep
         the Confidential Information confidential for the same time periods and
         to the same extent as such party is required to keep the Confidential
         Information confidential hereunder; and (ii) a party or its Corporate
         Partners may disclose, using appropriate measures to preserve
         confidentiality, such Confidential Information to government or other
         regulatory authorities to the extent that such disclosure is reasonably
         necessary to obtain authorizations to conduct clinical trials of, and
         to commercially market, Products pursuant to this Agreement.
         Furthermore, a Receiving Party may request permission from the
         Disclosing Party to disclose such Confidential Information to the
         extent that such disclosure is reasonably necessary to obtain patents
         which such Receiving Party is permitted to obtain hereunder, which
         permission shall not be unreasonably withheld or delayed.

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<PAGE>   32

         9.2 Injunctive Relief. The parties hereto understand and agree that
remedies at law may be inadequate to protect against any breach of any of the
provisions of this Article 9 by either party or their employees, agents,
officers or directors or any other person acting in concert with it or on its
behalf. Accordingly, each party shall be entitled to the granting of injunctive
relief by a court of competent jurisdiction against any action that constitutes
any such breach of this Article 9.

         9.3 Publication. BMS and/or Lexicon (each, a "Submitting Party") may
each publish or present data and/or results generated utilizing the Mutant Mice
or Progeny, subject to the prior review of the proposed disclosure by the other
party (each, a "Reviewing Party"), solely to determine (i) whether the proposed
disclosure contains the Confidential Information of the Reviewing Party or (ii)
whether the information contained in the proposed disclosure should be the
subject of a patent application to be filed by the Reviewing Party prior to such
disclosure. Each Submitting Party shall provide the Reviewing Party with the
opportunity to review any proposed abstract, manuscript or presentation which
discloses the results of research conducted utilizing the Mutant Mice or Progeny
by delivering a copy thereof to the Reviewing Party no less than [**] before its
intended submission for publication or presentation. The Reviewing Party shall
have [**] from its receipt of any such abstract, manuscript or presentation in
which to notify the Submitting Party in writing of any specific objections to
the disclosure, based on either the need to seek patent protection or concern
regarding the specific disclosure of the Confidential Information of the
Reviewing Party. In the event the Reviewing Party objects to the disclosure, the
Submitting Party agrees not to submit the publication or abstract or make the
presentation containing the objected-to information until the Reviewing Party is
given a reasonable additional period of time (not to exceed an additional [**])
to seek patent protection for any material in the disclosure which the Reviewing
Party believes is patentable (subject, in all events, to Section 8.2) or, in the
case of Confidential Information, to allow the Submitting Party to delete any
Confidential Information of the Reviewing Party from the proposed disclosure.
The Submitting Party agrees to delete from the proposed disclosure any
Confidential Information of the Reviewing Party upon request.

                   ARTICLE 10. REPRESENTATIONS AND WARRANTIES

         10.1 Representations, Warranties and Covenants of Lexicon. Lexicon
represents and warrants to and covenants with BMS that:

                  10.1.1 Lexicon is a corporation duly organized, validly
         existing and in corporate good standing under the laws of Delaware;

                  10.1.2 Lexicon has the corporate and legal right, authority
         and power to enter into this Agreement, and to extend the rights and
         licenses granted to BMS in this Agreement;

                  10.1.3 Lexicon has taken all necessary action to authorize the
         execution, delivery and performance of this Agreement;

                  10.1.4 upon the execution and delivery of this Agreement, this
         Agreement shall constitute a valid and binding obligation of Lexicon,
         enforceable in accordance with its

                                       31
<PAGE>   33

         terms, except as enforceability may be limited by applicable
         bankruptcy, insolvency, reorganization, moratorium or similar laws
         affecting creditors' and contracting parties' rights generally and
         except as enforceability may be subject to general principles of equity
         (regardless of whether such enforceability is considered in a
         proceeding in equity or at law);

                  10.1.5 the performance of Lexicon's obligations under this
         Agreement will not conflict with its charter documents or result in a
         breach of any agreements, contracts or other arrangements to which it
         is a party;

                  10.1.6 Lexicon will not during the term of this Agreement
         enter into any agreements, contracts or other arrangements that would
         be inconsistent with its obligations under this Agreement;

                  10.1.7 the summary of Lexicon's pre-existing obligations
         pursuant to its agreement with the Merck Genome Research Institute set
         forth in Exhibit 10.1.7 is accurate and complete in all material
         respects;

                  10.1.8 [**].

         10.2 Representations, Warranties and Covenants of BMS. BMS represents
and warrants to and covenants with Lexicon that:

                  10.2.1 BMS is a corporation duly organized, validly existing
         and in corporate good standing under the laws of the state of Delaware;

                  10.2.2 BMS has the corporate and legal right, authority and
         power to enter into this Agreement, and to extend the rights and
         licenses granted to Lexicon in this Agreement;

                  10.2.3 BMS has taken all necessary action to authorize the
         execution, delivery and performance of this Agreement;

                  10.2.4 upon the execution and delivery of this Agreement, this
         Agreement shall constitute a valid and binding obligation of BMS
         enforceable in accordance with its terms, except as enforceability may
         be limited by applicable bankruptcy, insolvency, reorganization,
         moratorium or similar laws affecting creditors' and contracting
         parties' rights generally and except as enforceability may be subject
         to general principles of equity (regardless of whether such
         enforceability is considered in a proceeding in equity or at law);

                  10.2.5 the performance of its obligations under this Agreement
         will not conflict with BMS's charter documents or result in a breach of
         any agreements, contracts or other arrangements to which it is a party;

                  10.2.6 BMS will not after the Effective Date enter into any
         agreements, contracts or other arrangements that would be inconsistent
         with its obligations under this Agreement;

                                       32
<PAGE>   34

                  10.2.7 [**]

                  10.2.8 BMS shall use the Cre-Lox Patent Rights, any Lox Mutant
         Mice, Cre-Lox Mutant Mice and/or Cre Mice that Lexicon may provide to
         BMS hereunder only in accordance with the terms of [**].

         10.3 Limited Warranties Relating to Performance of the LexVision and
OmniBank Databases. Lexicon warrants that the LexVision and OmniBank Databases
made available to BMS under this Agreement from time to time shall represent the
latest version of the LexVision and OmniBank Databases which Lexicon has made
available at each such time to subscribers to the LexVision and OmniBank
Databases. Lexicon does not represent that the operations of the LexVision and
OmniBank Databases will be trouble-free or that the LexVision or OmniBank
Databases contain no errors. Lexicon is, however, obligated to BMS, with respect
to the LexVision and OmniBank Databases, to periodically update the LexVision
and OmniBank Databases as provided in this Agreement and make every reasonable
effort to resolve any technical difficulties in a timely manner, as further
provided in Section 4.3.

         10.4 Limited Warranties Relating to the Development of Mutant Mice.
Except as otherwise expressly provided in this Agreement, Lexicon represents
that it will use commercially reasonable efforts to produce Mutant Mice upon
request by BMS. Lexicon does not represent that in all cases it will be
commercially and technically feasible to produce such Mutant Mice. Lexicon's
only obligation to BMS with respect to the production of Mutant Mice will be to
use commercially reasonable efforts to produce such Mutant Mice as requested by
BMS and to consult with the Steering Committee in the event of any material
difficulty.

         10.5 Warranty Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT TO THE LEXVISION
DATABASE, THE OMNIBANK DATABASE, ANY MUTANT MOUSE, PROGENY, PATENT RIGHTS,
GOODS, SERVICES OR ANY OTHER SUBJECT MATTER OF THIS AGREEMENT, AND EACH PARTY
HEREBY DISCLAIMS WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE
AND NON-INFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE FOREGOING. IN ADDITION,
BMS ACKNOWLEDGES THAT THE LEXVISION DATABASE AND THE OMNIBANK DATABASE MAY
CONTAIN INFORMATION THAT IS COVERED BY ONE OR MORE VALID PATENTS OF THIRD
PARTIES, AND THAT THE USE OF A MUTANT MOUSE OR PROGENY MAY BE COVERED BY ONE OR
MORE VALID PATENTS OF THIRD PARTIES. EACH PARTY ACKNOWLEDGES THAT EXERCISE BY IT
OF THE RIGHTS AND LICENSES GRANTED TO IT PURSUANT TO SECTION 3.4 HEREOF MAY BE
COVERED BY ONE OR MORE VALID PATENTS OF THIRD PARTIES.

         10.6 Limited Liability. NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT
OR OTHERWISE TO THE CONTRARY, NEITHER LEXICON NOR BMS WILL BE LIABLE WITH
RESPECT TO ANY MATTER ARISING UNDER THIS AGREEMENT UNDER ANY CONTRACT,
NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY
PUNITIVE, EXEMPLARY, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS.

                                       33
<PAGE>   35

                              ARTICLE 11. INDEMNITY

         11.1 BMS Indemnity Obligations. BMS agrees to defend, indemnify and
hold Lexicon, its Affiliates and their respective employees and agents harmless
from all claims, losses, damages or expenses (including reasonable attorneys'
fees and costs of litigation) arising as a result of: (i) actual or asserted
violations of any applicable law or regulation by BMS, its Affiliates or
Corporate Partners by virtue of which any Products manufactured, distributed or
sold hereunder shall be alleged or determined to be adulterated, misbranded,
mislabeled or otherwise not in compliance with any applicable law or regulation;
(ii) claims for bodily injury, death or property damage attributable to the
manufacture, distribution, sale or use of any Products by BMS, its Affiliates or
Corporate Partners; (iii) a Product recall ordered by a governmental agency or
required by a confirmed Product failure as reasonably determined by the parties
hereto; or (iv) BMS's breach of any of its representations, warranties or
covenants hereunder.

         11.2 Lexicon Indemnity Obligations. Lexicon agrees to defend, indemnify
and hold BMS, its Affiliates and their respective employees and agents harmless
from all claims, losses, damages or expenses (including reasonable attorneys'
fees and costs of litigation) arising as a result of (i) the infringement of any
issued patent or valid copyright of any Third Party as a result of Lexicon's
delivery to BMS of access to the LexVision or OmniBank Databases or any Mutant
Mouse, or the use by BMS of the LexVision or OmniBank Databases or any Mutant
Mouse, pursuant to this Agreement, or (ii) Lexicon's breach of any of its
representations, warranties or covenants hereunder. In the event that any claim
of infringement under clause (i) of this Section 11.2 is, or in Lexicon's
judgment is likely to be, substantiated, Lexicon will use all commercially
reasonable efforts to obtain a license from the applicable Third Party to permit
the parties to continue to engage in the allegedly infringing activities
(hereinafter the "Infringing Activities"). If, after all commercially reasonable
efforts, Lexicon is unable to effect a satisfactory solution to any such
infringement claim regarding the Infringing Technology, Lexicon will have the
right to terminate BMS's rights under this Agreement solely with respect to the
Infringing Activities.

         11.3 Limitation on Indemnity Obligations. Neither party, its Affiliates
or their respective employees and agents shall be entitled to the indemnities
set forth in Sections 11.1 or 11.2, respectively, to the comparative extent the
claim, loss, damage or expense for which indemnification is sought was caused by
a grossly negligent, reckless or intentional act or omission by such party, its
directors, officers, employees or authorized agents.

         11.4 Procedure. If a party or any of its Affiliates or their respective
employees or agents (collectively, the "Indemnitee") intends to claim
indemnification under this Article 11, the Indemnitee shall promptly notify the
other party (the "Indemnitor") of any loss, claim, damage, liability or action
in respect of which the Indemnitee intends to claim such indemnification, and
the Indemnitor shall assume the defense thereof with counsel selected by the
Indemnitor and reasonably acceptable to the Indemnitee, provided, however, that
an Indemnitee shall have the right to retain its own counsel, with the fees and
expenses to be paid by the Indemnitee, if representation of such Indemnitee by
the counsel retained by the Indemnitor would be inappropriate due to actual or
potential differing interests between such Indemnitee and any other party
represented by such counsel in such proceedings. The Indemnitor shall have the
right to settle or compromise any claims for which it is providing
indemnification under this Article 11,

                                       34
<PAGE>   36

provided that the consent of the Indemnitee (which shall not be unreasonably
withheld or delayed) shall be required in the event any such settlement or
compromise would adversely affect the interests of the Indemnitee. The indemnity
agreement in this Article 11 shall not apply to amounts paid in settlement of
any loss, claim, damage, liability or action if such settlement is effected
without the consent of the Indemnitor. The failure to deliver notice to the
Indemnitor within a reasonable time after the commencement of any such action,
if prejudicial to the Indemnitor's ability to defend such action, shall relieve
such Indemnitor of any liability to the Indemnitee under this Article 11, but
the omission so to deliver notice to the Indemnitor will not relieve it of any
liability that it may have to any Indemnitee otherwise than under this Article
11. The Indemnitee under this Article 11, its employees and agents, shall
cooperate fully with the Indemnitor and its legal representatives in the
investigation of any action, claim or liability covered by this indemnification.

         11.5 Insurance. BMS shall maintain appropriate product liability
insurance (and/or self-insurance) with respect to development, manufacture and
sale of Products by BMS in such amount as BMS customarily maintains with respect
to sales of its other products. BMS shall maintain such insurance for so long as
it continues to manufacture or sell Products, and thereafter for so long as BMS
customarily maintains insurance with respect to sales of its other products.

                     ARTICLE 12. EXPIRATION AND TERMINATION

         12.1 Collaboration Term.

                  12.1.1 Expiration. Unless this Agreement is sooner terminated
         in accordance with the provisions of this Article 12, the Collaboration
         Term shall commence on the Effective Date and shall expire on December
         31, 2005, provided that (i) each party shall have the option to
         terminate the Collaboration Term, without cause, as of December 31,
         2003, by providing the other party written notice of same no later than
         September 30, 2003, and (ii) the Collaboration Term may be extended
         upon the election of both parties by a written agreement having terms
         mutually agreeable to both parties.

                  12.1.2 Effect of Expiration of Collaboration Term. Following
         the expiration of the Collaboration Term, Lexicon shall have no further
         obligation under this Agreement to provide to BMS (i) updates to the
         LexVision or OmniBank Databases or any additional information of any
         nature relating thereto, (ii) any support services with respect to the
         LexVision or OmniBank Databases, except as the parties may further
         agree in writing, or (iii) any Mutant Mice (except for Mutant Mice
         ordered prior to the expiration of BMS's right to order same, as
         provided in Section 5.2) or the conduct of any S-T-V Project (except
         for S-T-V Projects commenced prior to the expiration of the
         Collaboration Term). Upon expiration of the Collaboration Term, BMS
         shall discontinue use of the LexVision and OmniBank Databases and shall
         remove any portions of the LexVision and OmniBank Databases from all
         computers at all sites on which such information may have been
         installed by BMS; provided, however, that BMS shall be entitled to
         continue to use the LexVision and/or OmniBank Databases for a
         reasonable period of time thereafter, for the purposes contemplated by
         this Agreement, in the event that Lexicon is required to provide any
         deliverables to BMS after the expiration of the Collaboration Term and
         use

                                       35
<PAGE>   37

         of the LexVision and/or OmniBank Databases is reasonably necessary or
         desirable for BMS's utilization of such deliverables. Following BMS's
         discontinuance of use of the LexVision and OmniBank Databases, any and
         all information, materials or documentation provided by Lexicon
         pursuant to this Agreement in connection therewith and all information
         relating thereto and any copies thereof (including electronic copies)
         shall be promptly returned by BMS to Lexicon, or upon Lexicon's written
         instruction, destroyed; provided that BMS may retain, and continue to
         use, copies of information from the LexVision and/or OmniBank Databases
         with respect to Mutant Mice for which it retains continuing rights,
         subject to BMS's compliance with the surviving terms and conditions of
         this Agreement. The expiration or termination of the Collaboration Term
         shall not affect BMS's right to continue to exercise its rights under
         Sections 3.1.2, 3.1.3 and 3.1.4 with respect to any Mutant Mice
         delivered by Lexicon hereunder or under Section 3.1.5, subject to BMS's
         compliance with the surviving terms and conditions of this Agreement.

         12.2 Expiration. Unless this Agreement is sooner terminated in
accordance with the provisions of this Article 12, this Agreement shall expire
and the licenses granted by Lexicon to BMS hereunder shall become fully paid, on
a Product-by-Product and country-by-country basis, on the latest to occur of (i)
[**] after the Effective Date, (ii) [**] after the First Commercial Sale of the
relevant Product or, (iii) upon the last to expire of any Valid Claim included
in the Lexicon Patent Rights covering such Product in such country.

         12.3 Events of Default.

                  12.3.1 Default by Either Party. An Event of Default by either
         party shall have occurred upon (i) the occurrence of a material breach
         of this Agreement if such party fails to remedy such breach within [**]
         after written notice thereof by the non-breaching party (or, if
         remediation of such breach in [**] is not practicable, if such party
         fails to commence and diligently pursue such remediation during such
         [**] period), or (ii) the commencement of any proceeding in or for
         bankruptcy, insolvency, dissolution or winding up by or against such
         party that is not dismissed or otherwise disposed of within [**]
         thereafter.

                  12.3.2 Default by Lexicon. For the avoidance of doubt, the
         entry against Lexicon of, or the entry into by Lexicon of, any
         judgment, decree, injunction, consent order, settlement agreement,
         cross-license or any other binding obligation, unappealable or
         unappealed during the time permitted for appeal (if applicable), that
         has the effect of materially adversely affecting BMS's exercise of its
         rights under this Agreement shall constitute an Event of Default by
         Lexicon, unless BMS has consented thereto, in writing, in advance.

                  12.3.3 Default by BMS. For the avoidance of doubt, an Event of
         Default shall have occurred if BMS fails to make any payments due
         hereunder, within [**] after Lexicon delivers written notice thereof to
         BMS specifying such failure and its claim of right to terminate, unless
         BMS makes such payments plus interest, calculated in accordance with
         Section 7.7, within such [**] period.
<PAGE>   38
         12.4 Effect of an Event of Default.

                  12.4.1 Remedies Available to Lexicon. If an Event of Default
         occurs relating to BMS, Lexicon shall have the right, at its option
         exercisable in its sole discretion, in addition to any other rights or
         remedies available to it at law or in equity and subject to the
         limitations set forth in Sections 2.4.2, 10.6 and 13.6 hereof, to
         terminate this Agreement upon [**] notice thereof to BMS, in which case
         (i) the licenses granted to BMS pursuant to Article 3 shall terminate,
         (ii) BMS shall discontinue use of the LexVision and OmniBank Databases,
         (iii) BMS shall return to Lexicon, or, upon Lexicon's written
         instruction, destroy all information, materials or documentation
         provided by Lexicon pursuant to this Agreement, including, without
         limitation, any materials derived from the LexVision or the OmniBank
         Databases and all information relating thereto and any copies thereof
         (including electronic copies) and (iv) BMS shall return to Lexicon, or,
         upon Lexicon's written instruction, destroy all Mutant Mice and any
         Progeny thereof.

                  12.4.2 Remedies Available to BMS. In the event that an Event
         of Default occurs relating to Lexicon, BMS shall have the right, at its
         option exercisable in its sole discretion, in addition to any other
         rights or remedies available to it at law or in equity and subject to
         the limitations set forth in Sections 2.4.2, 10.6 and 13.6 hereof, to
         terminate this Agreement upon notice thereof to Lexicon, in which case
         the rights and licenses granted to BMS pursuant to Sections 3.1.2,
         3.1.3, 3.1.4 and 3.1.5 shall, subject to BMS's obligations to pay
         milestones and royalties pursuant to Article 7, continue.

                  12.4.3 BMS Termination Right. In the event that (i) Lexicon
         has not added to the LexVision Database, in accordance with the terms
         and conditions of this Agreement, Level 1 S-T-V phenotypic data for at
         least [**] new murine genes by [**], or (ii) Lexicon has not completed
         [**], BMS shall have the right, at its option exercisable in its sole
         discretion, in addition to any other rights or remedies available to it
         at law or in equity and subject to the limitations set forth in
         Sections 2.4.2, 10.6 and 13.6 hereof, and whether or not such failure
         constitutes an Event of Default relating to Lexicon, to terminate this
         Agreement upon notice thereof to Lexicon, in which case the rights and
         licenses granted to BMS pursuant to Sections 3.1.2, 3.1.3, 3.1.4 and
         3.1.5 shall, subject to BMS's obligations to pay milestones and
         royalties pursuant to Article 7, continue.

         12.5 Effect of Expiration or Termination of Agreement. The expiration
or termination of this Agreement shall not relieve the parties of any obligation
accruing prior to such expiration or termination. The provisions of Articles 8,
9, 10, 11 and 12, and Sections 3.4 and 13.2 through 13.6 hereof shall survive
the expiration or termination of this Agreement. The provisions of Sections 7.3
through 7.7 hereof shall survive any termination of this Agreement under which
BMS retains the right to sell Products until such time as this Agreement would
have expired with respect to any Product or Royalty-Bearing Product, as the case
may be, in any country pursuant to Section 12.2 hereof had this Agreement not
been earlier terminated.

                                       37
<PAGE>   39
                            ARTICLE 13. MISCELLANEOUS

         13.1 Force Majeure. Neither party shall be held liable or responsible
to the other party nor be deemed to have defaulted under or breached this
Agreement for failure or delay in fulfilling or performing any obligation under
this Agreement when such failure or delay is caused by or results from causes
beyond the reasonable control of the affected party, including but not limited
to fire, floods, embargoes, war, acts of war (whether war is declared or not),
insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority; provided, however, that the party so affected shall use
reasonable commercial efforts to avoid or remove such causes of nonperformance,
and shall continue performance hereunder with reasonable dispatch whenever such
causes are removed. Either party shall provide the other party with prompt
written notice of any delay or failure to perform that occurs by reason of force
majeure. The parties shall mutually seek a resolution of the delay or the
failure to perform as noted above.

         13.2 Assignment. This Agreement may not be assigned or otherwise
transferred, in whole or in part, by either party without the consent of the
other party; provided, however, that either Lexicon or BMS may, without such
consent, assign its rights and obligations under this Agreement (i) to any
Affiliate, or (ii) in connection with a merger, consolidation or sale of such
portion of a party's assets that includes rights under this Agreement to an
unrelated Third Party; provided, further, that such party's rights and
obligations under this Agreement shall be assumed by its successor in interest
in any such transaction and shall not be transferred separate from all or
substantially all of its other business assets, including those business assets
that are the subject of this Agreement. Any purported assignment in violation of
the preceding sentence shall be void. Any permitted assignee shall assume all
obligations of its assignor under this Agreement, unless the parties otherwise
agree.

         13.3 Severability. Each party hereby agrees that it does not intend to
violate any public policy, statutory or common laws, rules, regulations, treaty
or decision of any government agency or executive body thereof of any country or
community or association of countries. Should one or more provisions of this
Agreement be or become invalid, the parties hereto shall substitute, by mutual
consent, valid provisions for such invalid provisions which valid provisions in
their economic effect are sufficiently similar to the invalid provisions that it
can be reasonably assumed that the parties would have entered into this
Agreement with such valid provisions in lieu of such invalid provisions. In case
such valid provisions cannot be agreed upon, the invalidity of one or several
provisions of this Agreement shall not affect the validity of this Agreement as
a whole, unless the invalid provisions are of such essential importance to this
Agreement that it is to be reasonably assumed that the parties would not have
entered into this Agreement without the invalid provisions.

         13.4 Notices. Any consent, notice or report required or permitted to be
given or made under this Agreement by one of the notification parties hereto to
the other shall be in writing, delivered personally or by facsimile (and
promptly confirmed by telephone, personal delivery or courier) or courier,
postage prepaid (where applicable), addressed to such other party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor and shall be effective upon receipt by the
addressee.

                                       38
<PAGE>   40
         If to Lexicon:      Lexicon Genetics Incorporated
                             4000 Research Forest Drive
                             The Woodlands, Texas 77381
                             Attention:  Arthur T. Sands, M.D., Ph.D.
                                         President and Chief Executive Officer
                             Telephone:  (281) 364-0100
                             Facsimile:  (281) 364-0155

         If to BMS:          Bristol-Myers Squibb Company
                             P.O. Box 4000
                             Route 206 and Province Line Road
                             Princeton, New Jersey  08543-4000
                             Attention:  Vice President and Senior Counsel,
                                         Pharmaceutical Research Institute and
                                         Worldwide Business Development
                             Telephone:  (609) 252-4311
                             Facsimile:  (609) 252-4232

All such communications shall be effective upon receipt.

         13.5 Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas, without reference to the
conflicts of law principles thereof.

         13.6 Dispute Resolution. Subject to Section 2.4.2, the parties hereby
agree that they will first attempt in good faith to resolve any controversy or
claim arising out of or relating to this Agreement promptly by negotiations. If
a controversy or claim should arise hereunder, the matter shall be referred to
an individual designated by the Chief Executive Officer (or the equivalent
position) of Lexicon and by the Senior Vice President, Early Discovery and
Applied Technology (or the equivalent position) of BMS (the "Representatives").
If the matter has not been resolved within [**] of the first meeting of the
Representatives of the parties (which period may be extended by mutual
agreement) concerning such matter, the parties shall be free to pursue all
available recourse both at law and in equity.

         13.7 Entire Agreement. This Agreement, together with the exhibits and
appendices hereto and any confidentiality agreement(s) executed in contemplation
of this Agreement, contains the entire understanding of the parties with respect
to the subject matter hereof. All express or implied agreements and
understandings, either oral or written, heretofore made are expressly merged in
and made a part of this Agreement. This Agreement may be amended, or any term
hereof modified, only by a written instrument duly executed by both parties
hereto.

         13.8 Publicity. Lexicon and BMS each agree not to disclose any terms or
conditions of this Agreement to any Third Party without consulting the other
party prior to such disclosure. Notwithstanding the foregoing, prior to
execution of this Agreement, Lexicon and BMS shall agree upon the substance of
information that can be used as a routine reference in the usual

                                       39
<PAGE>   41
course of business to describe the existence and general nature of this
transaction, and Lexicon and BMS may disclose such information without
consulting the other party. The parties may thereafter from time to time
mutually agree on revisions to material to be used as a routine reference, which
revisions shall be submitted by one party for the review and approval of the
other party at least [**] prior to the anticipated use or disclosure of the
revised material, such approval not to be unreasonably withheld. The terms of
this Agreement shall be treated as the Confidential Information of Lexicon and
BMS, and, except to the extent required by applicable law, shall not be
disclosed to anyone (except for the parties' respective employees, consultants,
agents and attorneys assisting in the review and negotiation of this Agreement
who have a need to know the terms of this Agreement) without the written
permission of BMS or Lexicon; provided, that, BMS may disclose to its Corporate
Partners that it is a subscriber to the LexVision and OmniBank Databases, and
provided, further, BMS may disclose the restrictions imposed on it as a
subscriber to the LexVision and OmniBank Databases to the employees, directors
or officers of its Academic Collaborators, under a written confidentiality
agreement, to the extent necessary to enable such Academic Collaborators to
fulfill their obligations to BMS under sponsored research and other similar
agreements by and between such Academic Collaborators and BMS. Any announcements
shall first be agreed upon by the parties in writing and may include the number
of Mutant Mice to be produced hereunder. If either party desires to release a
separate announcement relating to this Agreement, it shall first allow the other
party to approve in writing such proposed announcement; such approval shall not
be unreasonably withheld or delayed.

         13.9 Headings. The captions to the several Articles and Sections hereof
are not a part of this Agreement, but are merely guides or labels to assist in
locating and reading the several Articles and Sections hereof.

         13.10 No Partnership. It is expressly agreed that the relationship
between Lexicon and BMS shall not constitute a partnership, joint venture or
agency. Neither Lexicon nor BMS shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which shall
be binding on the other, without the prior consent of the other party to do so.

         13.11 Exports. The parties acknowledge that the export of technical
data, materials or products is subject to the exporting party receiving any
necessary export licenses and that the parties cannot be responsible for any
delays attributable to export controls which are beyond the reasonable control
of either party. Lexicon and BMS agree not to export or re-export, directly or
indirectly, any information, technical data, the direct product of such data,
samples or equipment received or generated under this Agreement in violation of
any applicable export control laws or governmental regulations. Lexicon and BMS
agree to obtain similar covenants from their licensees, sublicensees, Corporate
Partners or corporate partners, as the case may be, and contractors with respect
to the subject matter of this Section 13.11.

         13.12 Waiver. The waiver by either party hereto of any right hereunder
or the failure to perform or of a breach by the other party shall not be deemed
a waiver of any other right hereunder or of any other breach or failure by said
other party whether of a similar nature or otherwise.

                                       40
<PAGE>   42
         13.13 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

                                      * * *

                                       41
<PAGE>   43
         IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute and deliver this Agreement as of the Effective Date.

LEXICON GENETICS INCORPORATED

By:                                                  Date:
   --------------------------------------------           ----------------------
     Arthur T. Sands, M.D., Ph.D.
     President and Chief Executive Officer

BRISTOL-MYERS SQUIBB COMPANY

By:                                                  Date:
   --------------------------------------------           ----------------------

                                       42
<PAGE>   44
                                 EXHIBIT 1.11

                              CRE-LOX PATENT RIGHTS

<TABLE>
<CAPTION>
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
                            Application
Country                     Serial No.           Patent No.              Issue Date             Expiry Date
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
<S>                         <C>                  <C>                     <C>                    <C>
USA                                              4,959,317               9/25/90                9/25/2007
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
CANADA                                           1,293,460               12/24/91               12/24/2008
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
IRELAND                                          60421                   7/8/94                 10/6/2006
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
JAPAN                       86/236385
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
EPO                                              0 220 009               2/10/93                10/6/2006
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
AUSTRIA                                          E0085649                2/10/93                10/6/2006
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
BELGIUM                                          0 220 009               2/10/93                10/6/2006
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
FRANCE                                           0 220 009               2/10/93                10/6/2006
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
GREAT BRITAIN                                    0 220 009               2/10/93                10/6/2006
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
GERMANY                                          3687734                 2/10/93                10/6/2006
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
GREECE                                           3007809                 2/10/93                10/6/2006
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
ITALY                                            0 220 009               2/10/93                10/6/2006
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
LUXEMBOURG                                       0 220 009               2/10/93                10/6/2006
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
NETHERLANDS                                      0 220 009               2/10/93                10/6/2006
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
SWEDEN                                           0 220 009               2/10/93                10/6/2006
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
SWITZERLAND                                      0 220 009               2/10/93                10/6/2006
--------------------------- -------------------- ----------------------- ---------------------- ----------------------
</TABLE>

<PAGE>   45
                                  EXHIBIT 1.29

                    DESCRIPTION OF THE LEXVISION(TM) DATABASE

         The LexVision Database is a proprietary relational database comprising
Mutant Mice phenotypic data and associated information. The phenotypic
information and data present in the LexVision Database can be derived from the
study of Mutant Mice produced by the OmniBank method or by Homologous
Recombination.

<PAGE>   46
                                  EXHIBIT 1.34

                 ALLOCATION OF NET SALES IN BUNDLED TRANSACTION

         With respect to Royalty-Bearing Products sold in a Bundled Transaction
in which BMS or any of its Affiliates or Corporate Partners discounts the sales
price of the Royalty-Bearing Products to a greater degree than BMS, its
Affiliates or its Corporate Partners, respectively, generally discounts the
price of its other products to such customer, the amount to be included in Net
Sales of such Royalty-Bearing Products shall be calculated in accordance with
the following formula:

                                   ASP-P x N-P
              NS-P = ---------------------------------------- x BTF
                                    .
                             (SIGMA)m   ASP-p  x N-p
                                     =1      i      i

         Where:

                  NS-P     = Amount allocated to Net Sales of the
                             Royalty-Bearing Product

                  ASP-P    = Average Selling Price (as defined below) per unit,
                             during the applicable period, of the
                             Royalty-Bearing Product when sold alone

                  ASP-p    = Average Selling Price per unit, during the
                       i     applicable period, of each Royalty-Bearing Product
                             or each product other than a Royalty-Bearing
                             Product in the Bundled Transaction when sold alone

                  N-P      = Total number of units of Royalty-Bearing Product
                             included in the Bundled Transaction during the
                             applicable period

                  N-p      = Total number of units (i.e., corresponding to the
                     i       same ASP-pi) of each Royalty-Bearing Product or
                             product other than a Royalty-Bearing Product
                             included in the Bundled Transaction during the
                             applicable period

                       .
                (SIGMA)m   = The sum of the products of the formula ASP-pi o
                        =1   N-pi for each and every Royalty-Bearing Product or
                             product other than a Royalty-Bearing Product
                             included in the Bundled Transaction during the
                             applicable period

                  BTF      = The aggregate amounts paid to BMS for the Bundled
                             Transaction during the applicable period

<PAGE>   47
         The Average Selling Price shall be based on the actual average selling
price of the applicable Royalty-Bearing Product or product other than a
Royalty-Bearing Product, as the case may be, determined for the applicable
period.

         If a Royalty-Bearing Product or other product is not sold separately
and no bona fide list price exists for such Royalty-Bearing Product or other
product, the Parties shall agree upon an imputed bona fide list price for such
Royalty-Bearing Product or other product, and Net Sales with respect thereto
shall be based on such imputed list price.

                                       2
<PAGE>   48
                                  EXHIBIT 1.36

         DESCRIPTION OF THE OMNIBANK(R) LIBRARY AND OMNIBANK(R) DATABASE

         The OmniBank Library is a library of mouse embryonic stem ("ES") cell
clones each containing a gene trap in a single gene. The trapped gene is
identified by a sequence tag referred to as an OST, as defined herein, which
have an average length of approximately 250 base pairs (and no fewer than 100
base pairs). The OSTs identify exons of the trapped genes and are stored in a
searchable database. Once a gene of interest has been identified, the
corresponding ES cell clone, with a specified gene trap mutation, can be
microinjected into host blastocysts to produce knockout mice to study the gene's
function.

         The OmniBank mutations are created using insertional mutagenesis based
on Moloney murine leukemia virus ("MoMuLV") and other vectors. The vectors
deliver a gene trap construct to the ES cells that allows the expression of a
selectable marker gene when the vector has inserted into and trapped exons from
a gene. The gene trap vectors also provide for the semi-automated acquisition of
OSTs.

<PAGE>   49
                                 EXHIBIT 1.50-A

                   SEEK TARGET VALIDATION (S-T-V(TM)) PROGRAM

LEVEL 1 - PRIMARY BIOLOGICAL ANALYSIS

Level 1 analysis is designed to identify primary pathophysiological
perturbations resulting from engineered mutations. Primary phenotypic screens
may include all of the following scientific experiments. Information generated
under Level I analysis will be provided to BMS on a non-exclusive basis.

Level 1 analysis is intended as a first pass screen that may include:

[**]

<PAGE>   50
                                 EXHIBIT 1.50-B

                   SEEK TARGET VALIDATION (S-T-V(TM)) PROGRAM

Level 2 analysis is designed as a continuation of the Level 1 preliminary
analysis of the pathophysiological perturbations resulting from engineered
mutations. Level 2 analysis is focused on organ and physiologic system function
and represents an exhaustive analysis of organismal physiology. Phenotypic
screen analysis under Level 2 may include any or all of the following scientific
experiments depending on the partner's needs. Additional screens and assays to
be conducted by Lexicon can be explored between the parties prior to the
initiation of Level 2 biological experiments.

LEVEL 2 - ORGAN AND PHYSIOLOGIC SYSTEMS ANALYSIS

o        [**]

LEVEL 3 - PATHWAY DISCOVERY AND ANALYSIS

Level 3 analysis is designed as a continuation of the Level 1 and Level 2
analysis of the pathophysiological perturbations resulting from engineered
mutations. Level 3 analysis is designed to define biochemical pathways, identify
new drug targets and to define the biochemical mechanism of the pathophysiology
identified in the Level 1 and Level 2 analysis. [**]

<PAGE>   51
                                  EXHIBIT 1.53

                        SUMMARY OF BASF-OWNED PATENTS AND
                   PATENT APPLICATIONS CLAIMING THE TET-SYSTEM

FORWARD SYSTEM (REPRESSOR SYSTEM):

1.       U.S. Patent #5,464,758, issued November 7, 1995.
         Tight Control of Gene Expression in Eukaryotic Cells by Tetracycline
         Responsive Promoters, by Bujard and Gossen.

2.       June 14, 1993. Abandoned U.S. Patent Application.
         Tight Control of Gene Expression in Eukaryotic Cells by Tetracycline
         Responsive Promoters, by Bujard, Gossen, Salfeld and Voss. BBI-013;
         BBC-003.

3.       U.S. Patent #5,650,298, issued July 22, 1997.
         Tight Control of Gene Expression in Eukaryotic Cells by Tetracycline
         Responsive Promoters, by Bujard, Gossen, Salfeld and Voss.

4.       June 14, 1994. Abandoned PCT Patent Application.
         Tight Control of Gene Expression in Eukaryotic Cells by Tetracycline
         Responsive Promoters, by Bujard, Gossen, Salfeld and Voss. BBI-013CPPC;
         BBC-003B.
         Converted to National Applications as follows:
         Europe - BBI-013CPEP, BBC003B-EP
         Australia - Patent #684524, issued May 14, 1998
         Canada - BBI-013CPCA, BBC003B-CA
         Japan - BBI-013CPJP, BBC003B-JP
         Hong Kong - BBI-013CPHK, BBC003B-HK

5.       June 14, 1994. Pending Mexican Patent Application.
         Tight Control of Gene Expression in Eukaryotic Cells by Tetracycline
         Responsive Promoters, by Bujard, Gossen, Salfeld and Voss. BBI-013CPMX;
         BBC-003C.

6.       U.S. Patent #5,859,310, issued January 12, 1999.
         Mice Transgenic for a Tetracycline-Controlled Transcriptional
         Activator, by Bujard, Gossen, Salfeld and Voss.

7.       U.S. Patent #5,888,981, issued March 30, 1999.
         Methods for Regulating Gene Expression, by Bujard, Gossen, Salfeld and
         Voss.

8.       U.S. Patent #5,922,927, issued July 13, 1999.
         Methods for Producing Tetracycline-Regulated Transgenic Mice by Bujard,
         Gossen, Salfeld and Voss.

<PAGE>   52
9.       September 29, 1998. Pending U.S. Patent Application.
         Transgenic Organisms Having Tetracycline-Regulated Transcriptional
         Regulatory Systems, by Bujard, Gossen, Salfeld and Voss. BBI-013C2CN;
         BBC-003G

10.      September 29, 1998. Pending U.S. Patent Application.
         Tetracycline-Regulated Transcriptional Activator Fusion Proteins, by
         Bujard and Gossen. BBI-013C3CN; BBC-003H.

11.      March 30, 1999. Pending U.S. Patent Application.
         Methods for Regulating Gene Expression, by Bujard, Gossen, Salfeld and
         Voss. BBI-013C3CN2; BBC-0031.

REVERSE SYSTEM (ACTIVATION SYSTEM):

12.      July 1, 1994. Abandoned U.S. Patent Application.
         Tetracycline-Inducible Transcriptional Activator and
         Tetracycline-Regulated Transcription Units, by Bujard and Gossen.
         BBI-009; BBC-009.

13.      U.S. Patent #5,654,168, issued August 5, 1997.
         Tetracycline-Inducible Transcriptional Activator and
         Tetracycline-Regulated Transcriptional Units, by Bujard and Gossen.

14.      U.S. Patent #5,789,156, issued August 4, 1998.
         Tetracycline-Regulated Transcriptional Inhibitors, by Bujard and
         Gossen.

15.      June 7, 1995. Pending U.S. Patent Application.
         Animals Transgenic for a Tetracycline-Inducible Transcriptional
         Activator, by Bujard and Gossen. BBI-009CP3; BBC-009C.

16.      U.S. Patent #5,866,755, issued February 2, 1999.
         Animals Transgenic for a Tetracycline-Regulated Transcriptional
         Inhibitor, by Bujard and Gossen. BBI-009CP4; BBC-009D.

17.      June 7, 1995. Pending U.S. Patent Application.
         Methods for Regulating Gene Expression, by Bujard and Gossen.
         BBI-009CP5; BBC-009E.

18.      U.S. Patent #5,814,618, issued September 29, 1998.
         Methods for Regulating Gene Expression, by Bujard and Gossen.

19.      U.S. Patent #5,589,362, issued December 31, 1996.
         Tetracycline-Regulated Transcriptional Modulators with Altered DNA
         Binding Specificities, by Bujard, Gossen, Hillen, Helbl and
         Schnappinger.

<PAGE>   53
20.      June 29, 1995. Abandoned PCT Application.
         Tetracycline-Regulated Transcriptional Modulators, by Bujard and
         Gossen. BBI009C2PC; BBC-009H.
         Converted to National Applications as follows:
         Europe - BBT-009C2EP; BBC-009H-EP
         Australia - BBI-009C2AU; BBC-009H-AU
         Canada - BBI-009C2CA; BBC-009H-CA
         Japan - BBI-009C2JP; BBC-009H-JP
         Finland - BBI-009C2F1; BBC-009H-FI
         Norway - BBI-009C2NO; BBC-009H-NO S.
         Korea - BBI-009C2KR; BBC-009H-KR
         China - BBI-009C2C1; BBC-009H-CI
         Singapore - BBI-009C2SG; BBC-009H-SG

21.      September 28, 1998. Pending U.S. Patent Application.
         Transgenic Organisms Having Tetracycline-Regulated Transcriptional
         Regulatory Systems (As Amended), by Bujard and Gossen. BBI-009C3CN;
         BBC-009K

22.      February 2, 1999. Pending U.S. Patent Application.
         Animals Transgenic for a Tetracycline-Regulated Transcriptional
         Inhibitor, by Bujard and Gossen. BBI-009C6CN; BBC-009J.

23.      September 28, 1998. Pending U.S. Patent Application.
         Tetracycline-Inducible Transcriptional Activator and Inhibitor Fusion
         Proteins (As Amended), by Bujard and Gossen. BBI-009C4CN; BBC-009L.

<PAGE>   54
                                   EXHIBIT 2.1

                   STEERING COMMITTEE AND PROJECT COORDINATORS

BMS Steering Committee Representatives:

1.       Mark Cockett, Initial Chairperson
2.       David Bol
3.       Lucie Bruijn

BMS Project Coordinator: Kevin FitzGerald

Lexicon Steering Committee Representatives:

1.       Jim Piggott, Initial Secretary
2.       Brian Zambrowicz
3.       David Powell

Lexicon Project Coordinator: Cori Mossel

<PAGE>   55
                                  EXHIBIT 3.1.4

                            NOTICE AND ACKNOWLEDGMENT

         This Notice and Acknowledgment Agreement ("Agreement"), effective as of
the date set forth below (the "Effective Date"), is between BASF Bioresearch
Corporation, a Delaware corporation having a place of business at 100 Research
Drive, Worcester, MA 01605-4314 ("BBC") and Bristol-Myers Squibb Company, a
Delaware corporation having a place of business at Route 206 and Province Line
Road, Princeton, NJ 08543-4000 ("Recipient").

         WHEREAS, BBC entered into an agreement with Lexicon Genetics
Incorporated, a Delaware corporation having an office and place of business at
4000 Research Forest Drive, The Woodlands, Texas 77381-4287 (the "Licensee")
relating to a non-exclusive license to generate a line of knock-out mice (the
"Licensed Product") utilizing the tetracycline controllable expression systems
(the "TET-System").

         WHEREAS, the TET-System is covered under various patents included in
the exhibit that is attached hereto and made a part of this Agreement (the
"Patent Rights"), which have been assigned to BASF Aktiengesellschaft (itself
and/or its affiliate(s)).

         WHEREAS, Recipient now wishes Licensee to make Licensed Product(s) for
Recipient's and/or its affiliates' use under the collaboration agreement between
Recipient and Licensee dated as of __________, 2000.

         NOW, THEREFORE, in consideration for the acknowledgment below, BBC
grants Licensee the authority, under the Patent Rights, solely to transfer
Licensed Product to Recipient (the "Authorization") under the following
conditions:

1.       Recipient acknowledges that:

         A.       The TET-System is experimental in nature. BBC MAKES NO
                  WARRANTIES, EXPRESS OR IMPLIED OF ANY KIND, AND HEREBY
                  DISCLAIMS ANY WARRANTIES, REPRESENTATIONS OR GUARANTEES OF ANY
                  KIND AS TO THE TET-SYSTEM, AND/OR ANY PATENTS OR PRODUCTS
                  RELATED THERETO.

         B.       Recipient's Authorization to utilize the Licensed Product is
                  only valid for internal research and discovery purposes.

         C.       Except as otherwise stated in this Agreement, the
                  Authorization can not be assigned or otherwise transferred to
                  any third party without the prior written consent of BBC. Any
                  such attempted assignment shall be considered void.

         D.       Recipient must obtain the approval of BBC prior to utilizing
                  the TET-System in collaboration with any third party. A
                  commercial entity would be required to obtain a commercial
                  license from BBC and a not-for-profit entity would be required
                  to execute a notice and acknowledgement agreement from BBC.

<PAGE>   56
         E.       Development by Recipient leading to regulatory approval is not
                  allowed under this Authorization. In the event Recipient
                  wishes to engage in such development or commercialization
                  activities, Recipient and BBC shall negotiate, diligently and
                  in good faith, the terms of a commercially reasonable license
                  that will permit Recipient to do so.

         F.       Transfer of reagents, including, but not limited to, cell
                  lines, plasmids, vectors, receptors, promoters, embryos,
                  animals, chemical entities, pharmaceuticals, and other
                  products or agents which incorporate the TET-System or a
                  component of the TET-System ("Reagents") to any other
                  not-for-profit or commercial entity is not permitted without
                  the prior written approval of BBC.

2.       Recipient shall be responsible for and shall indemnify and hold
         harmless BBC and its affiliates, its officers, agents and employees,
         from and against any and all claims for or on account of, any injury to
         or death of persons, or damage to property, including but not by way of
         limitation, damage to property of Recipient or others, arising out of
         or in any way occurring directly or indirectly in connection with
         Recipient's use of the TET-System and the Patent Rights and Recipient
         shall at its sole expense defend any and all actions based thereon.

3.       Recipient further acknowledges that Recipient shall have no rights in
         equity or in law against BBC for any claims or any other cause of
         action arising out of this Agreement. BBC shall have the right at any
         time to terminate the rights granted to Recipient pursuant to this
         Agreement in the event Recipient materially breaches any provision
         hereunder.

         In consideration for the rights granted pursuant to the preceding
paragraphs, Recipient hereby acknowledges and agrees to comply with the
foregoing conditions.

                                     BASF BIORESEARCH CORPORATION

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

                                     BRISTOL-MYERS SQUIBB COMPANY

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

<PAGE>   57
                        SUMMARY OF BASF-OWNED PATENTS AND
                   PATENT APPLICATIONS CLAIMING THE TET-SYSTEM

FORWARD SYSTEM (REPRESSOR SYSTEM):

1.       U.S. Patent #5,464,758, issued November 7, 1995.
         Tight Control of Gene Expression in Eukaryotic Cells by Tetracycline
         Responsive Promoters, by Bujard and Gossen.

2.       June 14, 1993. Abandoned U.S. Patent Application.
         Tight Control of Gene Expression in Eukaryotic Cells by Tetracycline
         Responsive Promoters, by Bujard, Gossen, Salfeld and Voss. BBI-013;
         BBC-003.

3.       U.S. Patent #5,650,298, issued July 22, 1997.
         Tight Control of Gene Expression in Eukaryotic Cells by Tetracycline
         Responsive Promoters, by Bujard, Gossen, Salfeld and Voss.

4.       June 14, 1994. Abandoned PCT Patent Application.
         Tight Control of Gene Expression in Eukaryotic Cells by Tetracycline
         ResponsivePromoters, by Bujard, Gossen, Salfeld and Voss. BBI-013CPPC;
         BBC-003B.
         Converted to National Applications as follows:
         Europe - BBI-013CPEP, BBC003B-EP
         Australia - Patent #684524, issued May 14, 1998
         Canada - BBI-013CPCA, BBC003B-CA
         Japan - BBI-013CPJP, BBC003B-JP
         Hong Kong - BBI-013CPHK, BBC003B-HK

5.       June 14, 1994. Pending Mexican Patent Application.
         Tight Control of Gene Expression in Eukaryotic Cells by Tetracycline
         Responsive Promoters, by Bujard, Gossen, Salfeld and Voss. BBI-013CPMX;
         BBC-003C.

6.       U.S. Patent #5,859,310, issued January 12, 1999.
         Mice Transgenic for a Tetracycline-Controlled Transcriptional
         Activator, by Bujard, Gossen, Salfeld and Voss.

7.       U.S. Patent #5,888,981, issued March 30, 1999.
         Methods for Regulating Gene Expression, by Bujard, Gossen, Salfeld and
         Voss.

8.       U.S. Patent #5,922,927, issued July 13, 1999.
         Methods for Producing Tetracycline-Regulated Transgenic Mice by Bujard,
         Gossen, Salfeld and Voss.

9.       September 29, 1998. Pending U.S. Patent Application.
         Transgenic Organisms Having Tetracycline-Regulated Transcriptional
         Regulatory Systems, by Bujard, Gossen, Salfeld and Voss. BBI-013C2CN;
         BBC-003G

10.      September 29, 1998. Pending U.S. Patent Application.
         Tetracycline-Regulated Transcriptional Activator Fusion Proteins, by
         Bujard and Gossen. BBI-013C3CN; BBC-003H.

<PAGE>   58
11.      March 30, 1999. Pending U.S. Patent Application.
         Methods for Regulating Gene Expression, by Bujard, Gossen, Salfeld and
         Voss. BBI-013C3CN2; BBC-0031.

REVERSE SYSTEM (ACTIVATION SYSTEM):

12.      July 1, 1994. Abandoned U.S. Patent Application.
         Tetracycline-Inducible Transcriptional Activator and
         Tetracycline-Regulated Transcription Units, by Bujard and Gossen.
         BBI-009; BBC-009.

13.      U.S. Patent #5,654,168, issued August 5, 1997.
         Tetracycline-Inducible Transcriptional Activator and
         Tetracycline-Regulated Transcriptional Units, by Bujard and Gossen.

14.      U.S. Patent #5,789,156, issued August 4, 1998.
         Tetracycline-Regulated Transcriptional Inhibitors, by Bujard and
         Gossen.

15.      June 7, 1995. Pending U.S. Patent Application.
         Animals Transgenic for a Tetracycline-Inducible Transcriptional
         Activator, by Bujard and Gossen. BBI-009CP3; BBC-009C.

16.      U.S. Patent #5,866,755, issued February 2, 1999.
         Animals Transgenic for a Tetracycline-Regulated Transcriptional
         Inhibitor, by Bujard and Gossen. BBI-009CP4; BBC-009D.

17.      June 7, 1995. Pending U.S. Patent Application.
         Methods for Regulating Gene Expression, by Bujard and Gossen.
         BBI-009CP5; BBC-009E.

18.      U.S. Patent #5,814,618, issued September 29, 1998.
         Methods for Regulating Gene Expression, by Bujard and Gossen.

19.      U.S. Patent #5,589,362, issued December 31, 1996.
         Tetracycline-Regulated Transcriptional Modulators with Altered DNA
         Binding Specificities, by Bujard, Gossen, Hillen, Helbl and
         Schnappinger.

20.      June 29, 1995. Abandoned PCT Application.
         Tetracycline-Regulated Transcriptional Modulators, by Bujard and
         Gossen. BBI009C2PC; BBC-009H. Converted to National Applications as
         follows:
         Europe - BBT-009C2EP; BBC-009H-EP
         Australia - BBI-009C2AU; BBC-009H-AU
         Canada - BBI-009C2CA; BBC-009H-CA
         Japan - BBI-009C2JP; BBC-009H-JP
         Finland - BBI-009C2F1; BBC-009H-FI
         Norway - BBI-009C2NO; BBC-009H-NO S.
         Korea - BBI-009C2KR; BBC-009H-KR
         China - BBI-009C2C1; BBC-009H-CI
         Singapore - BBI-009C2SG; BBC-009H-SG

21.      September 28, 1998. Pending U.S. Patent Application.
         Transgenic Organisms Having Tetracycline-Regulated Transcriptional
         Regulatory Systems (As Amended), by Bujard and Gossen. BBI-009C3CN;
         BBC-009K

<PAGE>   59
22.      February 2, 1999. Pending U.S. Patent Application.
         Animals Transgenic for a Tetracycline-Regulated Transcriptional
         Inhibitor, by Bujard and Gossen. BBI-009C6CN; BBC-009J.

23.      September 28, 1998. Pending U.S. Patent Application.
         Tetracycline-Inducible Transcriptional Activator and Inhibitor Fusion
         Proteins (As Amended), by Bujard and Gossen. BBI-009C4CN; BBC-009L.

<PAGE>   60
                                  EXHIBIT 3.5-A

         MATERIAL TRANSFER AGREEMENT BETWEEN BMS AND A CORPORATE PARTNER
                    OR ACADEMIC COLLABORATOR FOR TRANSFER OF
                 NON-CRE-LOX MUTANT MICE PURSUANT TO SECTION 3.5

         Bristol-Myers Squibb Company ("BMS") is willing to provide Material
(defined below) to ___________________ ("Investigator") of _____________________
("[Institution/Company]") (hereinafter collectively "Recipient") solely for the
internal research purposes as described below, under the following terms.

         1. Upon execution of this agreement, BMS shall provide to Investigator
samples of the Material. "Material" as used herein means _______________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________
[SPECIFY THE NON-CRE-LOX MOUSE (MOUSE OR CELL LINE)] or any cell line or progeny
derived directly or therefrom.

         2. The Material will be used by Recipient solely in conducting research
under the supervision of Investigator in support of a collaborative research
project with BMS. The Material will be used solely within Recipient's internal
facilities and will not be transferred to any third party. The Material will be
used solely for internal research purposes and for no other purpose. In no event
will the Material be used in, or used in the manufacture of, a product for sale
(or lease or other transfer of a product for consideration).

         3. Recipient acknowledges the Material or its parent or progenitor has
been obtained by BMS from Lexicon Genetics Incorporated ("Lexicon"). Recipient
shall acknowledge in any publication or presentation of results of research
performed using the Material that the Material or its parent or progenitor was
obtained from Lexicon.

         4. Recipient will indemnify, defend and hold harmless BMS and Lexicon
from and against any and all claims, losses, liabilities and damages arising
from or related to the Recipient's use of the Material. THE MATERIAL IS PROVIDED
TO RECIPIENT WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR THAT THE USE OF THE
MATERIAL WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHTS OF OTHERS.

         5. Recipient agrees that any person utilizing the Material within
Institution will be advised of and shall be subject to the conditions of this
Agreement.

         6. BMS represents that it has obtained prior written permission from
Lexicon to enter into this Agreement. The parties agree to the foregoing and
have caused this Agreement to be executed by their duly authorized
representatives.

<PAGE>   61
                                                BRISTOL-MYERS SQUIBB COMPANY

                                                By:
                                                   -----------------------------
                                                Title:
                                                      --------------------------
                                                Date:
                                                     ---------------------------

[Name of Institution/Company]

By:
   -----------------------------------------    --------------------------------
(signature of authorized representative)        (signature of Investigator)

Printed Name:                                   Printed Name:
             -------------------------------                 -------------------

Title:
      --------------------------------------

Date:                                           Date:
     ---------------------------------------         ---------------------------

<PAGE>   62
                                 EXHIBIT 3.5-B

         MATERIAL TRANSFER AGREEMENT BETWEEN BMS AND A CORPORATE PARTNER
                  OR ACADEMIC COLLABORATOR FOR LOX-MUTANT MICE
                      PURSUANT TO SECTIONS 3.1.3(b) AND 3.5

         Bristol-Myers Squibb Company ("BMS") is willing to provide Material
(defined below) to _______________________ ("Investigator") of
_________________________________ ("[Institution/Company]") (hereinafter
collectively "Recipient") solely for the internal research purposes as described
below, under the following terms.

         1. Upon execution of this agreement, BMS shall provide to Investigator
samples of the Material. "Material" as used herein means _______________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________
[SPECIFY THE LOX MOUSE (MOUSE OR CELL LINE) OR ANY CELL LINE OR PROGENY
CONTAINING LOX DNA DERIVED THEREFROM] and any cell line or progeny containing
lox DNA or cre DNA derived directly or indirectly therefrom.

         2.1. The Material will be used by Recipient solely in conducting
research under the supervision of Investigator in support of the collaborative
research project with BMS. The material will be used solely within Recipient's
internal facilities will not be transferred to any third party. The Material
will be used solely for internal research purposes and for no other purpose. In
no event will the Material be used in, or used in the manufacture of, a product
for sale (or lease or other transfer of a product for consideration).

         2.2. Recipient further agrees that it will not manipulate the genetic
information at any loxP site in the Material using cre recombinase, except as
may be permitted as set forth in Section 4 below. For example and without
limitation, Recipient shall not cross-breed any mouse containing loxP with a
mouse expressing cre recombinase.

         3. The Material is covered by the claims of U.S. patent number
4,959,317, which is assigned to DuPont Pharmaceuticals Company. The Material or
its parent or progenitor has been obtained by BMS from Lexicon Genetics
Incorporated ("Lexicon") which has licensed certain rights under U.S. patent
number 4,959,317 from DuPont Pharmaceuticals Company, including the right to
permit BMS to extend to third parties the limited rights to practice under U.S.
patent number 4,959,317 as set forth herein. Except as specifically and
expressly set forth herein, no right is granted by DuPont Pharmaceuticals
Company to practice inventions claimed under U.S. patent number 4,959,317.
Recipient shall acknowledge in any publication or presentation of results of
research performed using the Material that the Material or its parent or
progenitor was obtained from Lexicon.

         4. In the event that Recipient has entered into a license agreement
with DuPont Pharmaceuticals Company, The DuPont Merck Pharmaceutical Company or
E.I. DuPont de

<PAGE>   63
Nemours and Company granting rights under U.S. patent number 4,959,317, then the
use of the Material shall be subject to the terms of such license agreement,
provided however, that the use of the Material shall be subject to any further
restrictions on the use of the Material as set forth herein.

         5. With respect to any further license rights under U.S. patent number
4,959,317, Recipient should contact:

                  Vice President, Product Planning & Acquisition
                  DuPont Pharmaceuticals Company
                  974 Centre Road, Chestnut Run Plaza, WR722
                  Wilmington, Delaware 19807-2802
                  (fax number: 302-922-3040)

         6. Recipient will indemnify, defend and hold harmless BMS and Lexicon
from and against any and all claims, losses, liabilities and damages arising
from or related to the Recipient's use of the Material. THE MATERIAL IS PROVIDED
TO RECIPIENT WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR THAT THE USE OF THE
MATERIAL WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHTS OF OTHERS.

         7. Recipient agrees that any person utilizing the Material within
[Institution/Company] will be advised of and shall be subject to the conditions
of this Agreement.

         8. BMS represents that it has obtained prior written permission from
Lexicon to enter into this Agreement.

<PAGE>   64
         The parties agree to the foregoing and have caused this Agreement to be
executed by their duly authorized representatives.

                                                BRISTOL-MYERS SQUIBB COMPANY

                                                By:
                                                   -----------------------------
                                                Title:
                                                      --------------------------
                                                Date:
                                                     ---------------------------

[Name of Institution/Company]

By:
   -----------------------------------------    --------------------------------
(signature of authorized representative)        (signature of Investigator)

Printed Name:                                   Printed Name:
             -------------------------------                 -------------------

Title:
      --------------------------------------

Date:                                           Date:
     ---------------------------------------         ---------------------------

<PAGE>   65
                                  EXHIBIT 4.4.1

                   FORM FOR DESIGNATION OF LEXVISION PROJECTS

DATE

Lexicon Genetics Incorporated
Attn: LexVision Project Manager
4000 Research Forest Drive
The Woodlands, TX  77381

Subject:  LexVision Project Initiation Request

Dear ______:

This letter is to provide notice to Lexicon Genetics Incorporated ("Lexicon") of
the request by Bristol-Myers Squibb Company ("BMS"), under Section 4.4.1 of the
LexVision Database and Collaboration Agreement between Lexicon and BMS dated
________________ (the "Agreement"), that Lexicon initiate the
Seek-Target-Validation Project specified below for inclusion in the LexVision
Database, subject to the terms and conditions of the Agreement.

The Seek-Target-Validation Project to be initiated is described as follows:

     o    Gene Name:

     o    Method of Development:
[**]
     o    Mouse cDNA sequence (if known):

             (Provide as an electronic file or on diskette if necessary)

     o    Is the genomic structure (i.e., intron/exon boundaries, size of
          introns, position of initiation codon, etc.) known for this gene?

             (Provide as an electronic file or on diskette if necessary)

     o    Description of desired mutation (i.e., which specific sequences to
          delete):

Sincerely,

Name: ___________________________
BMS Project Coordinator

Title: ____________________________

<PAGE>   66
                                  EXHIBIT 5.2-A

                 REQUIREMENTS FOR THE GENERATION OF MUTANT MICE

A.       Requirements for the Generation of Mutant Mice.

         1.       Mutant Mice made using the OmniBank Method.

                  Identification of the OST reference number from the OmniBank
                  Database.

         2.       Mutant Mice made using Homologous Recombination.

[**]B.   Specifications for Mutant Mice - Absence of Specific Pathogens.

         Lexicon will maintain the hygiene of its animal facility from which the
Mutant Mice derive in a specific pathogen free state according to standards in
the industry with screens for the following viral and bacterial pathogens using
sentinel mice. Lexicon may alter the list of screened pathogens listed below
according to generally accepted changes in industry standards: [**]

C.       Specifications for Tissue Culture Monitoring.

         Lexicon randomly tests tissue culture media and reagents for mycoplasma
         on a monthly basis, and for a variety of other pathogens, using the
         industry MAP procedures, on a quarterly basis.

<PAGE>   67
                                  EXHIBIT 5.2-B

   REQUEST FOR DELIVERY OF LEXVISION MUTANT MOUSE UNDER SECTION 5.2(a) OR (b)

DATE

Lexicon Genetics Incorporated
Attn: LexVision Project Coordinator
4000 Research Forest Drive
The Woodlands, TX  77381

Subject: Request for Delivery of LexVision Mutant Mice

Dear ______:

This letter is to provide notice to Lexicon Genetics Incorporated ("Lexicon") of
the request by Bristol Myers Squibb Company ("BMS"), under Section(s) 5.2(a)
and/or 5.2(b), as the case may be, of the LexVision Database and Collaboration
Agreement between Lexicon and BMS dated ________, 2000 (the "Agreement"), for
the delivery to BMS of the LexVision Mutant Mice [**] specified below, subject
to the terms and conditions of the Agreement.

     o    LexVision Accession No.:

     o    Gene Name:

    [ ]   In addition to receiving live mice from the line of Mutant Mice
          specified above, BMS requests, under Section 5.2(b) of the Agreement,
          [**].

    [ ]   In lieu of receiving live mice from the line of Mutant Mice
          specified above, BMS requests, under Section 5.2(b) of the Agreement,
          [**].

    [ ]   The "Request for Shipping Information" form has been completed and
          attached.

    [ ]   [**]

Sincerely,

Name: ___________________________
BMS Project Coordinator

Title: ____________________________

<PAGE>   68
================================================================================
                              FOR LEXICON USE ONLY

<TABLE>
<CAPTION>
-------------------- -------------------- ----------------------------- ------------------------
 REQUEST NO.:                              PROJECT I.D.:
-------------------- ---------------------------------------------------------------------------
<S>                  <C>
 METHOD:              [ ]  Stock        [ ]  Microinjection       [ ]  In Vitro Fertilization
-------------------- ---------------------------------------------------------------------------
</TABLE>

DATE OF COMPLETION: ________________    PROJECT MANAGER: ______________________

<PAGE>   69
          REQUEST FOR DEVELOPMENT OF MUTANT MOUSE UNDER SECTION 5.2(c)

DATE

Lexicon Genetics Incorporated
Attention:  LexVision Project Coordinator
4000 Research Forest Drive
The Woodlands, TX 77381

Dear ____:

This letter is to provide notice to Lexicon Genetics Incorporated ("Lexicon") of
the request by Bristol Myers Squibb Company ("BMS") that a Mutant Mouse with a
Selected Mutation in the murine gene specified below be developed for BMS under
Section 5.2(c) of the LexVision Database and Collaboration Agreement between
Lexicon and BMS dated ________, 2000 (the "Agreement"), subject to the terms and
conditions of the Agreement.

The Mutant Mouse Project to be initiated is described as follows:

Gene or project name: __________      GenBank Accession Number (if any): _______

Mouse cDNA sequence (if known):
(Attach additional sheets or electronic file if necessary)

Genomic structure (if known):
(Attach additional sheets or electronic file if necessary)

Type of mutation preferred:

[ ]      [**]

Sincerely,

Name: ___________________________
BMS Project Coordinator

Title: ____________________________

<PAGE>   70
                                   EXHIBIT 5.5

           STANDARD LEXICON MUTANT MOUSE SHIPPING AND RECEIVING REPORT

                        REQUEST FOR SHIPPING INFORMATION

The following information is required to process the shipment of your mutant
mice. In order to prevent any delays in shipping your mice, please complete this
form in full and submit it to Lexicon as soon as possible. Omission of any
information could delay your shipment. **Lexicon will not ship any mice without
explicit authorization from the receiving institution's veterinarian.**

      SHIPPING & RECEIVING CLERK:
                                   ---------------------------------------------
               Clerk's Telephone:
                                   ---------------------------------------------
                     Clerk's Fax:
                                   ---------------------------------------------
                  Clerk's E-mail:
                                   ---------------------------------------------

                                   ---------------------------------------------
                     INSTITUTION:
                                   ---------------------------------------------
                SHIPPING ADDRESS:
                           Street
                                   ---------------------------------------------
                         Building
                                   ---------------------------------------------
                         Room No.
                                   ---------------------------------------------
         City, State and Zip Code
                                   ---------------------------------------------
                          Country
                                   ---------------------------------------------

      INSTITUTION'S VETERINARIAN:
                                   ---------------------------------------------
        Veterinarian's Telephone:
                                   ---------------------------------------------
              Veterinarian's Fax:
                                   ---------------------------------------------
           Veterinarian's E-mail:
                                   ---------------------------------------------

          RECEIVING INVESTIGATOR:
                                   ---------------------------------------------
        Investigator's Telephone:
                                   ---------------------------------------------
              Investigator's Fax:
                                   ---------------------------------------------
           Investigator's E-mail:
                                   ---------------------------------------------

SHIPPING & DELIVERY REQUIREMENTS (DOMESTIC AND INTERNATIONAL):

Lexicon will use the information you provide above to exchange the required
health documents with the Institution's Veterinarian and schedule the shipment.
The shipping costs have been included in the overall project cost.

INTERNATIONAL ONLY:  Lexicon will contact the Receiving Veterinarian
                     approximately 3 weeks prior to delivery. At this time,
                     Lexicon will provide serology reports and request an Import
                     Permit from the Receiving Veterinarian. An Import Permit is
                     required in most countries and must be provided to Lexicon
                     in English and the predominant language of the receiving
                     country. Lexicon will notify Receiving Institution and
                     Animal Port Houston when mice are ready to be shipped. Upon
                     arrival in the destination country, the Receiving
                     Institution is responsible for arranging delivery from the
                     airport to Receiving Institution. Animal Port Houston will
                     contact the Receiving Institution and provide flight
                     information.

PLEASE RETURN THIS FORM TO:  LexVision(TM) Project Manager
                             Lexicon Genetics Incorporated
                             4000 Research Forest Drive
                             The Woodlands, TX 77381
                             Tel: 281-364-0100
                             Fax: 281-296-0749
                             E-mail: jd@lexgen.com or cmossel@lexgen.com

<PAGE>   71
                                 EXHIBIT 10.1.7

                            SUMMARY OF MGRI AGREEMENT

In April 1997, Lexicon entered into an agreement with the Merck Genome Research
Institute ("MGRI"), a not-for-profit institution, pursuant to which MGRI agreed
to pay Lexicon $8.0 million over five years for the development of 150 lines of
mutant mice from OmniBank. The lines of mice generated for MGRI are selected by
a mutation selection committee comprised of selected scientists from academic
institutions and industry. Under the agreement, a non-profit institution
designated by MGRI (an "NFP") will distribute the mice at cost to the biomedical
research community to support research. MGRI has exclusive rights to the 150
lines of mice selected by the selection committee, provided that Lexicon retains
rights to use the mice for its own research programs and, subsequent to the time
that a given line of mice are made available by an NFP, to provide mice from
such line of mice to Lexicon collaborators; and provided, further, that MGRI's
rights of exclusivity to mice made from an OmniBank ES cell do not limit
Lexicon's right to make or sell mice made by Homologous Recombination.

<PAGE>   72
                                 EXHIBIT 10.1.15

                         ANIMAL CARE AND USE GUIDELINES

     To satisfy BMS requirements for assuring appropriate care and use of
animals used by Lexicon under this Agreement, Lexicon agrees as follows:

A.   All animal test methods or other procedures used by Lexicon hereunder must
     be reviewed and approved by a BMS Animal Care and Use Committee (ACUC) or
     by another appropriate reviewing body mutually acceptable to BMS and the
     Lexicon, such acceptance by BMS not to be unreasonably withheld or delayed
     (for facilities located within the United States Lexicon's ACUC is
     presumptively acceptable to BMS). Suitable documents for review include:
     animal test methods, written descriptions of animal use portions of
     activities or animal use protocols, etc. For activities reviewed and
     approved by a non-BMS reviewing body, Lexicon shall provide to BMS the
     following for its review, comment, and, if necessary, recommended changes
     in procedures or methods approved by the non-BMS reviewing body that would
     be reasonably acceptable to BMS:

     (1)  A copy of the specific animal test method or animal use protocol to be
          used by Lexicon for the animal work under this Agreement; and

     (2)  Documentation of the non-BMS reviewing body approval of such use.

B.   Within 30 days after Lexicon obtains accreditation by the American
     Association for the Accreditation of Laboratory Animal Care (AAALAC),
     Lexicon will provide to BMS a copy of the Accreditation Certificate or
     Accreditation Letter evidencing such accreditation. Lexicon will use all
     commercially reasonable efforts to finalize its application for AAALAC
     accreditation by the end of August 2001. If Lexicon is unable to meet this
     timeline using all commercially reasonable efforts, Lexicon shall promptly
     notify BMS and inform BMS of the actions Lexicon is taking to promptly
     complete and submit its application to obtain AAALAC accreditation.
     Following its receipt of AAALAC accreditation, Lexicon will use all
     commercially reasonable efforts to maintain such accreditation during the
     remainder of the Collaboration Term. If at any time during the
     Collaboration Term, AAALAC revokes Lexicon's accreditation, Lexicon will
     immediately notify BMS of such event and will thereafter comply with the
     criteria in (C) below.

C.   If Lexicon is not AAALAC accredited or loses its AAALAC accreditation at
     any time during the Collaboration Term, Lexicon will provide to BMS, at
     such time(s) as BMS may request, documented evidence satisfactory to BMS of
     proper animal care and use in connection with the work under this
     Agreement, which evidence shall include without limitation the following:

     (1)  For facilities located within the United States:

<PAGE>   73
          (a)  Copies of the most recent two USDA inspection reports, indicating
               no exceptions or deficiencies unacceptable to BMS, if and after
               Lexicon's facilities become subject to the jurisdiction of the
               USDA;

          (b)  Copies of the two most recent ACUC semi-annual inspection
               reports/reviews for the facilities at which the work under this
               Agreement will be conducted, indicating no exceptions or
               deficiencies unacceptable to BMS; and

          (c)  A copy of Lexicon's NIH Assurance statement and number, if
               applicable.

     (2)  For facilities located outside the United States:

          (a)  Copies of such local accreditation and/or satisfactory local
               governmental inspection reports as BMS may require; and

          (b)  Evidence of compliance with such other minimum standards as may
               be established by BMS.

         Lexicon shall notify BMS promptly of any change in the status of any
         accreditation or inspection report provided to BMS hereunder.

D.   Lexicon represents that it will use all commercially reasonable efforts to
     establish and maintain appropriate written procedures or guidelines for the
     humane care and treatment of all animals to be used in the work under this
     Agreement.

E.   Lexicon agrees that, upon reasonable advance written notice from time to
     time during the Collaboration Term, representatives of BMS shall have the
     right to inspect the facilities used by Lexicon hereunder and to audit the
     care, treatment and use of the animals used in Lexicon's performance
     hereunder.

F.   Except to the extent otherwise provided in this Agreement, title to animals
     used hereunder shall remain with Lexicon. Upon conclusion of Lexicon's work
     under this Agreement, the animals shall be disposed of as provided in any
     protocol or other agreed upon methodology, unless otherwise mutually agreed
     or unless BMS requests that such animals be transferred to BMS (in which
     case Lexicon will do so in accordance with the terms of the Agreement).
     Destruction of any animals by Lexicon shall be accomplished in a lawful and
     humane manner.

G.   Lexicon agrees that no drug or device provided by BMS to Lexicon may be
     used in humans under any circumstances.

H.   If any work to be done by Lexicon hereunder is intended as a non-clinical
     laboratory safety study to be submitted to or reviewed by the FDA, Lexicon
     agrees to comply with the requirements of 21 CFR 58.1 et seq. in the
     conduct of such work. In such event, BMS will notify Lexicon of this
     intention.<PAGE>

                                                                     EXHIBIT 4.1

                               MASTER INDENTURE

                                    between

                     SPIEGEL CREDIT CARD MASTER NOTE TRUST

                                    Issuer,

                                      and

                             THE BANK OF NEW YORK

                               Indenture Trustee

                       Dated as of [____________], 2000
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                     Page
                                                                                                     ----
<S>                                                                                                  <C>
ARTICLE I    DEFINITIONS...........................................................................     2
             Section 1.1.     Definitions..........................................................     2
             Section 1.2.     Other Definitional Provisions........................................     3

ARTICLE II   THE NOTES.............................................................................     4
             Section 2.1.     Form Generally.......................................................     4
             Section 2.2.     Denominations........................................................     4
             Section 2.3.     Execution, Authentication and Delivery...............................     5
             Section 2.4.     Authenticating Agent.................................................     5
             Section 2.5.     Registration of and Limitations on Transfer and
                              Exchange of Notes....................................................     6
             Section 2.6.     Mutilated, Destroyed, Lost or Stolen Notes...........................     8
             Section 2.7.     Persons Deemed Owners................................................     9
             Section 2.8.     Appointment of Paying Agent..........................................     9
             Section 2.9.     Access to List of Noteholders' Names
                              and Addresses........................................................    10
             Section 2.10.    Cancellation.........................................................    11
             Section 2.11.    [Reserved]
             Section 2.12.    New Issuances........................................................    11
             Section 2.13.    Book-Entry Notes.....................................................    13
             Section 2.14.    Notices to Clearing Agency or Foreign Clearing Agency................    14
             Section 2.15.    Definitive Notes.....................................................    14
             Section 2.16.    Global Note..........................................................    15
             Section 2.17.    Meetings of Noteholders..............................................    15
             Section 2.18.    Uncertificated Classes...............................................    15

ARTICLE III  REPRESENTATIONS AND COVENANTS OF ISSUER...............................................    15
             Section 3.1.     Payment of Principal and Interest....................................    15
             Section 3.2.     Maintenance of Office or Agency......................................    16
             Section 3.3.     Money for Note Payments to Be Held in Trust..........................    16
             Section 3.4.     Existence............................................................    17
             Section 3.5.     Protection of Collateral.............................................    17
             Section 3.6.     Opinions as to Collateral............................................    18
             Section 3.7.     Performance of Obligations; Servicing of
                              Receivables..........................................................    19
             Section 3.8.     Negative Covenants...................................................    20
             Section 3.9.     Statements as to Compliance..........................................    21
             Section 3.10.    Issuer May Consolidate, Etc., Only on
                              Certain Terms........................................................    22
</TABLE>

                                       i
<PAGE>

TABLE OF CONTENTS
(Continued)

<TABLE>
<CAPTION>
                                                                                                     Page
                                                                                                     ----
<S>                                                                                                  <C>
             Section 3.11.    Successor Substituted................................................    24
             Section 3.12.    No Other Business....................................................    24
             Section 3.13.    [Reserved]
             Section 3.14.    Servicer's Obligations...............................................    24
             Section 3.15.    Investments..........................................................    24
             Section 3.16.    Capital Expenditures.................................................    24
             Section 3.17.    Removal of Administrator.............................................    24
             Section 3.18.    Restricted Payments..................................................    25
             Section 3.19.    Notice of Events of Default..........................................    25
             Section 3.20.    Further Instruments and Acts.........................................    25

ARTICLE IV   SATISFACTION AND DISCHARGE............................................................    25
             Section 4.1.     Satisfaction and Discharge of this Indenture.........................    25
             Section 4.2.     Application of Issuer Money..........................................    27

ARTICLE V    PAY OUT EVENTS, DEFAULTS AND REMEDIES.................................................    27
             Section 5.1.     Pay Out Events.......................................................    27
             Section 5.2.     Events of Default....................................................    27
             Section 5.3.     Acceleration of Maturity; Rescission and Annulment...................    29
             Section 5.4.     Collection of Indebtedness and Suits for Enforcement
                              by Indenture Trustee.................................................    30
             Section 5.5.     Remedies; Priorities.................................................    32
             Section 5.6.     Optional Preservation of the Collateral..............................    33
             Section 5.7.     Limitation on Suits..................................................    34
             Section 5.8.     Unconditional Rights of Noteholders to Receive
                              Principal and Interest...............................................    35
             Section 5.10.    Rights and Remedies Cumulative.......................................    35
             Section 5.11.    Delay or Omission Not Waiver.........................................    35
             Section 5.12.    Rights of Noteholders to Direct Indenture Trustee....................    35
             Section 5.13.    Waiver of Past Defaults..............................................    36
             Section 5.14.    Undertaking for Costs................................................    36
             Section 5.16.    Sale of Receivables..................................................    37
             Section 5.17.    Action on Notes......................................................    37

ARTICLE VI   THE INDENTURE TRUSTEE.................................................................    38
             Section 6.1.     Duties of the Indenture Trustee......................................    38
             Section 6.2.     Notice of Pay Out Event or Event of Default..........................    40
             Section 6.3.     Rights of Indenture Trustee..........................................    40
             Section 6.4.     Not Responsible for Recitals or Issuance of Notes....................    41
             Section 6.5.     May Hold Notes.......................................................    42
             Section 6.6.     Money Held in Trust..................................................    42
</TABLE>

                                       ii
<PAGE>

TABLE OF CONTENTS
(Continued)

<TABLE>
<CAPTION>
                                                                                                     Page
                                                                                                     ----
<S>                                                                                                  <C>
             Section 6.7.     Compensation, Reimbursement and Indemnification......................    42
             Section 6.8.     Replacement of Indenture Trustee.....................................    43
             Section 6.9.     Successor Indenture Trustee by Merger................................    44
             Section 6.10.    Appointment of Co-Indenture Trustee or Separate
                              Indenture Trustee....................................................    44
             Section 6.11.    Eligibility; Disqualification........................................    46
             Section 6.12.    Preferential Collection of Claims Against............................    46
             Section 6.13.    Tax Returns..........................................................    46
             Section 6.14.    Representations and Covenants of the Indenture Trustee...............    46

ARTICLE VII  NOTEHOLDERS' LIST AND REPORTS
             BY INDENTURE TRUSTEE AND ISSUER.......................................................    47
             Section 7.1.     Issuer to Furnish Indenture Trustee Names and
                              Addresses of Noteholders.............................................    47
             Section 7.2.     Preservation of Information; Communications to Noteholders...........    48
             Section 7.3.     Reports by Issuer....................................................    48
             Section 7.4.     Reports by Indenture Trustee.........................................    49

ARTICLE VIII ALLOCATION AND APPLICATION OF COLLECTIONS.............................................    49
             Section 8.1.     Collection of Money..................................................    49
             Section 8.2.     Rights of Noteholders................................................    49
             Section 8.3.     Establishment of Collection Account and
                              Excess Funding Account...............................................    50
             Section 8.4.     Collections and Allocations..........................................    52
             Section 8.5.     Shared Principal Collections.........................................    55
             Section 8.6.     Excess Finance Charge Collections....................................    55
             Section 8.7.     Allocation of Collateral to Series or Groups.........................    56
             Section 8.8.     Release of Collateral; Eligible Loan Documents.......................    56
             Section 8.9.     Opinion of Counsel...................................................    57

ARTICLE IX   DISTRIBUTIONS AND REPORTS TO NOTEHOLDERS..............................................    58

ARTICLE X    SUPPLEMENTAL INDENTURES...............................................................    58
             Section 10.1.    Supplemental Indentures Without Consent of Noteholders...............    58
             Section 10.2.    Supplemental Indentures with Consent of
                              Noteholders..........................................................    60
             Section 10.3.    Execution of Supplemental Indentures.................................    61
             Section 10.4.    Effect of Supplemental Indenture.....................................    62
</TABLE>

                                      iii
<PAGE>

TABLE OF CONTENTS
(Continued)

<TABLE>
<CAPTION>
                                                                                                     Page
                                                                                                     ----
<S>                                                                                                  <C>
             Section 10.5.    Conformity With Trust Indenture Act..................................    62
             Section 10.6.    Reference in Notes to Supplemental Indentures........................    62

ARTICLE XI   TERMINATION...........................................................................    62
             Section 11.1.    Termination of Issuer................................................    62
             Section 11.2.    Final Distribution...................................................    62
             Section 11.3.    Issuer's Termination Rights..........................................    63

ARTICLE XII  MISCELLANEOUS.........................................................................    64
             Section 12.1.    Compliance Certificates and Opinions etc.............................    64
             Section 12.2.    Form of Documents Delivered to Indenture Trustee.....................    65
             Section 12.3.    Acts of Noteholders..................................................    66
             Section 12.4.    Notices, Etc. to Indenture Trustee and Issuer........................    66
             Section 12.5.    Notices to Noteholders; Waiver.......................................    67
             Section 12.6.    Alternate Payment and Notice Provisions..............................    67
             Section 12.7.    Conflict with Trust Indenture Act....................................    68
             Section 12.8.    Effect of Headings and Table of Contents.............................    68
             Section 12.9.    Successors and Assigns...............................................    68
             Section 12.10.   Separability.........................................................    68
             Section 12.11.   Benefits of Indenture................................................    68
             Section 12.12.   Legal Holidays.......................................................    68
             Section 12.13.   GOVERNING LAW........................................................    68
             Section 12.14.   Counterparts.........................................................    68
             Section 12.15.   Issuer Obligation....................................................    69
             Section 12.16.   No Petition..........................................................    69
</TABLE>

                                       iv
<PAGE>

                RECONCILIATION AND TIE BETWEEN TRUST INDENTURE
                    ACT OF 1939 AND INDENTURE PROVISIONS/1/

<TABLE>
<CAPTION>
Trust Indenture
  Act Section                                    Indenture Section
---------------                                  -----------------
<S>                                              <C>
  310(a)(1)................................            6.11
     (a)(2)................................            6.11
     (a)(3)................................            6.10
     (a)(4)................................       Not Applicable
     (a)(5)................................            6.11
     (b)...................................            6.8, 6.11
     (c)...................................       Not Applicable
  311(a)...................................            6.12
     (b)...................................            6.12
     (c)...................................       Not Applicable
  312(a)...................................            7.1, 7.2(a)
     (b)...................................            7.2(b)
     (c)...................................            7.2(c)
  313(a)...................................            7.4
     (b)...................................            7.4
     (c)...................................            7.3, 7.4
     (d)...................................            7.4
  314(a)...................................            3.9, 7.3(a)
     (b)...................................            3.6
     (c)(1)................................            8.9, 12.1(a)
     (c)(2)................................            8.9, 12.1(a)
     (c)(3)................................            8.9, 12.1(a)
     (d)(1)................................            8.9, 12.1(b)
     (d)(2)................................       Not Applicable
     (d)(3)................................       Not Applicable
     (e)...................................           12.1(a)
  315(a)...................................            6.1(b)
     (b)...................................            6.2
     (c)...................................            6.1(c)
     (d)...................................            6.1(d)
     (d)(1)................................            6.1(d)
     (d)(2)................................            6.1(d)
     (d)(3)................................            6.1(d)
     (e)...................................            5.14
  316(a)(1)(A).............................            5.12
  316(a)(1)(B).............................            5.13
  316(a)(2)................................       Not Applicable
  316(b)...................................            5.8
  317(a)(1)................................            5.4
  317(a)(2)................................            5.4(d)
</TABLE>

_________
/1/  This reconciliation and tie shall not, for any purpose, be deemed to be
     part of the within indenture.

<PAGE>

<TABLE>
<S>                                                   <C>
  317(b)...................................            5.4(a)
  318(a)...................................           12.7
</TABLE>
<PAGE>

          MASTER INDENTURE, dated as of _______ __, 2000 (the "Indenture"),
                                                               ---------
     between Spiegel Credit Card Master Note Trust, a trust organized under the
     laws of the State of Illinois (the "Issuer"), and The Bank of New York, a
                                         ------
     New York banking corporation, as indenture trustee (the "Indenture
                                                              ---------
     Trustee"). This Indenture may be supplemented at any time and from time to
     -------
     time by an indenture supplement in accordance with Article X (an "Indenture
                                                        ---------      ---------
     Supplement," and together with this Indenture and any amendments, the
     ----------
     "Agreement"). If a conflict exists between the terms and provisions of this
      ---------
     Indenture and any Indenture Supplement, the terms and provisions of the
     Indenture Supplement shall be controlling with respect to the related
     Series.

                             PRELIMINARY STATEMENT

          The Issuer has duly authorized the execution and delivery of this
     Indenture to provide for an issue of its asset backed notes as provided in
     this Indenture. All covenants and agreements made by the Issuer herein are
     for the benefit and security of the Noteholders. The Issuer is entering
     into this Indenture, and the Indenture Trustee is accepting the trusts
     created hereby, for good and valuable consideration, the receipt and
     sufficiency of which are hereby acknowledged.

          Simultaneously with the delivery of this Indenture, the Issuer is
     entering into a Transfer and Servicing Agreement with Spiegel Credit
     Corporation III, a Delaware corporation, as Seller, and First Consumers
     National Bank, a national banking association, as Servicer, pursuant to
     which (a) the Seller will convey to the Issuer all of its right, title and
     interest in, to and under (i) the Collateral Certificate, which the Seller
     will have received from Spiegel Master Trust, and (ii) on and after the SMT
     Termination Date, the Receivables, which the Seller will have received from
     First Consumers National Bank pursuant to a Receivables Purchase Agreement
     and (b) the Servicer will agree to service the Receivables and make
     collections thereon on behalf of the Noteholders.

          Under the Receivables Purchase Agreement and the Transfer and
     Servicing Agreement, Receivables arising in the Accounts from time to time
     will be conveyed thereunder to the Issuer.

                                GRANTING CLAUSE

          The Issuer hereby Grants to the Indenture Trustee, for the benefit of
     the Holders of the Notes, all of the Issuer's right, title and interest,
     whether now owned or hereafter acquired, in, to and under (a) the
     Collateral Certificate, (b) the Receivables, (c) Recoveries related to and
     all money, instruments, investment property and other property distributed
     or distributable in respect of (together with all earnings, dividends,
     distributions, income, issues, and profits relating to) the Receivables
     pursuant to the terms of the Transfer and Servicing Agreement, this
     Indenture and any Indenture Supplement; (d) all Permitted Investments and
     all money, investment property,
<PAGE>

     instruments and other property on deposit from time to time in, credited to
     or related to the Collection Account, the Series Accounts and the Excess
     Funding Account (including any subaccounts of any such account), and in all
     interest, dividends, earnings, income and other distributions from time to
     time received, receivable or otherwise distributed or distributable thereto
     or in respect thereof (including any accrued discount realized on
     liquidation of any investment purchased at a discount); (e) all rights,
     remedies, powers, privileges and claims of the Issuer under or with respect
     to any Series Enhancement and the Transfer and Servicing Agreement (whether
     arising pursuant to the terms of the Transfer and Servicing Agreement or
     otherwise available to the Issuer at law or in equity), including the
     rights of the Issuer to enforce the Transfer and Servicing Agreement, and
     to give or withhold any and all consents, requests, notices, directions,
     approvals, extensions or waivers under or with respect to the Transfer and
     Servicing Agreement to the same extent as the Issuer could but for the
     assignment and security interest granted to the Indenture Trustee for the
     benefit of the Noteholders; (f) all proceeds of any Credit Insurance
     policies relating to the Receivables; (g) all proceeds of any derivative
     contracts between the Issuer or FCNB and a counterparty, as described in
     any Indenture Supplement; (h) all money, accounts, general intangibles,
     chattel paper, instruments, documents, goods, investment property, deposit
     accounts, certificates of deposit, letters of credit, and advices of credit
     consisting of, arising from or related to the foregoing; (i) all other
     property of the Issuer; (j) all present and future claims, demands, causes
     and choses in action in respect of any or all of the foregoing and all
     payments on or under and all proceeds of every kind and nature whatsoever
     in respect of any or all of the foregoing, including all proceeds,
     products, rents, receipts or profits of the conversion, voluntary or
     involuntary, into cash or other property, all cash and non-cash proceeds,
     and other property consisting of, arising from or relating to all or any
     part of any of the foregoing; and (k) any proceeds of the foregoing
     (collectively, the "Collateral").
                         ----------

                               LIMITED RECOURSE

          The obligation of the Issuer to make payments of principal, interest
     and other amounts in respect of the Notes is limited by recourse only to
     the Collateral.

                                   ARTICLE I

                                  DEFINITIONS

          Section 1.1. Definitions.
                       -----------

          Capitalized terms used herein are defined in Annex A.
                                                       -------

                                       2
<PAGE>

          Section 1.2. Other Definitional Provisions.
                       -----------------------------

          (a)  All terms defined directly or by reference in this Indenture
     shall have the defined meanings when used in any certificate or other
     document delivered pursuant hereto unless otherwise defined therein. For
     purposes of this Indenture and all such certificates and other documents,
     unless the context otherwise requires: (i) accounting terms not otherwise
     defined in this Indenture, and accounting terms partly defined in this
     Indenture to the extent not defined, shall have the respective meanings
     given to them under generally accepted accounting principles; (ii) terms
     defined in Article 9 of the UCC as in effect in the State of Illinois and
     not otherwise defined in this Indenture are used as defined in that
     Article; (iii) any reference to each Rating Agency shall only apply to any
     specific rating agency if such rating agency is then rating any outstanding
     Series; (iv) references to any amount as on deposit or outstanding on any
     particular date means such amount at the close of business on such day; (v)
     the words "hereof," "herein" and "hereunder" and words of similar import
     refer to this Indenture (or the certificate or other document in which they
     are used) as a whole and not to any particular provision of this Indenture
     (or such certificate or document); (vi) references to any Section, Schedule
     or Exhibit are references to Sections, Schedules and Exhibits in or to this
     Indenture (or the certificate or other document in which the reference is
     made), and references to any paragraph, Section, clause or other
     subdivision within any Section or definition refer to such paragraph,
     subsection, clause or other subdivision of such Section or definition;
     (vii) the term "including" means "including without limitation"; (viii)
     references to any law or regulation refer to that law or regulation as
     amended from time to time and include any successor law or regulation; (ix)
     references to any Person include that Person's successors and assigns; and
     (x) headings are for purposes of reference only and shall not otherwise
     affect the meaning or interpretation of any provision hereof.

          (b)  Whenever this Indenture refers to a provision of the TIA, the
     provision is incorporated by reference in and made a part of this
     Indenture. The following TIA terms used in this Indenture have the
     following meanings:

          "indenture securities" means the Notes
           --------------------

          "indenture security holder" means a Noteholder
           -------------------------

          "indenture to be qualified" means this Indenture
           -------------------------

          "indenture trustee" or "institutional trustee" means the Indenture
           -----------------      ---------------------
     Trustee

          "obligor" on the indenture securities means the Issuer and any other
           -------
     obligor on the indenture securities

                                       3
<PAGE>

          All other TIA terms used in this Indenture that are defined by the
     TIA, defined by TIA reference to another statute or defined by Commission
     rule have the meanings assigned to them by such definitions.

                                  ARTICLE II

                                   THE NOTES

          Section 2.1. Form Generally. Any Series or Class of Notes, together
                       --------------
     with the Indenture Trustee's certificate of authentication related thereto,
     may be issued in bearer form (the "Bearer Notes") with attached interest
                                        ------------
     coupons and a special coupon (collectively, the "Coupons") or in fully
                                                      -------
     registered form (the "Registered Notes") and shall be in substantially the
                           ----------------
     form of an exhibit to the related Indenture Supplement with such
     appropriate insertions, omissions, substitutions and other variations as
     are required or permitted by this Indenture or such Indenture Supplement,
     and may have such letters, numbers or other marks of identification and
     such legends or endorsements placed thereon, as may, consistently herewith,
     be determined by the officers executing such Notes, as evidenced by their
     execution of such Notes. Any portion of the text of any Note may be set
     forth on the reverse thereof, with an appropriate reference thereto on the
     face of the Note. The terms of any Notes set forth in an exhibit to the
     related Indenture Supplement are part of the terms of this Indenture, as
     applicable.

          The Definitive Notes shall be typewritten, printed, lithographed or
     engraved or produced by any combination of these methods, all as determined
     by the officers executing such Notes, as evidenced by their execution of
     such Notes.

          Each Note will be dated the Closing Date and each Definitive Note will
     be dated as of the date of its authentication.

          Section 2.2. Denominations. Except as otherwise specified in the
                       -------------
     related Indenture Supplement and the Notes, each class of Notes of each
     Series shall be issued in fully registered form in minimum amounts of
     $1,000 and in integral multiples of $1,000 in excess thereof (except that
     one Note of each Class may be issued in a different amount, so long as such
     amount exceeds the applicable minimum denomination for such Class), and
     shall be issued upon initial issuance as one or more Notes in an aggregate
     original principal amount equal to the applicable Collateral Amount for
     such Class or Series.

          Section 2.3. Execution, Authentication and Delivery. Each Note shall
                       --------------------------------------
     be executed by manual or facsimile signature on behalf of the Issuer by an
     Authorized Officer.

          Notes bearing the manual or facsimile signature of an individual who
     was, at the time when such signature was affixed, authorized to sign on
     behalf of the Issuer shall

                                       4
<PAGE>

     not be rendered invalid, notwithstanding the fact that such individual
     ceased to be so authorized prior to the authentication and delivery of such
     Notes or does not hold such office at the date of issuance of such Notes.

          At any time and from time to time after the execution and delivery of
     this Indenture, the Issuer may deliver Notes executed by the Issuer to the
     Indenture Trustee for authentication and delivery, and the Indenture
     Trustee shall authenticate at the written direction of the Issuer and
     deliver such Notes as provided in this Indenture or the related Indenture
     Supplement and not otherwise.

          No Note shall be entitled to any benefit under this Indenture or the
     applicable Indenture Supplement or be valid or obligatory for any purpose,
     unless there appears on such Note a certificate of authentication
     substantially in the form provided for herein or in the related Indenture
     Supplement executed by or on behalf of the Indenture Trustee by the manual
     signature of a duly authorized signatory, and such certificate upon any
     Note shall be conclusive evidence, and the only evidence, that such Note
     has been duly authenticated and delivered hereunder.

          Section 2.4. Authenticating Agent.
                       --------------------

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

          (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 power or any further act on the part of the
     Indenture Trustee or such authenticating agent.

          (c)  An authenticating agent may at any time resign by giving written
     notice of resignation to the Indenture Trustee, the Issuer and the
     Servicer. The Indenture Trustee may at any time terminate the agency of an
     authenticating agent by giving notice of termination to such authenticating
     agent and to the Issuer and the Servicer. 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 Indenture Trustee
     or the Issuer and the Servicer, the Indenture Trustee may promptly appoint
     a successor authenticating agent. Any successor authenticating agent upon
     acceptance of its

                                       5
<PAGE>

     appointment hereunder shall become vested with all the rights, powers and
     duties of its predecessor hereunder, with like effect as if originally
     named as an authenticating agent. No successor authenticating agent shall
     be appointed unless acceptable to the Issuer and the Servicer.

          (d)  The Issuer agrees to pay to each authenticating agent from time
     to time reasonable compensation for its services under this Section 2.4.
                                                                 -----------

          (e)  The provisions of Sections 6.1 and 6.4 shall be applicable to any
                                 ------------     ---
     authenticating agent.

          (f)  Pursuant to an appointment made under this Section 2.4, the Notes
                                                          -----------
     may have endorsed thereon, in lieu of or in addition to the Indenture
     Trustee's certificate of authentication, an alternative certificate of
     authentication in substantially the following form:

     "This is one of the Notes described in the within-mentioned Agreement.

     ____________________________

     ____________________________

     as Authenticating Agent
     for the Indenture Trustee

     By: ________________________

     "Authorized Signatory"

          Section 2.5. Registration of and Limitations on Transfer and Exchange
                       --------------------------------------------------------
     of Notes. The Issuer shall cause to be kept a register (the "Note
     --------                                                     ----
     Register") in which the Issuer shall provide for the registration of Notes
     --------
     and the registration of transfers of Notes. The Indenture Trustee initially
     shall be the transfer agent and registrar (in such capacity, the "Transfer
                                                                       --------
     Agent and Registrar") for the purpose of registering Notes and transfers of
     -------------------
     Notes as herein provided. Upon any resignation of any Transfer Agent and
     Registrar, the Issuer shall promptly appoint a successor or, if it elects
     not to make such an appointment, assume the duties of Transfer Agent and
     Registrar.

          If a Person other than the Indenture Trustee is appointed by the
     Issuer as Transfer Agent and Registrar, the Issuer will give the Indenture
     Trustee prompt written notice of the appointment of a Transfer Agent and
     Registrar and of the location, and any change in the location, of the
     Transfer Agent and Registrar and Note Register. The Indenture Trustee shall
     have the right to inspect the Note Register at all reasonable times and to
     obtain copies thereof, and the Indenture Trustee shall have the right to

                                       6
<PAGE>

     conclusively rely upon a certificate executed on behalf of the Transfer
     Agent and Registrar by an officer thereof as to the names and addresses of
     the Noteholders and the principal amounts and numbers of such Notes.

          Upon surrender for registration of transfer of any Note at the office
     or agency of the Transfer Agent and Registrar, to be maintained as provided
     in Section 3.2, if the requirements of Section 8-401 of the UCC are met as
        -----------
     certified by the Administrator to the Indenture Trustee, the Issuer shall
     execute, and upon receipt of such surrendered Note the Indenture Trustee
     shall authenticate and deliver to the Noteholder, in the name of the
     designated transferee or transferees, one or more new Notes (of the same
     Series and Class) in any authorized denominations of like aggregate
     principal amount.

          At the option of a Noteholder, Notes may be exchanged for other Notes
     (of the same Series and Class) in any authorized denominations and of like
     aggregate principal amount, upon surrender of such Notes to be exchanged at
     the office or agency of the Transfer Agent and Registrar. Whenever any
     Notes are so surrendered for exchange, if the requirements of Section 8-401
     of the UCC are met as certified by the Administrator to the Indenture
     Trustee, the Issuer shall execute, and upon receipt of such surrendered
     Note the Indenture Trustee shall authenticate and deliver to the
     Noteholder, the Notes which the Noteholder making the exchange is entitled
     to receive.

          All Notes issued upon any registration of transfer or exchange of
     Notes shall evidence the same obligations, evidence the same debt, and be
     entitled to the same rights and privileges under this Indenture, as the
     Notes surrendered upon such registration of transfer or exchange.

          Every Note presented or surrendered for registration of transfer or
     exchange shall be duly endorsed by, or be accompanied by a written
     instrument of transfer in a form satisfactory to the Indenture Trustee duly
     executed by, the Noteholder thereof or its attorney-in-fact duly authorized
     in writing, and by such other documents as the Indenture Trustee may
     reasonably require.

          Any Note held by the Seller at any time after the date of its initial
     issuance may be transferred or exchanged only upon the delivery to the
     Owner Trustee and the Indenture Trustee of a Tax Opinion dated as of the
     date of such transfer or exchange, as the case may be, with respect to such
     transfer or exchange.

          The registration of transfer of any Note shall be subject to the
     additional requirements, if any, set forth in the related Indenture
     Supplement.

          No service charge shall be made for any registration of transfer or
     exchange of Notes, but the Issuer and the Transfer Agent and Registrar may
     require payment of a sum sufficient to cover any tax or other governmental
     charge that may be imposed in connection with any registration of transfer
     or exchange of such Notes.

                                       7
<PAGE>

          All Notes surrendered for registration of transfer and exchange shall
     be canceled by the Issuer and delivered to the Indenture Trustee for
     subsequent destruction without liability on the part of either. The
     Indenture Trustee shall destroy the Global Note upon its exchange in full
     for Definitive Notes and shall deliver a certificate of destruction to the
     Seller. Such certificate shall also state that a certificate or
     certificates of each Foreign Clearing Agency referred to in the applicable
     Indenture Supplement was received with respect to each portion of the
     Global Note exchanged for Definitive Notes.

          The preceding provisions of this Section 2.5 notwithstanding, the
                                           -----------
     Issuer shall not be required to make, and Transfer Agent and Registrar need
     not register, transfers or exchanges of Notes for a period of twenty (20)
     days preceding the due date for any payment with respect to the Note.

          If and so long as any Series of Notes are listed on the Luxembourg
     Stock Exchange and such exchange shall so require, the Issuer shall appoint
     a co-transfer agent and co-registrar in Luxembourg or another European
     city. Any reference in this Indenture to the Transfer Agent and Registrar
     shall include any co-transfer agent and co-registrar unless the context
     otherwise requires. The Indenture Trustee will enter into any appropriate
     agency agreement with any co-transfer agent and co-registrar not a party to
     this Indenture, which will implement the provisions of this Indenture that
     relate to such agent. [The Issuer initially appoints [__________________]
     at its office located at [_____________________], as Transfer Agent and
     Registrar for each Series of Notes listed on the Luxembourg Stock
     Exchange.]

          Section 2.6. Mutilated, Destroyed, Lost or Stolen Notes. If (a) any
                       ------------------------------------------
     mutilated Note is surrendered to the Indenture Trustee, or the Indenture
     Trustee receives evidence to its satisfaction of the destruction, loss or
     theft of any Note, and (b) in case of destruction, loss, or theft there is
     delivered to the Indenture Trustee such security or indemnity as may be
     required by it to hold the Issuer, the Noteholders and the Indenture
     Trustee harmless, then, in the absence of notice to the Issuer, the
     Transfer Agent and Registrar or the Indenture Trustee that such Note has
     been acquired by a protected purchaser (as defined in Section 8-303 of the
     UCC as in effect in the State of Illinois), the Issuer shall execute, and
     the Indenture Trustee shall authenticate and deliver, in exchange for or in
     lieu of any such mutilated, destroyed, lost or stolen Note, a replacement
     Note of like tenor (including the same date of issuance) and principal
     amount, bearing a number not contemporaneously outstanding; provided,
                                                                 --------
     however, that if any such mutilated, destroyed, lost or stolen Note shall
     -------
     have become or within seven (7) days shall be due and payable, or shall
     have been selected or called for redemption, instead of issuing a
     replacement Note, the Issuer may pay such Note without surrender thereof,
     except that any mutilated Note shall be surrendered. If, after the delivery
     of such replacement Note or payment of a destroyed, lost or stolen Note
     pursuant to the proviso to the preceding sentence, a protected purchaser
     (as defined in Section 8-303 of the UCC as in effect in the State of
     Illinois) of the original Note in lieu of which such

                                       8
<PAGE>

     replacement Note was issued presents for payment such original Note, the
     Issuer and the Indenture Trustee shall be entitled to recover such
     replacement Note (or such payment) from the Person to whom it was delivered
     or any Person taking such replacement Note from such Person to whom such
     replacement Note was delivered or any assignee of such Person, except a
     protected purchaser, and shall be entitled to recover upon the security or
     indemnity provided therefor to the extent of any loss, damage, cost or
     expense incurred by the Issuer or the Indenture Trustee in connection
     therewith.

          Upon the issuance of any replacement Note under this Section 2.6, the
                                                               -----------
     Issuer may require the payment by the Holder of such Note of a sum
     sufficient to cover any tax or other governmental charge that may be
     imposed in relation thereto and any other reasonable expenses (including
     the fees and expenses of the Indenture Trustee or the Transfer Agent and
     Registrar) connected therewith.

          Every replacement Note issued pursuant to this Section 2.6 in
                                                         -----------
     replacement of any mutilated, destroyed, lost or stolen Note shall
     constitute complete and indefeasible evidence of an obligation of the
     Trust, as if originally issued, whether or not the mutilated, destroyed,
     lost or stolen Note shall be found at any time, and shall be entitled to
     all the benefits of this Indenture equally and proportionately with any and
     all other Notes duly issued hereunder.

          The provisions of this Section 2.6 are exclusive and shall preclude
                                 -----------
     (to the extent lawful) all other rights and remedies with respect to the
     replacement or payment of mutilated, destroyed, lost or stolen Notes.

          Section 2.7. Persons Deemed Owners. Prior to due presentment for
                       ---------------------
     registration of transfer of any Note, the Issuer, the Seller, the Indenture
     Trustee and any agent of the Issuer, the Seller or the Indenture Trustee
     shall treat the Person in whose name any Note is registered as the owner of
     such Note for the purpose of receiving distributions pursuant to the terms
     of the applicable Indenture Supplement and for all other purposes
     whatsoever, whether or not such Note is overdue, and neither the Issuer,
     the Seller, the Indenture Trustee nor any agent of the Issuer, the Seller
     or the Indenture Trustee shall be affected by any notice to the contrary.

          Section 2.8. The Appointment of Paying Agent.
                       -------------------------------

          (a)  The Issuer reserves the right at any time to vary or terminate
     the appointment of a Paying Agent for the Notes, and to appoint additional
     or other Paying Agents, provided that it will at all times maintain the
     Indenture Trustee as a Paying Agent.

          If and so long as any Notes are listed on the Luxembourg Stock
     Exchange and such exchange shall so require, the Indenture Trustee will
     appoint a co-paying agent in

                                       9
<PAGE>

     Luxembourg or another European city. The Indenture Trustee will enter into
     any appropriate agency agreement with any co-paying agent not a party to
     this Indenture, which will implement the provisions of this Indenture that
     relate to such agent. [The Issuer initially appoints [___________________],
     at its office located at [___________________], as Paying Agent for each
     Series of Notes listed on the Luxembourg Stock Exchange.]

          Notice of all changes in the identity or specified office of a Paying
     Agent will be delivered promptly to the Noteholders by the Indenture
     Trustee.

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

          Section 2.9. Access to List of Noteholders' Names and Addresses.
                       --------------------------------------------------

          (a)  The Issuer will furnish or cause to be furnished to the Indenture
     Trustee, the Servicer or the Paying Agent, within five (5) Business Days
     after receipt by the Issuer of a written request therefor from the
     Indenture Trustee, the Servicer or the Paying Agent, respectively, a list
     of the names and addresses of the Noteholders. Unless otherwise provided in
     the related Indenture Supplement, the Holders of not less than 10% of the
     Outstanding Amount of any Series (the "Applicants") may apply in writing to
                                            ----------
     the Indenture Trustee, and if such application states that the Applicants
     desire to communicate with other Noteholders of any Series with respect to
     their rights under this Indenture or under the Notes and is accompanied by
     a copy of the communication which such Applicants propose to transmit, then
     the Indenture 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 Noteholders held by the Indenture
     Trustee and shall give the Servicer notice that such request has been made,
     within five (5) Business Days after the receipt of such application. Such
     list shall be as of a date no more than forty-five (45) days prior to the
     date of receipt of such Applicants' request.

          (b)  Every Noteholder, by receiving and holding a Note, agrees that
     none of the Issuer, the Indenture Trustee, the Transfer Agent and Registrar
     and the Servicer or any of their respective agents and employees shall be
     held accountable by reason of the disclosure of any such information as to
     the names and addresses of the Noteholders hereunder, regardless of the
     sources from which such information was derived.

                                       10
<PAGE>

          Section 2.10. Cancellation. All Notes surrendered for payment,
                        ------------
     registration of transfer, exchange or redemption shall, if surrendered to
     any Person other than the Indenture Trustee, be delivered to the Indenture
     Trustee and shall be promptly canceled by it. The Issuer may at any time
     deliver to the Indenture Trustee for cancellation any Notes previously
     authenticated and delivered hereunder which the Issuer may have acquired in
     any lawful manner whatsoever, and all Notes so delivered shall be promptly
     canceled by the Indenture Trustee. No Notes shall be authenticated in lieu
     of or in exchange for any Notes canceled as provided in this Section 2.10,
                                                                  ------------
     except as expressly permitted by this Indenture. All canceled Notes held by
     the Indenture Trustee shall be destroyed unless the Issuer shall direct by
     a timely order that they be returned to it.

          Section 2.11. [Reserved]
                         --------

          Section 2.12. New Issuances.
                        -------------

          (a)  Pursuant to one or more Indenture Supplements, the Seller may
     from time to time direct the Owner Trustee, on behalf of the Issuer, to
     issue one or more new Series of Notes (a "New Issuance"). The Notes of all
                                               ------------
     outstanding Series shall be equally and ratably entitled as provided herein
     to the benefits of this Indenture without preference, priority or
     distinction, all in accordance with the terms and provisions of this
     Indenture and the applicable Indenture Supplement except, with respect to
     any Series or Class, as provided in the related Indenture Supplement.
     Interest on and principal of the Notes of each outstanding Series shall be
     paid as specified in the Indenture Supplement relating to such outstanding
     Series.

          (b)  On or before the Closing Date relating to any new Series of
     Notes, the parties hereto will execute and deliver an Indenture Supplement
     which will specify the Principal Terms of such Series. The terms of such
     Indenture Supplement may modify or amend the terms of this Indenture solely
     as applied to such new Series. The obligation of the Owner Trustee to
     execute, on behalf of the Issuer, the Notes of any Series and of the
     Indenture Trustee to authenticate such Notes (other than any Series issued
     pursuant to an Indenture Supplement dated as of the date hereof) and to
     execute and deliver the related Indenture Supplement is subject to the
     satisfaction of the following conditions:

               (i)  on or before the fifth day immediately preceding the Closing
          Date the Seller shall have given the Owner Trustee, the Indenture
          Trustee, the Servicer and each Rating Agency notice (unless such
          notice requirement is otherwise waived) of such issuance and the
          Closing Date;

               (ii) the Seller shall have delivered to the Owner Trustee and the
          Indenture Trustee any related Indenture Supplement, in form
          satisfactory to the Owner Trustee and the Indenture Trustee, executed
          by each party hereto (other than the Indenture Trustee);

                                       11
<PAGE>

               (iii)  the Seller shall have delivered to the Owner Trustee and
          the Indenture Trustee any related Enhancement Agreement executed by
          the Seller and the Series Enhancer;

               (iv)   the Rating Agency Condition shall have been satisfied with
          respect to such issuance;

               (v)    such issuance will not result in any Adverse Effect and
          the Seller shall have delivered to the Owner Trustee and the Indenture
          Trustee an Officer's Certificate, dated the Closing Date to the effect
          that the Seller reasonably believes that such issuance will not, based
          on the facts known to such officer at the time of such certification,
          have an Adverse Effect;

               (vi)   the Seller shall have delivered to the Owner Trustee and
          the Indenture Trustee (with a copy to each Rating Agency) (A) an
          Opinion of Counsel, dated the Closing Date with respect to such
          issuance, to the effect that, except as otherwise stated in the
          related Indenture Supplement, the Notes of the new Series will be
          characterized as debt for federal income tax purposes and (B) a Tax
          Opinion, dated the Closing Date with respect to such issuance; and

               (vii)  the Aggregate Principal Balance shall not be less than the
          Minimum Aggregate Principal Receivables as of the Closing Date and
          after giving effect to such issuance and the Seller Amount shall
          exceed the Minimum Seller Amount.

          (c)  Upon satisfaction of the above conditions, pursuant to Section
                                                                      -------
     2.3, the Owner Trustee, on behalf of the Issuer, shall execute and the
     ---
     Indenture Trustee shall upon written direction of the Issuer authenticate
     and deliver the Notes of such Series as provided in this Indenture and the
     applicable Indenture Supplement.

          (d)  The Issuer may direct the Indenture Trustee in writing to deposit
     the net proceeds from any New Issuance in the Excess Funding Account. The
     Issuer may also specify that on any Transfer Date the proceeds from the
     sale of any new Series may be withdrawn from the Excess Funding Account and
     treated as Shared Principal Collections.

          Section 2.13. Book-Entry Notes. Unless otherwise provided in any
                        ----------------
     related Indenture Supplement, the Notes, upon original issuance, shall be
     issued in the form of typewritten or printed Notes representing the Book-
     Entry Notes to be delivered to the depository specified in such Indenture
     Supplement which shall be the Clearing Agency or Foreign Clearing Agency,
     by or on behalf of such Series.

                                       12
<PAGE>

          The Notes of each Series shall, unless otherwise provided in the
     related Indenture Supplement, initially be registered in the Note Register
     in the name of the nominee of the Clearing Agency or Foreign Clearing
     Agency for such Book-Entry Notes and shall be delivered to the Indenture
     Trustee or, pursuant to such Clearing Agency's or Foreign Clearing Agency's
     instructions held by the Indenture Trustee's agent as custodian for the
     Clearing Agency or Foreign Clearing Agency.

          Unless and until Definitive Notes are issued under the limited
     circumstances described in Section 2.15, no Note Owner shall be entitled to
                                ------------
     receive a Definitive Note representing such Note Owner's interest in such
     Note. Unless and until Definitive Notes have been issued to the Note Owners
     pursuant to Section 2.15:
                 ------------

          (a)  the provisions of this Section 2.13 shall be in full force and
                                      ------------
     effect with respect to each such Series;

          (b)  the Indenture Trustee shall be entitled to deal with the Clearing
     Agency or Foreign Clearing Agency and the Clearing Agency Participants for
     all purposes of this Indenture (including the payment of principal of and
     interest on the Notes of each such Series) as the authorized
     representatives of the Note Owners;

          (c)  to the extent that the provisions of this Section 2.13 conflict
                                                         ------------
     with any other provisions of this Indenture, the provisions of this Section
                                                                         -------
     2.13 shall control with respect to each such Series;
     ----

          (d)  the rights of Note 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 Note 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 Notes of such Series are issued pursuant to Section 2.15,
                                                                  ------------
     the initial Clearing Agency shall make book-entry transfers among the
     Clearing Agency Participants and receive and transmit distributions of
     principal and interest on the Notes to such Clearing Agency Participants;
     and

          (e)  whenever this Indenture requires or permits actions to be taken
     based upon instructions or directions of the Holders of Notes representing
     a specified percentage of the Outstanding Amount, the Clearing Agency or
     Foreign Clearing Agency shall be deemed to represent such percentage only
     to the extent that they have received instructions to such effect from the
     Note Owners and/or Clearing Agency Participants owning or representing,
     respectively, such required percentage of the beneficial interest in the
     Notes and has delivered such instructions to the Indenture Trustee.

                                       13
<PAGE>

          Section 2.14.  Notices to Clearing Agency or Foreign Clearing Agency.
                         -----------------------------------------------------
     Whenever a notice or other communication to the Noteholders is required
     under this Indenture, unless and until Definitive Notes shall have been
     issued to Note Owners pursuant to Section 2.15, the Indenture Trustee shall
                                       ------------
     give all such notices and communications specified herein to be given to
     Noteholders to the Clearing Agency or Foreign Clearing Agency, as
     applicable, and shall have no obligation to the Note Owners.

          Section 2.15.  Definitive Notes. If (i) (a) the Seller advises the
                         ----------------
     Indenture Trustee in writing that the Clearing Agency is no longer willing
     or able to discharge properly its responsibilities as Clearing Agency with
     respect to the Book-Entry Notes of a given Series and (b) the Indenture
     Trustee or Issuer is unable to locate and reach an agreement on
     satisfactory terms with a qualified successor, (ii) the Seller, at its
     option, advises the Indenture Trustee in writing that it elects to
     terminate the book-entry system through the Clearing Agency with respect to
     such Series or (iii) after the occurrence of a Servicer Default, Note
     Owners of Notes evidencing more than 50% of the Outstanding Amount (or such
     other percentage as specified in the related Indenture Supplement) of such
     Series advise the Indenture Trustee and the applicable Clearing Agency
     through the applicable Clearing Agency Participants in writing that the
     continuation of a book-entry system is no longer in the best interests of
     the Note Owners of such Series, the Clearing Agency shall notify all Note
     Owners of such Series of the occurrence of such event and of the
     availability of Definitive Notes to Note Owners of such Series requesting
     the same. Upon surrender to the Indenture Trustee of the Notes of such
     Series, accompanied by registration instructions from the applicable
     Clearing Agency, the Issuer shall execute and the Indenture Trustee shall
     authenticate Definitive Notes of such Series and shall recognize the
     registered holders of such Definitive Notes as Noteholders under this
     Indenture. Neither the Issuer nor the Indenture Trustee shall be liable for
     any delay in delivery of such instructions, and the Issuer and the
     Indenture Trustee may conclusively rely on, and shall be fully protected in
     relying on, such instructions. Upon the issuance of Definitive Notes 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 Indenture Trustee,
     to the extent applicable with respect to such Definitive Notes, and the
     Indenture Trustee shall recognize the registered holders of the Definitive
     Notes of such Series as Noteholders of such Series hereunder. Definitive
     Notes will be transferable and exchangeable at the offices of the Transfer
     Agent and Registrar.

          Section 2.16.  Global Note. If specified in the related Indenture
                         -----------
     Supplement for any Series, Notes may be initially issued in the form of a
     single temporary Global Note (the "Global Note") in bearer form, without
                                        -----------
     interest coupons, in the denomination of the Initial Collateral Amount and
     substantially in the form attached to the related Indenture Supplement.
     Unless otherwise specified in the related Indenture Supplement, the
     provisions of this Section 2.16 shall apply to such Global Note. The Global
                        ------------
     Note will be authenticated by the Indenture Trustee upon the same
     conditions, in substantially the

                                       14
<PAGE>

     same manner and with the same effect as the Definitive Notes. The Global
     Note may be exchanged in the manner described in the related Indenture
     Supplement for Registered Notes or Bearer Notes in definitive form. Except
     as otherwise specifically provided in the Indenture Supplement, any Notes
     that are issued in bearer form pursuant to this Indenture shall be issued
     in accordance with the requirements of Code section 163(f)(2).

          Section 2.17.  Meetings of Noteholders. To the extent provided by the
                         -----------------------
     Indenture Supplement for any Series issued in whole or in part in Bearer
     Notes, the Servicer or the Indenture Trustee may at any time call a meeting
     of the Noteholders of such Series, to be held at such time and at such
     place as the Servicer and the Indenture Trustee, as the case may be, shall
     determine, for the purpose of approving a modification or amendment to, or
     obtaining a waiver of, any covenant or condition set forth in this
     Indenture with respect to such Series or in the Notes of such Series,
     subject to Article X.
                ---------

          Section 2.18.  Uncertificated Classes. Notwithstanding anything to the
                         ----------------------
     contrary contained in this Article II or in Article XI, unless otherwise
                                ----------       ----------
     specified in any Indenture Supplement, any provisions contained in this
     Article II and in Article XI relating to the registration, form, execution,
     ----------        ----------
     authentication, delivery, presentation, cancellation and surrender of Notes
     shall not be applicable to any uncertificated Notes, provided, however,
                                                          --------  -------
     that, except as otherwise specifically provided in the Indenture
     Supplement, any such uncertificated Notes shall be issued in "registered
     form" within the meaning of Code section 163(f)(1).

                                  ARTICLE III

                    REPRESENTATIONS AND COVENANTS OF ISSUER

          Section 3.1.   Payment of Principal and Interest.
                         ---------------------------------

          (a)  The Issuer will duly and punctually pay principal and interest in
     accordance with the terms of the Notes as specified in the relevant
     Indenture Supplement.

          (b)  The Noteholders of a Series as of the Record Date in respect of a
     Distribution Date shall be entitled to the interest accrued and payable and
     principal payable on such Distribution Date as specified in the related
     Indenture Supplement. All payment obligations under a Note are discharged
     to the extent such payments are made to the Noteholder of record.

                                       15
<PAGE>

          Section 3.2.   Maintenance of Office or Agency. The Issuer will
                         -------------------------------
     maintain an office or agency within the State of [New York] and such other
     locations as may be set forth in an Indenture Supplement where Notes may be
     presented or surrendered for payment, where Notes may be surrendered for
     registration of transfer or exchange and where notices and demands to or
     upon the Issuer in respect of the Notes and this Indenture may be served.
     The Issuer hereby initially appoints the Indenture Trustee at its Corporate
     Trust Office to serve as its agent for the foregoing purposes. The Issuer
     will give prompt written notice to the Indenture Trustee and the
     Noteholders of the location, and of any change in the location, of any such
     office or agency. If at any time the Issuer shall fail to maintain any such
     office or agency or shall fail to furnish the Indenture Trustee with the
     address thereof, such presentations, surrenders, notices and demands may be
     made or served at the Corporate Trust Office, and the Issuer hereby
     appoints the Indenture Trustee at its Corporate Trust Office as its agent
     to receive all such presentations, surrenders, notices and demands.

          Section 3.3.   Money for Note Payments to Be Held in Trust. As
                         -------------------------------------------
     specified in Section 8.3(a) and (b) herein and in the related Indenture
                  --------------     ---
     Supplement, all payments of amounts due and payable with respect to the
     Notes which are to be made from amounts withdrawn from the Collection
     Account and the Excess Funding Account shall be made on behalf of the
     Issuer by the Indenture Trustee or by the Paying Agent, and no amounts so
     withdrawn from the Collection Account or the Excess Funding Account shall
     be paid over to or at the direction of the Issuer except as provided in
     this Section 3.3 and in the related Indenture Supplement.
          -----------

          The Issuer will cause each Paying Agent other than the Indenture
     Trustee to execute and deliver to the Indenture Trustee an instrument in
     which such Paying Agent shall agree with the Indenture Trustee (and if the
     Indenture Trustee acts as Paying Agent, it hereby so agrees), subject to
     the provisions of this Section 3.3, that such Paying Agent, in acting as
                            -----------
     Paying Agent, is an express agent of the Issuer and, further, that such
     Paying Agent will:

                  (i)    hold all sums held by it for the payment of amounts due
          with respect to the Notes in trust for the benefit of the Persons
          entitled thereto until such sums shall be paid to such Persons or
          otherwise disposed of as herein provided and pay such sums to such
          Persons as herein provided;

                  (ii)   give a Responsible Officer of the Indenture Trustee
          written notice of any default by the Issuer (or any other obligor upon
          the Notes) of which it has actual knowledge in the making of any
          payment required to be made with respect to the Notes;

                  (iii)  at any time during the continuance of any such default,
          upon the written request of the Indenture Trustee, forthwith pay to
          the Indenture Trustee all sums so held in trust by such Paying Agent;

                                       16
<PAGE>

                  (iv)   immediately resign as a Paying Agent and forthwith pay
          to the Indenture Trustee all sums held by it in trust for the payment
          of Notes if at any time it ceases to meet the standards required to be
          met by a Paying Agent at the time of its appointment; and

                  (v)    comply with all requirements of the Code with respect
          to the withholding from any payments made by it on any Notes of any
          applicable withholding taxes imposed thereon and with respect to any
          applicable reporting requirements in connection therewith.

     The Issuer may at any time, for the purpose of obtaining the satisfaction
     and discharge of this Indenture or for any other purpose, by Issuer Order
     direct any Paying Agent to pay to the Indenture Trustee all sums held in
     trust by such Paying Agent, such sums to be held by the Trustee upon the
     same trusts as those upon which such sums were held by such Paying Agent;
     and upon such payment by any Paying Agent to the Indenture Trustee, such
     Paying Agent shall be released from all further liability with respect to
     such sums.

          Section 3.4.   Existence. The Issuer will keep in full effect its
                         ---------
     existence, rights and franchises as a common law trust under the laws of
     the State of Illinois (unless it becomes, or any successor Issuer hereunder
     is or becomes, organized under the laws of any other State or of the United
     States of America, in which case the Issuer will keep in full effect its
     existence, rights and franchises under the laws of such other jurisdiction)
     and will obtain and preserve its qualification to do business in each
     jurisdiction in which such qualification is or shall be necessary to
     protect the validity and enforceability of this Indenture, the Notes, the
     Collateral and each other related instrument or agreement.

          Section 3.5.   Protection of Collateral. The Issuer will from time to
                         ------------------------
     time prepare, or cause to be prepared, execute and deliver all such
     supplements and amendments hereto and all such financing statements,
     continuation statements, instruments of further assurance and other
     instruments, and will take such other action necessary or advisable to:

          (a)  grant more effectively all or any portion of the Collateral as
     security for the Notes;

          (b)  maintain or preserve the lien (and the priority thereof) of this
     Indenture or to carry out more effectively the purposes hereof;

          (c)  perfect, publish notice of, or protect the validity of any Grant
     made or to be made under this Indenture;

                                       17
<PAGE>

          (d)  enforce any of the Collateral; or

          (e)  preserve and defend title to the Collateral securing the Notes
     and the rights therein of the Indenture Trustee and the Noteholders secured
     thereby against the claims of all persons and parties.

          The Issuer hereby designates the Indenture Trustee its agent and
     attorney-in-fact to execute any financing statement, continuation statement
     or other instrument required pursuant to this Section 3.5.
                                                   -----------

          The Issuer shall pay or cause to be paid any taxes levied on all or
     any part of the Receivables securing the Notes.

          Section 3.6.   Opinions as to Collateral.
                         -------------------------

          (a)  On the Closing Date relating to any new Series of Notes, the
     Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
     stating that, in the opinion of such counsel, such action has been taken to
     perfect the lien and security interest of this Indenture, including with
     respect to the recording and filing of this Indenture, any indentures
     supplemental hereto, and any other requisite documents, and with respect to
     the execution and filing of any financing statements and continuation
     statements, as are so necessary and reciting the details of such action, or
     stating that, in the opinion of such counsel, no such action is necessary
     to maintain the perfection of such lien and security interest.

          (b)  On or before May 30 in each calendar year, beginning in 2001, the
     Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
     stating that, in the opinion of such counsel, such action has been taken to
     perfect the lien and security interest of this Indenture, including with
     respect to the recording, filing, re-recording and refiling of this
     Indenture, any indentures supplemental hereto and any other requisite
     documents and with respect to the execution and filing of any financing
     statements and continuation statements as is so necessary and reciting the
     details of such action or stating that in the opinion of such counsel no
     such action is necessary to maintain the perfection of such lien and
     security interest. Such Opinion of Counsel shall also describe the
     recording, filing, rerecording and refiling of this Indenture, any
     indentures supplemental hereto and any other requisite documents and the
     execution and filing of any financing statements and continuation
     statements that will, in the opinion of such counsel, be required to
     maintain the perfection of the lien and security interest of this Indenture
     until May 30 in the following calendar year.

                                       18
<PAGE>

          Section 3.7.   Performance of Obligations; Servicing of Receivables.
                         ----------------------------------------------------

          (a)  The Issuer will not take any action and will use its best efforts
     not to permit any action to be taken by others that would release any
     Person from any of such Person's material covenants or obligations under
     any instrument or agreement included in the Collateral or that would result
     in the amendment, hypothecation, subordination, termination or discharge
     of, or impair the validity or effectiveness of, any such instrument or
     agreement, except as expressly provided in this Indenture, the Transfer and
     Servicing Agreement or such other instrument or agreement.

          (b)  The Issuer may contract with other Persons to assist it in
     performing its duties under this Indenture, and any performance of such
     duties by a Person identified to the Indenture Trustee in an Officer's
     Certificate of the Issuer shall be deemed to be action taken by the Issuer.
     Initially, the Issuer has contracted with the Administrator to assist the
     Issuer in performing its duties under this Indenture.

          (c)  The Issuer will punctually perform and observe all of its
     obligations and agreements contained in this Indenture, the other
     Transaction Documents and in the instruments and agreements relating to the
     Collateral, including but not limited to filing or causing to be filed all
     UCC financing statements and continuation statements required to be filed
     by the terms of this Indenture and the Transfer and Servicing Agreement in
     accordance with and within the time periods provided for herein and
     therein.

          (d)  If the Issuer shall have knowledge of the occurrence of a
     Servicer Default under the Transfer and Servicing Agreement, the Issuer
     shall cause the Indenture Trustee to promptly notify the Rating Agencies
     thereof, and shall cause the Indenture Trustee to specify in such notice
     the action, if any, being taken with respect to such default. If a Servicer
     Default shall arise from the failure of the Servicer to perform any of its
     duties or obligations under the Transfer and Servicing Agreement with
     respect to the Receivables, the Issuer shall take all reasonable steps
     available to it to remedy such failure.

          (e)  On and after the receipt by the Servicer of a Termination Notice
     pursuant to Section 7.1 of the Transfer and Servicing Agreement, the
                 -----------
     Servicer shall continue to perform all servicing functions under this
     Indenture until the date specified in the Termination Notice or until a
     date mutually agreed upon by the Servicer and the Indenture Trustee. As
     promptly as possible after the giving of a Termination Notice to the
     Servicer, the Indenture Trustee shall appoint a Successor Servicer, and
     such Successor Servicer shall accept its appointment by a written
     assumption in a form acceptable to the Indenture Trustee. In the event that
     a Successor Servicer has not been appointed and accepted its appointment at
     the time when the Servicer ceases to act as Servicer, the Indenture Trustee
     in accordance with Section 7.2 of the Transfer and Servicing Agreement
                        -----------
     without further action shall automatically be appointed the

                                       19
<PAGE>

     Successor Servicer. The Indenture Trustee may delegate any of its servicing
     obligations to an Affiliate or agent in accordance with Section 3.1(b) and
                                                             --------------
     Section 5.7 of the Transfer and Servicing Agreement. Notwithstanding the
     -----------
     foregoing, the Indenture Trustee shall, if it is legally unable so to act,
     petition at the expense of the Servicer a court of competent jurisdiction
     to appoint any established institution qualifying as an Eligible Servicer
     as the Successor Servicer hereunder. The Indenture Trustee shall give
     prompt notice to each Rating Agency and each Series Enhancer upon the
     appointment of a Successor Servicer. Upon its appointment, the Successor
     Servicer shall be the successor in all respects to the Servicer with
     respect to servicing functions under this Indenture 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
     Indenture to the Servicer shall be deemed to refer to the Successor
     Servicer. In connection with any Termination Notice, the Indenture Trustee
     will review any bids which it obtains from Eligible Servicers and shall be
     permitted to appoint any Eligible Servicer submitting such a bid as a
     Successor Servicer for servicing compensation, subject to the limitations
     set forth in Section 7.2 of the Transfer and Servicing Agreement.
                  -----------

          (f)  Without derogating from the absolute nature of the assignment
     granted to the Indenture Trustee under this Indenture or the rights of the
     Indenture Trustee hereunder, the Issuer agrees (i) that it will not,
     without the prior written consent of the Indenture Trustee and the Holders
     of Notes representing more than 50% of the Outstanding Amount of each
     Series, amend, modify, waive, supplement, terminate or surrender, or agree
     to any amendment, modification, supplement, termination, waiver or
     surrender of, the terms of any Collateral (except to the extent otherwise
     provided in the Transfer and Servicing Agreement) or the Transaction
     Documents (except to the extent otherwise provided in the Transaction
     Documents), or waive timely performance or observance by the Servicer or
     the Seller under the Transfer and Servicing Agreement; and (ii) that any
     such amendment shall not (A) increase or reduce in any manner the amount
     of, or accelerate or delay the timing of, collections of payments on the
     Receivables or distributions that are required to be made for the benefit
     of the Noteholders or (B) reduce the aforesaid percentage of the Notes that
     is required to consent to any such amendment, without the consent of the
     Holders of all the Outstanding Notes. If any such amendment, modification,
     supplement or waiver shall be so consented to by the Indenture Trustee and
     such Noteholders, the Issuer agrees, promptly following a request by the
     Indenture Trustee to do so, to execute and deliver, in its own name and at
     its own expense, such agreements, instruments, consents and other documents
     as the Indenture Trustee may deem necessary or appropriate in the
     circumstances.

                                       20
<PAGE>

          Section 3.8.   Negative Covenants. So long as any Notes are
                         ------------------
     Outstanding, the Issuer will not:

          (a)  sell, transfer, exchange, or otherwise dispose of any part of the
     Collateral unless directed to do so by the Indenture Trustee, except as
     expressly permitted by this Indenture and any Indenture Supplement, the
     Receivables Purchase Agreement, the Trust Agreement or the Transfer and
     Servicing Agreement;

          (b)  claim any credit on, or make any deduction from, the principal
     and interest payable in respect of the Notes (other than amounts properly
     withheld from such payments under the Code or applicable state law) or
     assert any claim against any present or former Noteholder by reason of the
     payment of any taxes levied or assessed upon any part of the Collateral;

          (c)  incur, assume, guarantee or otherwise become liable, directly or
     indirectly, for any indebtedness other than incurred under the Notes and
     this Indenture;

          (d)  (A) permit the validity or effectiveness of this Indenture to be
     impaired, or permit the lien of this Indenture to be amended, hypothecated,
     subordinated, terminated or discharged, or permit any Person to be released
     from any covenants or obligations with respect to the Notes under this
     Indenture except as may be expressly permitted hereby, (B) permit any Lien,
     charge, excise, claim, security interest, mortgage or other encumbrance
     (other than the lien of this Indenture) to be created on or extend to or
     otherwise arise upon or burden the Collateral or any part thereof or any
     interest therein or the proceeds thereof or (C) permit the lien of this
     Indenture not to constitute a valid first priority security interest (other
     than with respect to a tax, mechanics, or similar lien) in the Collateral;
     or

          (e)  voluntarily dissolve or liquidate in whole or in part.

          Section 3.9.   Statements as to Compliance. The Issuer will deliver to
                         ---------------------------
     the Indenture Trustee, within 120 days after the end of each fiscal year of
     the Issuer at the end of which any Notes are outstanding (commencing within
     120 days after the end of the fiscal year 2000), an Officer's Certificate
     stating, as to the Authorized Officer signing such Officer's Certificate,
     that

                  (i)    a review of the activities of the Issuer during the 12-
          month period ending at the end of such fiscal year and of performance
          under this Indenture has been made under such Authorized Officer's
          supervision, and

                  (ii)   to the best of such Authorized Officer's knowledge,
          based on such review, the Issuer has complied with all conditions and
          covenants under this Indenture throughout such year, or, if there has
          been a default in the

                                       21
<PAGE>

          compliance of any such condition or covenant, specifying each such
          default known to such Authorized Officer and the nature and status
          thereof.

          Section 3.10.  Issuer May Consolidate, Etc., Only on Certain Terms.
                         ---------------------------------------------------

          (a)  The Issuer shall not consolidate or merge with or into any other
     Person, unless:

                         (1)  the Person (if other than the Issuer) formed by or
               surviving such consolidation or merger (the "Surviving Person")
                                                            ----------------
               (i) is organized and existing under the laws of the United States
               of America or any state or the District of Columbia, (ii) is not
               subject to regulation as an "investment company" under the
               Investment Company Act and (iii) expressly assumes, by an
               indenture supplemental hereto, executed and delivered to the
               Indenture Trustee, in a form satisfactory to the Indenture
               Trustee, the obligation to make due and punctual payment of the
               principal of and interest on all Notes and the performance of
               every covenant of this Indenture on the part of the Issuer to be
               performed or observed;

                         (2)  immediately after giving effect to such
               transaction, no Event of Default or Pay Out Event shall have
               occurred and be continuing;

                         (3)  the Issuer shall have delivered to the Indenture
               Trustee an Officer's Certificate and an Opinion of Counsel each
               stating that (i) such consolidation or merger and such
               supplemental indenture comply with this Section 3.10, (ii) all
                                                       ------------
               conditions precedent in this Section 3.10 provided for relating
                                            ------------
               to such transaction have been complied with (including any filing
               required by the Exchange Act), and (iii) such supplemental
               indenture is duly authorized, executed and delivered and is
               valid, binding and enforceable against the Surviving Person;

                         (4)  the Rating Agency Condition shall have been
               satisfied with respect to such transaction;

                         (5)  the Issuer shall have received a Tax Opinion with
               respect to such consolidation or merger; and

                         (6)  any action that is necessary to maintain the lien
               and security interest created by this Indenture shall have been
               taken.

          For the avoidance of doubt, this Section 3.10 shall not apply to the
                                           ------------
     transfer of the Receivables and other assets to the Issuer on the SMT
     Termination Date.

                                       22
<PAGE>

          (b)  The Issuer shall not convey or transfer any of its properties or
     assets, including those included in the Collateral, substantially as an
     entirety to any Person, unless:

                    (1)  the Person that acquires by conveyance or transfer the
               properties and assets of the Issuer the conveyance or transfer of
               which is hereby restricted (the "Acquiring Person") (A) is a
                                                ----------------
               United States citizen or a Person organized and existing under
               the laws of the United States of America or any state, or the
               District of Columbia, (B) expressly assumes, by an indenture
               supplemental hereto, executed and delivered to the Indenture
               Trustee, in form satisfactory to the Indenture Trustee, the
               obligation to make due and punctual payments of the principal of
               and interest on all Notes and the performance of every covenant
               of this Indenture on the part of the Issuer to be performed or
               observed, (C) expressly agree by means of such supplemental
               indenture that all right, title and interest so conveyed or
               transferred shall be subject and subordinate to the rights of
               Holders of the Notes, (D) unless otherwise provided in such
               supplemental indenture, expressly agree to indemnify, defend and
               hold harmless the Issuer against and from any loss, liability or
               expense arising under or related to this Indenture and the Notes
               and (E) expressly agree by means of such supplemental indenture
               that such Person (or if a group of Persons, then one specified
               Person) shall make all filings with the Commission (and any other
               appropriate Person) required by the Exchange Act in connection
               with the Notes;

                    (2)  immediately after giving effect to such transaction, no
               Event of Default or Pay Out Event shall have occurred and be
               continuing;

                    (3)  the Rating Agency Condition shall have been satisfied
               with respect to such transaction;

                    (4)  the Issuer shall have received a Tax Opinion with
               respect to such transaction;

                    (5)  any action that is necessary to maintain the lien and
               security interest created by this Indenture shall have been
               taken; and

                    (6)  the Issuer shall have delivered to the Indenture
               Trustee an Officer's Certificate and an Opinion of Counsel each
               stating that (i) such conveyance or transfer and such
               supplemental indenture comply with this Section 3.10, (ii) all
                                                       ------------
               conditions precedent herein provided for relating to such
               transaction have been complied with (including any

                                       23
<PAGE>

               filing required by the Exchange Act), and (iii) such supplemental
               indenture is duly authorized, executed and delivered and is
               valid, binding and enforceable against the Acquiring Person.

          Section 3.11.  Successor Substituted. Upon any consolidation or
                         ---------------------
     merger, or any conveyance or transfer of the properties and assets of the
     Issuer substantially as an entirety in accordance with Section 3.10, the
                                                            ------------
     Surviving Person or the Acquiring Person, as the case may be, shall succeed
     to, and be substituted for, and may exercise every right and power of, the
     Issuer under this Indenture with the same effect as if such Person had been
     named as the Issuer herein. In the event of any such conveyance or
     transfer, the Person named as the Issuer in the first paragraph of this
     Indenture or any successor which shall theretofore have become such in the
     manner prescribed in this Section 3.11 shall be released from its
                               ------------
     obligations under this Indenture as issued immediately upon the
     effectiveness of such conveyance or transfer, provided that the Issuer
     shall not be released from any obligations or liabilities to the Indenture
     Trustee or the Noteholders arising prior to such effectiveness.

          Section 3.12.  No Other Business. The Issuer shall not engage in any
                         -----------------
     business other than (i) purchasing, owning and managing the Trust Assets
     and the proceeds thereof in the manner contemplated by this Indenture and
     the other Transaction Documents, (ii) issuing and making payments in
     respect of the Notes and (iii) all activities related thereto.

          Section 3.13.  [Reserved].

          Section 3.14.  Servicer's Obligations. The Issuer shall cause the
                         ----------------------
     Servicer to comply with all of its obligations under the Transaction
     Documents.

          Section 3.15.  Investments. Except as contemplated by this Indenture
                         -----------
     or the Transfer and Servicing Agreement, the Issuer shall not own,
     purchase, repurchase or acquire (or agree contingently to do so) any stock,
     obligations, assets or securities of, or any other interest in, or make any
     capital contribution to, any other Person.

          Section 3.16.  Capital Expenditures. The Issuer shall not make any
                         --------------------
     expenditure (by long-term or operating lease or otherwise) for capital
     assets (either realty or personalty).

          Section 3.17.  Removal of Administrator. So long as any Notes are
                         ------------------------
     outstanding, the Issuer shall not remove the Administrator without cause
     unless the Rating Agency Condition shall have been satisfied in connection
     with such removal.

                                       24
<PAGE>

          Section 3.18.  Restricted Payments. The Issuer shall not, directly or
                         -------------------
     indirectly, (i) pay any dividend or make any distribution (by reduction of
     capital or otherwise), whether in cash, property, securities or a
     combination thereof, to the Owner Trustee or any owner of a beneficial
     interest in the Issuer or otherwise with respect to any ownership or equity
     interest or security in or of the Issuer or to the Servicer, (ii) redeem,
     purchase, retire or otherwise acquire for value any such ownership or
     equity interest or security or (iii) set aside or otherwise segregate any
     amounts for any such purpose; provided, however, that the Issuer may make,
                                   --------  -------
     or cause to be made, (x) distributions as contemplated by, and to the
     extent funds are available for such purpose under, the Transaction
     Documents and (y) payments to the Indenture Trustee pursuant to Section
                                                                     -------
     6.7. The Issuer will not, directly or indirectly, make payments to or
     ---
     distributions from the Collection Account except in accordance with the
     Transaction Documents.

          Section 3.19.  Notice of Events of Default. The Issuer agrees to give
                         ---------------------------
     a Responsible Officer of the Indenture Trustee and the Rating Agencies
     prompt written notice of each Event of Default hereunder and, immediately
     after obtaining knowledge of any of the following occurrences, written
     notice of each default on the part of the Servicer or the Seller of its
     obligations under the Transfer and Servicing Agreement and each default on
     the part of a Seller of its obligations under the Receivables Purchase
     Agreement, as applicable.

          Section 3.20.  Further Instruments and Acts. Upon request of the
                         ----------------------------
     Indenture Trustee, the Issuer will execute and deliver such further
     instruments and do such further acts as may be reasonably necessary or
     proper to carry out more effectively the purpose of this Indenture.

                                  ARTICLE IV

                          SATISFACTION AND DISCHARGE

          Section 4.1.   Satisfaction and Discharge of this Indenture. This
                         --------------------------------------------
     Indenture shall cease to be of further effect with respect to the Notes
     except as to (a) rights of registration of transfer and exchange, (b)
     substitution of mutilated, destroyed, lost or stolen Notes, (c) the rights
     of Noteholders to receive payments of principal thereof and interest
     thereon, (d) Sections 3.3, 3.7, 3.8, 3.11, 3.12 and 12.16, (e) the rights
                  ------------  ---  ---  ----  ----     -----
     and immunities of the Indenture Trustee hereunder, including the rights of
     the Indenture Trustee under Section 6.7, and the obligations of the
                                 -----------
     Indenture Trustee under Section 4.2, and (f) the rights of Noteholders as
                             -----------
     beneficiaries hereof with respect to the property so deposited with the
     Indenture Trustee and payable to all or any of them, and the Indenture
     Trustee, on written demand of and at the expense of the Issuer, shall
     execute proper instruments acknowledging satisfaction and discharge of this
     Indenture with respect to the Notes when:

                  (i)    either

                                       25
<PAGE>

                         (A) all Notes theretofore authenticated and delivered
                    (other than (1) Notes which have been destroyed, lost or
                    stolen and which have been replaced, or paid as provided in
                    Section 2.6, and (2) Notes for whose full payment money has
                    theretofore been deposited in trust or segregated and held
                    in trust by the Issuer and thereafter repaid to the Issuer
                    or discharged from such trust, as provided in Section 3.3)
                    have been delivered to the Indenture Trustee for
                    cancellation; or

                         (B) all Notes not theretofore delivered to the
                    Indenture Trustee for cancellation:

                    (1)  have become due and payable;

                    (2)  will become due and payable at the Series Termination
               Date for such Class or Series of Notes; or

                    (3)  are to be called for redemption within one year under
          arrangements satisfactory to the Indenture Trustee for the giving of
          notice of redemption by the Indenture Trustee in the name, and at the
          expense, of the Issuer;

                    (4)  and the Issuer, in the case of (1), (2) or (3) above,
          has irrevocably deposited or caused to be irrevocably deposited with
          the Indenture Trustee cash or direct obligations of or obligations
          guaranteed by the United States of America (which will mature prior to
          the date such amounts are payable), in trust for such purpose, in an
          amount sufficient to pay and discharge the entire indebtedness on such
          Notes not theretofore delivered to the Indenture Trustee for
          cancellation when due at the Series Termination Date for such Class or
          Series of Notes or the Redemption Date (if Notes shall have been
          called for redemption pursuant to the related Indenture Supplement),
          as the case may be;

          (ii)    the Issuer has paid or caused to be paid all other sums
payable hereunder by the Issuer; and

          (iii)   the Issuer has delivered to the Indenture Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA or the Indenture
Trustee) an Independent Certificate from a firm of certified public accountants,
each meeting the applicable requirements of Section 12.1(a) and each stating
that all conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with.

                                       26
<PAGE>

     Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Issuer to the Indenture Trustee under Section 6.7 and of the
                                                         -----------
Indenture Trustee to the Noteholders under Section 4.2 shall survive.
                                           -----------

     Section 4.2. Application of Issuer Money. All monies deposited with the
                  ---------------------------
Indenture Trustee pursuant to Section 4.1 shall be held in trust and applied by
                              -----------
it, in accordance with the provisions of the Notes, this Indenture and the
applicable Indenture Supplement, to make payments, either directly or through
any Paying Agent, as the Indenture Trustee may determine, to the Noteholders and
for the payment in respect of which such monies have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest; but such monies need not be segregated from other funds except to the
extent required herein or in the Transfer and Servicing Agreement or required by
law.

                                   ARTICLE V

                     PAY OUT EVENTS, DEFAULTS AND REMEDIES

     Section 5.1. Pay Out Events. If any one of the following events (each, a
                  --------------
"Trust Pay Out Event") shall occur:
--------------------

     (a)  the occurrence of a Servicer Default which would have an Adverse
Effect;

     (b)  the occurrence of an Insolvency Event relating to the Seller or FCNB;

     (c)  a Transfer Restriction Event shall occur; or

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

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

     Upon the occurrence of a Pay Out Event, payment on the Notes of each Series
will be made in accordance with the terms of the related Indenture Supplement.

     Section 5.2. Events of Default. "Event of Default," wherever used herein,
means with respect to any Series any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):

                                       27
<PAGE>

     (a)  default in the payment of the principal of any Note of that Series, if
and to the extent not previously paid, when the same becomes due and payable on
its Series Termination Date; or

     (b)  default in the payment of any interest on any Note of that Series when
the same becomes due and payable, and such default shall continue for a period
of thirty-five (35) days; or

     (c)  the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer in an involuntary case
under any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, conservator,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
the Issuer or ordering the winding-up or liquidation of the Issuer's affairs,
and such decree or order shall remain unstayed and in effect for a period of
sixty (60) consecutive days; or

     (d) the commencement by the Issuer of a voluntary case under any applicable
federal or state bankruptcy, insolvency or other similar law now or hereafter in
effect, or the consent by the Issuer to the entry of an order for relief in an
involuntary case under any such law, or the consent by the Issuer to the
appointment of or the taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator, conservator or similar official of the Issuer,
or the making by the Issuer of any general assignment for the benefit of
creditors, or the failure by the Issuer generally to pay, or the admission in
writing by the Issuer of its inability to pay, its debts as such debts become
due, or the taking of action by the Issuer in furtherance of any of the
foregoing; or

     (e)  default in the observance or performance of any covenant or agreement
of the Issuer made in this Indenture made in respect of the Notes of such Series
(other than a covenant or agreement, a default in the observance or performance
of which is elsewhere in this Section 5.2 specifically dealt with) (all of such
covenants and agreements in the Indenture which are not expressly stated to be
for the benefit of a particular Series being deemed to be in respect of the
Notes of all Series for this purpose) and such default shall continue or not be
cured for a period of sixty (60) days after there shall have been given, by
registered or certified mail, return receipt requested to the Issuer by the
Indenture Trustee or to the Issuer and the Indenture Trustee by the Holders of
Notes representing at least 25% of the Outstanding Amount of all Series, a
written notice specifying such default and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder and, as a result of
such default, the interests of the Holders of the Notes are materially and
adversely affected and continue to be materially and adversely affected during
the 60-day period; or

     (f)  any additional events specified in the Indenture Supplement related to
such Series.

                                       28
<PAGE>

     The Issuer shall deliver to a Responsible Officer of the Indenture Trustee,
within five (5) days after the occurrence thereof, written notice in the form of
an Officer's Certificate of any event which with the giving of notice and the
lapse of time would become an Event of Default, its status and what action the
Issuer is taking or proposes to take with respect thereto.

     Section 5.3. Acceleration of Maturity; Rescission and Annulment. If an
                  --------------------------------------------------
Event of Default described in paragraph (a), (b) or (e) of Section 5.2 should
                              ------------   ---    ---    -----------
occur and be continuing with respect to a Series, then and in every such case
the Indenture Trustee or the Holders of Notes representing more than 50% of the
Outstanding Amount of such Series may declare all the Notes of such Series to be
immediately due and payable, by a notice in writing to the Issuer (and to a
Responsible Officer of the Indenture Trustee if declared by Noteholders), and
upon any such declaration the unpaid principal amount of such Notes, together
with accrued and unpaid interest thereon through the date of acceleration, shall
become immediately due and payable.

     If an Event of Default described in paragraph (c) or (d) of Section 5.2
                                         -------------    ---    -----------
should occur and be continuing, then the unpaid principal of the Notes, together
with accrued and unpaid interest thereon through the date of acceleration, shall
automatically become due and payable.

     At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, the
Holders of Notes representing more than 50% of the Outstanding Amount of such
Series, by written notice to the Issuer and a Responsible Officer of the
Indenture Trustee, may rescind and annul such declaration and its consequences;
provided, that:

     (a)  the Issuer has paid or deposited with the Indenture Trustee a sum
sufficient to pay:

          (i)  all payments of principal of and interest on all Notes and all
     other amounts that would then be due hereunder or upon such Notes if the
     Event of Default giving rise to such acceleration had not occurred; and

          (ii) all sums paid or advanced by the Indenture Trustee hereunder and
     the reasonable compensation, expenses, disbursements and advances of the
     Indenture Trustee and its agents and counsel; and

     (b)  all Events of Default, other than the nonpayment of the principal of
the Notes that has become due solely by such acceleration, have been cured or
waived as provided in Section 5.13.

                                       29
<PAGE>

     No such rescission shall affect any subsequent default or impair any right
consequent thereto.

     Section 5.4. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee.

     (a) The Issuer covenants that if (i) default is made in the payment of any
interest on any Note when the same becomes due and payable, and such default
continues for a period of thirty-five (35) days following the date on which such
interest became due and payable, or (ii) default is made in the payment of
principal of any Note, if and to the extent not previously paid, when the same
becomes due and payable on the Series Termination Date, the Issuer will, upon
demand of the Indenture Trustee, pay to it, for the benefit of the Holders of
the Notes of the affected Series, the whole amount then due and payable on such
Notes for principal and interest, with interest upon the overdue principal, and,
to the extent payment at such rate of interest shall be legally enforceable,
interest upon overdue installments of interest, as specified in the related
Indenture Supplement, and in addition thereto will pay such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee and its agents and counsel.

     (b) In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Indenture Trustee, in its own name and as trustee of an express
trust, may institute a Proceeding for the collection of the sums so due and
unpaid, and may prosecute such Proceeding to judgment or final decree, and may
enforce the same against the Issuer or other obligor upon such Notes and collect
in the manner provided by law out of the property of the Issuer or other obligor
upon such Notes, wherever situated, the moneys adjudged or decreed to be
payable.

      (c) If an Event of Default occurs and is continuing, the Indenture Trustee
may, as more particularly provided in Section 5.5, in its discretion, proceed to
protect and enforce its rights and the rights of the Noteholders of the affected
Series, by such appropriate Proceedings as the Indenture Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy or
legal or equitable right vested in the Indenture Trustee by this Indenture or by
law.

      (d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes of the affected Series, or any Person having or claiming
an ownership interest in the Collateral, Proceedings under Title 11 of the
United States Code or any other applicable federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or in case a
receiver, conservator, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator, custodian or other similar official shall have

                                       30
<PAGE>

been appointed for or taken possession of the Issuer or its property or such
other obligor or Person, or in case of any other comparable judicial Proceedings
relative to the Issuer or other obligor upon the Notes of such Series, or to the
creditors or property of the Issuer or such other obligor, the Indenture
Trustee, irrespective of whether the principal of any Notes shall then be due
and payable as therein expressed or by declaration or otherwise and irrespective
of whether the Indenture Trustee shall have made any demand pursuant to the
provisions of this Section 5.4, shall be entitled and empowered, by intervention
in such Proceedings or otherwise:

               (i)   to file and prove a claim or claims for the whole amount of
          principal and interest owing and unpaid in respect of the Notes of
          such Series and to file such other papers or documents as may be
          necessary or advisable in order to have the claims of the Indenture
          Trustee (including any claim for reasonable compensation to the
          Indenture Trustee and each predecessor Indenture Trustee, and their
          respective agents, attorneys and counsel, and for reimbursement of all
          expenses and liabilities incurred, and all advances made, by the
          Indenture Trustee and each predecessor Indenture Trustee, except as a
          result of negligence or willful misconduct) and of the Noteholders of
          such Series allowed in such Proceedings;

               (ii)  unless prohibited by applicable law and regulations, to
          vote on behalf of the Holders of Notes of such Series in any election
          of a trustee, a standby trustee or Person performing similar functions
          in any such Proceedings; (iii) to collect and receive any moneys or
          other property payable or deliverable on any such claims and to
          distribute all amounts received with respect to the claims of the
          Noteholders of such Series and of the Indenture Trustee on their
          behalf; and

                (iv) to file such proofs of claim and other papers or documents
          as may be necessary or advisable in order to have the claims of the
          Indenture Trustee or the Holders of Notes of such Series allowed in
          any judicial Proceedings relative to the Issuer, its creditors and its
          property;

and any trustee, receiver, conservator, liquidator, custodian, assignee,
sequestrator or other similar official in any such Proceeding is hereby
authorized by each of such Noteholders to make payments to the Indenture
Trustee, and, in the event that the Indenture Trustee shall consent to the
making of payments directly to such Noteholders, to pay to the Indenture Trustee
such amounts as shall be sufficient to cover reasonable compensation to the
Indenture Trustee, each predecessor Indenture Trustee and their respective
agents, attorneys and counsel, and all other expenses and liabilities incurred,
and all advances made, by the Indenture Trustee and each predecessor Indenture
Trustee except as a result of negligence or willful misconduct.

                                       31
<PAGE>

     (e)  Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.

     (f)  All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
benefit of the Holders of the Notes of the affected Series as provided herein.

     (g)  In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Holders of the Notes of the affected Series, and it
shall not be necessary to make any such Noteholder a party to any such
Proceedings.

     Section 5.5. Remedies; Priorities.
                  ---------------------

     (a)  If an Event of Default shall have occurred and be continuing with
respect to any Series, and the Notes of such Series have been accelerated
pursuant to Section 5.3, the Indenture Trustee may do one or more of the
following (subject to Sections 5.6 and 12.16):

          (i)    institute Proceedings in its own name and as trustee of an
     express trust for the collection of all amounts then payable on the Notes
     of the affected Series or under this Indenture with respect thereto,
     whether by declaration or otherwise, enforce any judgment obtained, and
     collect from the Issuer and any other obligor upon such Notes moneys
     adjudged due;

          (ii)   take any other appropriate action to protect and enforce the
     rights and remedies of the Indenture Trustee and the Holders of the Notes
     of the affected Series;

          (iii)  cause the Issuer to sell Principal Receivables and the related
     Finance Charge Receivables (or interests therein) in an amount equal to the
     Collateral Amount of the accelerated Series in accordance with Section
     5.16;

                                       32
<PAGE>

provided, however, that the Indenture Trustee may not exercise the remedy
-----------------
described in subparagraph (iii) above unless (A) (1) the Holders of Notes
representing 100% of the Outstanding Amount of the affected Series consent in
writing thereto, (2) the Indenture Trustee determines that any proceeds of such
exercise distributable to the Noteholders of the affected Series are sufficient
to discharge in full all amounts then due and unpaid upon the Notes for
principal and interest and is directed to exercise this remedy by at the
direction of Holders of Notes representing more than 50% of the Outstanding
Amount of such Series, or (3) the Indenture Trustee determines that the
Collateral may not continue to provide sufficient funds for the payment of
principal of and interest on the Notes as they would have become due if the
Notes had not been declared due and payable, and the Indenture Trustee obtains
the consent of the Holders of Notes representing at least 66-2/3% of the
Outstanding Amount of each Class of such Series and (B) the Indenture Trustee
has obtained an Opinion of Counsel to the effect that the exercise of such
remedy (1) will not cause the Issuer or any portion thereof to be deemed to be
an association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes and (2) complies with applicable federal and state
securities laws. In determining such sufficiency or insufficiency with respect
to clause (A)(2) and (3), the Indenture Trustee may, but need not, obtain and
conclusively rely upon an opinion of an Independent investment banking or
accounting firm of national reputation as to the feasibility of such proposed
action and as to the sufficiency of the Collateral for such purpose.

     The remedies provided in this Section 5.5(a) are the exclusive remedies
                                   --------------
provided to the Noteholders with respect to the Collateral and each of the
Noteholders (by their acceptance of their respective interests in the Notes) or
the Indenture Trustee hereby expressly waive any other remedy that might have
been available under the applicable UCC.

     (b)  The Indenture Trustee may, upon notification to the Issuer, fix a
record date and payment date for any payment to Noteholders of the affected
Series pursuant to this Section 5.5. At least fifteen (15) days before such
                        ------------
record date, the Indenture Trustee shall mail or send by facsimile to each such
Noteholder a notice that states the record date, the payment date and the amount
to be paid.

     Section 5.6. Optional Preservation of the Collateral. If the Notes of any
                  ---------------------------------------
Series have been declared to be due and payable under Section 5.3 following an
                                                      -----------
Event of Default and such declaration and its consequences have not been
rescinded and annulled, and the Indenture Trustee has not received directions
from the Noteholders pursuant to Section 5.12, the Indenture Trustee may, but
                                 ------------
need not, elect to maintain possession of the portion of the Collateral which
secures such Notes and apply proceeds of the Collateral to make payments on such
Notes to the extent such proceeds are available therefor. It is the desire of
the parties hereto and the Noteholders that there be at all times sufficient
funds for the payment of principal of and interest on the Notes, and the
Indenture Trustee shall take such desire into account when determining whether

                                       33
<PAGE>

or not to maintain possession of the Collateral. In determining whether to
maintain possession of the Collateral, the Indenture Trustee may, but need not,
obtain and conclusively rely upon an opinion of an Independent investment
banking or accounting firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Trust Assets for such purpose.

     Section 5.7. Limitation on Suits. No Noteholder shall have any right to
                  -------------------
institute any proceedings, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:

     (a)  the Holders of Notes representing not less than 25% of the Outstanding
Amount of each affected Series have made written request to the Indenture
Trustee to institute such proceeding in its own name as indenture trustee;

     (b)  such Noteholder or Noteholders has previously given written notice to
the Indenture Trustee of a continuing Event of Default;

     (c)  such Noteholder or Noteholders has offered to the Indenture Trustee
indemnity satisfactory to it against the costs, expenses and liabilities to be
incurred in compliance with such request;

     (d)  the Indenture Trustee for sixty (60) days after its receipt of such
request and offer of indemnity has failed to institute any such Proceeding; and

     (e)  no direction inconsistent with such written request has been given to
the Indenture Trustee during such 60-day period by the Holders of Notes
representing more than 50% of the Outstanding Amount of such Series;

it being understood and intended that no one or more Noteholders of the affected
Series shall have any right in any manner whatever by virtue of, or by availing
of, any provision of this Indenture to affect, disturb or prejudice the rights
of any other Noteholders of such Series or to obtain or to seek to obtain
priority or preference over any other Noteholders of such Series or to enforce
any right under this Indenture, except in the manner herein provided.

     In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two (2) or more groups of Noteholders
of such affected Series, each representing no more than 50% of the Outstanding
Amount of such Series, the Indenture Trustee in its sole discretion may
determine what action, if any, shall be taken, notwithstanding any other
provisions of this Indenture.

                                      34
<PAGE>

     Section 5.8. Unconditional Rights of Noteholders to Receive Principal and
                  ------------------------------------------------------------
Interest. Notwithstanding any other provision in this Indenture, each Noteholder
--------
shall have the right which is absolute and unconditional to receive payment of
the principal of and interest in respect of such Note as such principal and
interest becomes due and payable and to institute suit for the enforcement of
any such payment, and such right shall not be impaired without the consent of
such Noteholder.

     Section 5.9. Restoration of Rights and Remedies. If the Indenture Trustee
                  ----------------------------------
or any Noteholder has instituted any Proceeding to enforce any right or remedy
under this Indenture and such Proceeding has been discontinued or abandoned, or
has been determined adversely to the Indenture Trustee or to such Noteholder,
then and in every such case the Issuer, the Indenture Trustee and the Noteholder
shall, subject to any determination in such Proceeding, be restored severally
and respectively to their former positions hereunder, and thereafter all rights
and remedies of the Indenture Trustee and the Noteholders shall continue as
though no such Proceeding had been instituted.

     Section 5.10. Rights and Remedies Cumulative. No right, remedy, power or
                   ------------------------------
privilege herein conferred upon or reserved to the Indenture Trustee or to the
Noteholders is intended to be exclusive of any other right, remedy, power or
privilege, and every right, remedy, power or privilege shall, to the extent
permitted by law, be cumulative and in addition to every other right, remedy,
power or privilege given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or exercise of any right or remedy shall not
preclude any other further assertion or the exercise of any other appropriate
right or remedy.

     Section 5.11. Delay or Omission Not Waiver. No failure to exercise and no
                   ----------------------------
delay in exercising, on the part of the Indenture Trustee or of any Noteholder
or other Person, any right or remedy occurring hereunder upon any Event of
Default shall impair any such right or remedy or constitute a waiver thereof of
any such Event of Default or an acquiescence therein. Every right and remedy
given by this Article V or by law to the Indenture Trustee or to the Noteholders
              ---------
may be exercised from time to time, and as often as may be deemed expedient, by
the Indenture Trustee or by the Noteholders, as the case may be.

     Section 5.12. Rights of Noteholders to Direct Indenture Trustee. The
                   -------------------------------------------------
Holders of Notes representing more than 50% of the Outstanding Amount of any
affected Series shall have the right to direct in writing the time, method and
place of conducting any Proceeding for any remedy available to the Indenture
Trustee with respect to such Series or exercising any trust or power conferred
on the Indenture Trustee with respect to such Series; provided, however, that
                                                      --------  -------
subject to Section 6.1:
           -----------

     (a)  Indenture Trustee shall have the right to decline any such direction
if the Indenture Trustee, after being advised by counsel, determines that the
action so directed is in conflict with any rule of law or with this Indenture,
and

                                      35
<PAGE>

     (b)  the Indenture Trustee shall have the right to decline any such
direction if the Indenture Trustee in good faith shall, by a Responsible Officer
of the Indenture Trustee, determine that the Proceedings so directed would be
illegal or involve the Indenture Trustee in personal liability or be unjustly
prejudicial to the Noteholders not parties to such direction.

     Section 5.13. Waiver of Past Defaults. Prior to the declaration of the
                   ------ -- -------------
acceleration of the maturity of the Notes of the affected Series as provided in
Section 5.3, Holders of Notes representing more than 50% of the Outstanding
-----------
Amount of the Notes of such Series may, on behalf of all such Noteholders, waive
in writing any past default with respect to such Notes and its consequences,
except a default:

     (a)  in the payment of the principal or interest in respect of any Note of
such Series, or

     (b)  in respect of a covenant or provision hereof that under Section 10.2
                                                                  ------------
cannot be modified or amended without the consent of the Noteholder of each
Outstanding Note affected.

     Upon any such written waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.

     Section 5.14. Undertaking for Costs. All parties to this Indenture agree,
                   ---------------------
and each Noteholder by its acceptance thereof shall be deemed to have agreed,
that any court may in its discretion require, in any suit for the enforcement of
any right or remedy under this Indenture, or in any suit against the Indenture
Trustee for any action taken, suffered or omitted by it as Indenture Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant (other than the
Indenture Trustee) in such suit, having due regard to the merits and good faith
of the claims or defenses made by such party litigant; but the provisions of
this Section 5.14 shall not apply to any suit instituted by the Indenture
     ------------
Trustee, to any suit instituted by any Noteholder, or group of Noteholders (in
compliance with Section 5.8), holding Notes representing more than 10% of the
                -----------
Outstanding Amount of the affected Series, or to any suit instituted by any
Noteholder for the enforcement of the payment of the principal or interest in
respect of any Note on or after the Distribution Date on which any of such
amounts was due (or, in the case of redemption, on or after the applicable
Redemption Date).

                                      36
<PAGE>

     Section 5.15. Waiver of Stay or Extension Laws. The Issuer covenants (to
                   --------------------------------
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may adversely affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.

     Section 5.16. Sale of Receivables.
                   -------------------

     (a)  The method, manner, time, place and terms of any sale of Receivables
pursuant to Section 5.5(a)(iii) shall be commercially reasonable. The Indenture
            ------------------
Trustee may from time to time postpone any sale by public announcement made at
the time and place of such sale. The Indenture Trustee hereby expressly waives
its right to any amount fixed by law as compensation for any sale.

     (b)  The Indenture Trustee is hereby irrevocably appointed the agent and
attorney-in-fact of the Issuer in connection with any sale of Receivables
pursuant to Section 5.5(a)(iii). No purchaser or transferee at any such sale
            ------------------
shall be bound to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
monies.

     (c)  In its exercise of the foreclosure remedy pursuant to Section
                                                                -------
5.5(a)(iii), the Indenture Trustee shall solicit bids for the sale of Principal
-----------
Receivables and the related Finance Charge Receivables (or interests therein) in
any amount equal to the Collateral Amount of the affected Series of Notes at the
time of sale. The Seller or any of its affiliates shall be entitled to
participate in, and to receive from the Indenture Trustee a copy of each other
bid submitted in connection with, such bidding process; provided that (i) at
                                                        --------
least one participant other than the Seller and any of its affiliates must
submit at bona fide offer, and (ii) the Seller and any of its affiliates are
prohibited from bidding an amount which exceeds fair value for the transferred
assets. The Indenture Trustee shall sell such Receivables (or interests therein)
to the bidder with the highest cash purchase offer. The proceeds of any such
sale shall be applied as specified in the applicable Indenture Supplement.

     Section 5.17. Action on Notes. The Indenture Trustee's right to seek and
                   ---------------
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking or obtaining of or application for any other relief under or with
respect to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Indenture Trustee or the Noteholders shall be impaired by the
recovery of any judgment by the Indenture Trustee against the Issuer or by the
levy of any execution under such judgment upon any portion of the Collateral or
upon any of the assets of the Issuer. Any

                                      37
<PAGE>

money or property collected by the Indenture Trustee shall be applied as
specified in the applicable Indenture Supplement.

                                  ARTICLE VI

                             THE INDENTURE TRUSTEE

     Section 6.1. Duties of the Indenture Trustee.
                  -------------------------------

     (a)  If an Event of Default has occurred and is continuing and a Trustee
Officer shall have actual knowledge or written notice of such Event of Default,
the Indenture Trustee shall exercise the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.

     (b)  Except during the continuance of an Event of Default:

          (i)  the Indenture Trustee undertakes to perform such duties and only
     such duties as are specifically set forth in this Indenture, and no implied
     covenants or obligations shall be read into this Indenture against the
     Indenture Trustee; and

          (ii) in the absence of bad faith or negligence on its part, the
     Indenture Trustee may conclusively rely, as to the truth of the statements
     and the correctness of the opinions expressed therein, upon certificates or
     opinions furnished to the Indenture Trustee and conforming to the
     requirements of this Indenture; provided, however, the Indenture Trustee,
                                     --------  -------
     upon receipt of any resolutions, certificates, statements, opinions,
     reports, documents, orders or other instruments furnished to the Indenture
     Trustee which are specifically required to be furnished pursuant to any
     provision of this Indenture or any Indenture Supplement, shall examine them
     to determine whether they substantially conform to the requirements of this
     Indenture or any Indenture Supplement.

     (c)  In case a Pay Out Event has occurred and is continuing and a Trustee
Officer shall have actual knowledge or written notice of such Pay Out Event, the
Indenture Trustee shall exercise such of the rights and powers vested in it by
this Indenture, and use the same degree of care and skill in their exercise, as
a prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.

     (d)  No provision of this Indenture shall be construed to relieve the
Indenture Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:

                                      38

<PAGE>

          (i)    this Section (d) shall not be construed to limit the effect of
                      -----------
     Section (a) of this Section 6.1;
     -----------         -----------
          (ii)   the Indenture Trustee shall not be liable for any error of
     judgment made in good faith by a Trustee Officer, unless it shall be proved
     that the Indenture Trustee was negligent in ascertaining the pertinent
     facts; and

          (iii)  the Indenture Trustee shall not be liable with respect to any
     action taken, suffered or omitted to be taken by it in good faith in
     accordance with the Indenture and/or the direction of the Holders of Notes
     or for exercising any trust or power conferred upon the Indenture Trustee,
     under this Indenture. The Indenture Trustee shall not be liable for any
     action taken, suffered or omitted to be taken by it in good faith in
     accordance with the direction of the Servicer, the Seller or the Trust in
     compliance with the terms of this Indenture or any Indenture Supplement.

     (e)  No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur any liability, financial or
otherwise, in the performance of any of its duties hereunder or in the exercise
of any of its rights or powers if it shall have reasonable grounds for believing
that repayment of such funds or indemnity satisfactory to it against such risk
or liability is not reasonably assured to it.

     (f)  Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to Sections (a), (b), (c) and (d) of this Section
                                ------------  ---  ---     ---         -------
6.1.
---

     (g)  Except as expressly provided in this Indenture, the Indenture Trustee
shall have no power to vary the Collateral, including by (i) accepting any
substitute payment obligation for a Receivable initially transferred to the
Trust under the Transfer and Servicing Agreement, (ii) adding any other
investment, obligation or security to the Trust or (iii) withdrawing from the
Issuer any Receivable (except as otherwise provided in the Transfer and
Servicing Agreement).

     (h)  The Indenture Trustee shall have no responsibility or liability for
investment losses on Permitted Investments (other than Permitted Investments on
which the institution acting as Indenture Trustee is an obligor). The Indenture
Trustee shall have no obligation to invest and reinvest any cash held in the
absence of timely and specific written investment direction from the Issuer. In
no event shall the Indenture Trustee be liable for the selection of investments
or for investment losses incurred thereon. The Indenture Trustee shall have no
liability in respect of losses incurred as a result of the liquidation of any
investment prior to its stated maturity or the failure of the Issuer to provide
timely written investment direction.

                                      39
<PAGE>

     (i)  The Indenture Trustee shall notify each Rating Agency (i) of any
change in any rating of the Notes by any other Rating Agency of which a
Responsible Officer of the Indenture Trustee has actual knowledge, and (ii)
immediately of the occurrence of any Event of Default or Pay Out Event of which
a Responsible Officer of the Indenture Trustee has actual knowledge of or has
actual notice from the Servicer of potential Pay Out Events or Events of
Default.

     (j)  For all purposes under this Indenture, the Indenture Trustee shall not
be deemed to have notice or knowledge of any Event of Default, Pay Out Event or
Servicer Default unless a Trustee Officer assigned to and working in the
Corporate Trust Office of the Indenture Trustee has actual knowledge thereof or
has received written notice thereof. For purposes of determining the Indenture
Trustee's responsibility and liability hereunder, any reference to an Event of
Default, Pay Out Event or Servicer Default shall be construed to refer only to
such event of which the Indenture Trustee is deemed to have notice as described
in this Section 6.1(j).
        --------------

     Section 6.2. Notice of Pay Out Event or Event of Default. Upon the
                  -------------------------------------------
occurrence of any Pay Out Event or Event of Default of which a Trustee Officer
has actual knowledge or has received written notice thereof, the Indenture
Trustee shall transmit by mail to all Noteholders as their names and addresses
appear on the Note Register and the Rating Agencies, notice of such Pay Out
Event or Event of Default hereunder known to the Indenture Trustee within thirty
(30) days after it occurs or within ten (10) Business Days after it receives
such notice or obtains actual notice, if later.

     Section 6.3. Rights of Indenture Trustee. Except as otherwise provided in
                  ---------------------------
Section 6.1:
-----------

     (a)  the Indenture Trustee may conclusively rely and shall fully be
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, note or other paper or document reasonably believed by it to be
genuine and to have been signed or presented by the proper party or parties;

     (b)  whenever in the administration of this Indenture the Indenture Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Indenture Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, conclusively rely upon an Officer's Certificate of the Issuer. The
Issuer shall provide a copy of such Officer's Certificate to the Noteholders at
or prior to the time the Indenture Trustee receives such Officer's Certificate;

     (c)  as a condition to the taking, suffering or omitting of any action by
it hereunder, the Indenture Trustee may consult with counsel and the advice of
such

                                      40
<PAGE>

counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in-good faith and in reliance thereon;

     (d)  the Indenture Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture or to honor the request or
direction of any of the Noteholders pursuant to this Indenture, unless such
Noteholders shall have offered to the Indenture Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction;

     (e)  the Indenture Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
note or other paper or document, but the Indenture Trustee at the written
direction of one or more of the Noteholders and at the expense of the Issuer, in
its discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Indenture Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Issuer and the Servicer, personally or by
agent or attorney;

     (f)  the Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents, attorneys, custodians or nominees and the Indenture Trustee shall not be
responsible for any (i) misconduct or negligence on the part of any agent,
attorney, custodians or nominees appointed with due care by it hereunder or (ii)
the supervision of such agents, attorneys, custodians or nominees after such
appointment with due care;

     (g)  the Indenture Trustee shall not be liable for any actions taken,
suffered or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights conferred upon the Indenture Trustee by this
Indenture; and

     (h)  in the event that the Indenture Trustee is also acting as Paying Agent
and Transfer Agent and Registrar, the rights and protections afforded to the
Indenture Trustee pursuant to this Article VI shall also be afforded to such
                                   ----------
Paying Agent and Transfer Agent and Registrar.

     Section 6.4. Not Responsible for Recitals or Issuance of Notes. The
                  -------------------------------------------------
recitals contained herein and in the Notes, except the certificate of
authentication of the Indenture Trustee, shall be taken as the statements of the
Issuer, and the Indenture Trustee assumes no responsibility for their
correctness. The Indenture Trustee makes no representation as to the validity or
sufficiency of the Agreement, the Notes, or any related document. The Indenture
Trustee shall not be accountable for the use or application by the Issuer of the
proceeds from the Notes.

                                      41
<PAGE>

     Section 6.5. May Hold Notes. The Indenture Trustee shall not in its
                  --------------
individual capacity, but may in a fiduciary capacity, become the owner or
pledgee of Notes and may otherwise deal with the Issuer with the same rights it
would have if it were not Indenture Trustee, Paying Agent, Transfer Agent and
Registrar or such other agent. Any Paying Agent, Transfer Agent and Registrar or
any other agent of the Issuer, in its individual or any other capacity, may
become the owner or pledgee of Notes and may otherwise deal with the Issuer with
the same rights it would have if it were not Indenture Trustee, Paying Agent,
Transfer Agent and Registrar or such other agent.

     Section 6.6. Money Held in Trust. Money held by the Indenture Trustee in
                  -------------------
trust hereunder need not be segregated from other funds held by the Indenture
Trustee in trust hereunder except to the extent required herein or required by
law. The Indenture Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed upon in writing by the
Indenture Trustee and the Issuer.

     Section 6.7. Compensation, Reimbursement and Indemnification. The Servicer
                  -----------------------------------------------
shall pay to the Indenture Trustee from time to time reasonable compensation for
all services rendered by the Indenture Trustee and the Authenticating Agent
under this Agreement (which compensation shall not be limited by any law on
compensation of a trustee of an express trust). The Servicer shall reimburse the
Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by
it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Issuer shall direct the Servicer to indemnify,
defend and hold harmless, and the Servicer shall indemnify the Indenture Trustee
and its officers, directors, employees and agents against any and all loss,
liability, expense, damage or claim (including the fees of either in-house
counsel or outside counsel) incurred by it in connection with the administration
of this trust and the performance of its duties hereunder and under any other
Transaction Document. The Indenture Trustee shall notify the Issuer and the
Servicer promptly of any claim for which it may seek indemnity. Failure by the
Indenture Trustee to so notify the Issuer and the Servicer shall not relieve the
Issuer or the Servicer of its obligations hereunder unless such loss, liability
or expense could have been avoided with such prompt notification and then only
to the extent of such loss, expense or liability which could have been so
avoided. The Servicer shall defend any claim against the Indenture Trustee, the
Indenture Trustee may have separate counsel and, if it does, the Servicer shall
pay the fees and expenses of such counsel. Neither the Issuer nor the Servicer
need reimburse any expense or indemnify against any loss, liability or expense
incurred by the Indenture Trustee through the Indenture Trustee's own willful
misconduct or negligence.

     The Servicer's payment obligations to the Indenture Trustee pursuant to
this Section 6.7 shall survive the discharge of this Indenture or earlier
     -----------
resignation or

                                      42
<PAGE>

removal of the Indenture Trustee. When the Indenture Trustee incurs expenses
after the occurrence of a Default specified in Section 5.2(c) or (d) with
                                               --------------    ---
respect to the Issuer, the expenses are intended to constitute expenses of
administration under Title 11 of the United States Code or any other applicable
federal or state bankruptcy, insolvency or similar law.

     Notwithstanding anything herein to the contrary, the Indenture Trustee's
right to enforce any of the Servicer's payment obligations pursuant to this
Section 6.7 shall be subject to the provisions of Section 12.16.
-----------                                       -------------

     Section 6.8. Replacement of Indenture Trustee. No resignation or removal of
                  --------------------------------
the Indenture Trustee and no appointment of a successor Indenture Trustee shall
become effective until the acceptance of appointment by the successor Indenture
Trustee pursuant to this Section 6.8. The Indenture Trustee may resign at any
                         -----------
time by giving thirty (30) days written notice to the Issuer. The Holders of
Notes representing more than 50% of the Outstanding Amount of all Series may
remove the Indenture Trustee by so notifying the Indenture Trustee in writing
and may appoint a successor Indenture Trustee. The [Administrator] shall remove
the Indenture Trustee upon written notice if:

          (i)    the Indenture Trustee fails to comply with Section 6.11;
                                                            ------------

          (ii)   the Indenture Trustee is adjudged a bankrupt or insolvent;

          (iii)  a receiver of the Indenture Trustee or of its property shall be
     appointed, or any public officer takes charge of the Indenture Trustee or
     its property or its affairs for the purpose of rehabilitation, conservation
     or liquidation; or

          (iv)   the Indenture Trustee otherwise becomes legally unable to act.
If the Indenture Trustee resigns or is removed or if a vacancy exists in the
office of Indenture Trustee for any reason (the Indenture Trustee in such event
being referred to herein as the retiring Indenture Trustee), the Administrator
shall promptly appoint a successor Indenture Trustee.

     A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee, the Servicer and to the Issuer.
Thereupon the resignation or removal of the retiring Indenture Trustee shall
become effective, and the successor Indenture Trustee shall have all the rights,
powers and duties of the Indenture Trustee under this Indenture. The successor
Indenture Trustee shall mail a notice of its succession to Noteholders. The
retiring Indenture Trustee shall promptly transfer all property held by it as
Indenture Trustee to the successor Indenture Trustee, subject to the payment of
any an all amounts then due and owing to the Indenture Trustee.

                                      43
<PAGE>

     If a successor Indenture Trustee does not take office within sixty (60)
days after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of Notes representing more than 50%
of the Outstanding Amount of all Series may petition any court of competent
jurisdiction for the appointment of a successor Indenture Trustee.

     If the Indenture Trustee fails to comply with Section 6.11, any Noteholder
                                                   ------------
may petition any court of competent jurisdiction for the removal of the
Indenture Trustee and the appointment of a successor Indenture Trustee.

     Notwithstanding the replacement of the Indenture Trustee pursuant to this
Section 6.8, the Issuer's obligations under Section 6.7 shall continue for the
-----------                                 -----------
benefit of the retiring Indenture Trustee.

     Section 6.9. Successor Indenture Trustee by Merger. If the Indenture
                  -------------------------------------
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Rating
               ------------
Agencies prior written notice of any such transaction.

     In case at the time such successor or successors by merger, conversion,
consolidation or transfer to the Indenture Trustee shall succeed to the trusts
created by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the certificate
of authentication of any predecessor Indenture Trustee and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes in the name of the successor to the Indenture Trustee; and in all such
cases such certificates shall have the full force which it is anywhere in the
Notes or in this Indenture provided that the certificate of the Indenture
Trustee shall have.

     Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
                   ---------------------------------------------------------
Trustee.
-------

     (a)  Notwithstanding any other provisions of this Indenture, at any time,
for the purpose of meeting any legal requirement of any jurisdiction in which
any part of the Collateral may at the time be located, the Indenture 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 Collateral, and to vest in such
Person or Persons, in such capacity and for the benefit of the Noteholders, such
title to the Collateral, or any part hereof, and, subject to the other
provisions of this Section 6.10, such powers, duties, obligations, rights and
                   ------------
trusts as the

                                      44
<PAGE>

Indenture 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 6.11 and no notice to Noteholders of the
                        ------------
appointment of any co-trustee or separate trustee shall be required under
Section 6.8.
-----------

     (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 Indenture Trustee shall be conferred or imposed upon and exercised or
performed by the Indenture 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 Indenture Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed the Indenture 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
Collateral 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 Indenture Trustee;

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

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

          (iv)   The Indenture Trustee shall not be liable for any act or
     failure to act on the part of any separate trustee or co-trustee.

     (c)  Any notice, request or other writing given to the Indenture 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 Indenture and
the conditions of this Article VI. 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
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.

     (d)  Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, 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 of
this Indenture

                                      45
<PAGE>

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
Indenture Trustee, to the extent permitted by law, without the appointment of a
new or successor trustee.

     Section 6.11. Eligibility; Disqualification. The Indenture Trustee shall at
                   -----------------------------
all times satisfy the requirements of TIA (S)310(a). The Indenture Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition and either its long-term
unsecured debt shall be rated at least Baa3 by Moody's and BBB- by Standard &
Poor's or its short-term debt shall be rated at least P-2 by Moody's or A-2 by
Standard & Poor's. The Indenture Trustee shall comply with TIA (S)310(b),
including the optional provision permitted by the second sentence of TIA
(S)310(b)(9); provided, however, that there shall be excluded from the operation
of TIA (S)310(b)(1) any indenture or indentures under which other securities of
the Issuer are outstanding if the requirements for such exclusion set forth in
TIA (S)310(b)(1) are met.

     Section 6.12. Preferential Collection of Claims Against. The Indenture
                   -----------------------------------------
Trustee shall comply with TIA (S)311(a), excluding any creditor relationship
listed in TIA (S)311(b). An Indenture Trustee who has resigned or been removed
shall be subject to TIA (S)311(a) to the extent indicated.

     Section 6.13. Representations and Covenants of the Indenture Trustee. The
                   ------------------------------------------------------
Indenture Trustee represents, warrants and covenants that:

          (i)      the Indenture Trustee is a banking corporation duly organized
     and validly existing under the laws of the State of New York;

          (ii)     The Indenture Trustee has full power and authority to deliver
     and perform this Indenture and has taken all necessary action to authorize
     the execution, delivery and performance by it of this Indenture and other
     Transaction Documents to which it is a party; and

          (iii)    Each of this Indenture and the other Transaction Documents to
     which it is a party has been duly executed and delivered by the Indenture
     Trustee and constitutes its legal, valid and binding obligation in
     accordance with its terms.

     Section 6.14. Custody of the Collateral. The Indenture Trustee shall hold
                   -------------------------
such of the Trust Estate as consists of instruments, deposit accounts,
negotiable documents, money, goods, letters of credit, and advices of credit in
the State of Illinois. The Indenture Trustee shall hold such of the Trust Estate
as constitutes investment property through a securities intermediary, which
securities intermediary shall agree with the Indenture Trustee that (a) such
investment property shall at all times be credited to a

                                      46
<PAGE>

securities account of the Indenture Trustee, (b) such securities intermediary
shall treat the Indenture Trustee as 48 entitled to exercise the rights that
comprise each financial asset credited to such securities account, (c) all
property credited to such securities account shall be treated as a financial
asset, (d) such securities intermediary shall comply with entitlement orders
originated by the Indenture Trustee without the further consent of any other
person or entity, (e) such securities intermediary will not agree with any
person or entity other than the Indenture Trustee to comply with entitlement
orders originated by such other person or entity, (f) such securities accounts
and the property credited thereto shall not be subject to any lien, security
interest, or right of set-off in favor of such securities intermediary or anyone
claiming through it (other than the Indenture Trustee), and (g) such agreement
shall be governed by the laws of the State of Illinois. Terms used in the
preceding sentence that are defined in the Illinois UCC and not otherwise
defined herein shall have the meaning set forth in the Illinois UCC. Except as
permitted by this Section 6.14, the Indenture Trustee shall not hold any part of
                  ------------
the Trust Estate through an agent or a nominee.

                                  ARTICLE VII

                       NOTEHOLDERS' LIST AND REPORTS BY
                         INDENTURE TRUSTEE AND ISSUER

     Section 7.1. Issuer to Furnish Indenture Trustee Names and Addresses of
                  ----------------------------------------------------------
Noteholders. The Issuer will furnish or cause to be furnished to the Indenture
-----------
Trustee (a) upon each transfer of a Note, a list, in such form as the Indenture
Trustee may reasonably require, of the names, addresses and taxpayer
identification numbers of the Noteholders as they appear on the Note Register as
of such Record Date, and (b) at such other times, as the Indenture Trustee may
request in writing, within ten (10) days after receipt by the Issuer of any such
request, a list of similar form and content as of a date not more than ten (10)
days prior to the time such list is furnished; provided, however, that for so
                                               --------  -------
long as the Indenture Trustee is the Transfer Agent and Registrar, the Indenture
Trustee shall furnish to the Issuer such list in the same manner prescribed in
clause (b) above.

     Section 7.2. Preservation of Information; Communications to Noteholders.
                  ----------------------------------------------------------

     (a) The Indenture Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Noteholders contained in
the most recent list furnished to the Indenture Trustee as provided in Section
                                                                       -------
7.1 and the names, addresses and taxpayer identification numbers of the
---
Noteholders received by the Indenture Trustee in its capacity as Transfer Agent
and Registrar. The Indenture Trustee may destroy any list furnished to it as
provided in Section 7.1 upon receipt of a new list so furnished.
            -----------

                                      47
<PAGE>

     (b) Noteholders may communicate, pursuant to TIA (S)312(b), with other
Noteholders with respect to their rights under this Indenture or under the
Notes.

     (c) The Issuer, the Indenture Trustee and the Transfer Agent and Registrar
shall have the protection of TIA (S)312(c).

     Section 7.3. Reports by Issuer.
                  -----------------

     (a)  The Issuer shall:

          (i) file with the Indenture Trustee, within fifteen (15) days after
     the Issuer is required to file the same with the Commission, copies of the
     annual reports and of the information, documents and other reports (or
     copies of such portions of any of the foregoing as the Commission may from
     time to time by rules and regulations prescribe) which the Issuer may be
     required to file with the Commission pursuant to Section 13 or 15(d) of the
                                                      ----------    -----
     Exchange Act;

          (ii) file with the Indenture Trustee and the Commission in accordance
     with rules and regulations prescribed from time to time by the Commission
     such additional information, documents and reports with respect to
     compliance by the Issuer with the conditions and covenants of this
     Indenture as may be required from time to time by such rules and
     regulations; and

          (iii)  supply to the Indenture Trustee (and the Indenture Trustee
     shall transmit by mail to all Noteholders described in TIA (S)313(c)) such
     summaries of any information, documents and reports required to be filed by
     the Issuer pursuant to clauses (i) and (ii) of this Section 7.3(a) as may
                                                         --------------
     be required by rules and regulations prescribed from time to time by the
     Commission.

     (b) Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.

     (c) Delivery of such reports, information and documents to the Indenture
Trustee is for informational purposes only and the Indenture Trustee's receipt
of such shall not constitute constructive notice of any information contained
therein or determinable from information contained therein, including the
Issuer's compliance with any of the covenants hereunder.

     Section 7.4. Reports by Indenture Trustee. If required by TIA (S)313(a),
                  ----------------------------
within sixty (60) days after each March 31 beginning with March 31, 2001, the
Indenture Trustee shall mail to each Noteholder as required by TIA (S)313(c) a
brief report dated as of such date that complies with TIA (S)313(a). The
Indenture Trustee also shall comply with TIA (S)313(b).

                                      48
<PAGE>

     A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.

                                 ARTICLE VIII

                   ALLOCATION AND APPLICATION OF COLLECTIONS

     Section 8.1. Collection of Money. Except as otherwise expressly provided
                  -------------------
herein and in the related Indenture Supplement, the Indenture Trustee may demand
payment or delivery of, and shall receive and collect, directly and without
intervention or assistance of any fiscal agent or other intermediary, all money
and other property payable to or receivable by the Indenture Trustee pursuant to
this Indenture. The Indenture Trustee shall hold all such money and property
received by it in trust for the Noteholders and shall apply it as provided in
this Indenture. Except as otherwise expressly provided in this Indenture, if any
default occurs in the making of any payment or performance under the Transfer
and Servicing Agreement or any other Transaction Document, the Indenture Trustee
may, and upon the written request of the Holders of Notes representing a
majority of the Outstanding Amount of the affected Series shall, subject to
Sections 6.1(e) and 6.3(d) take such action as may be appropriate to enforce
---------------     ------
such payment or performance, including the institution and prosecution of
appropriate Proceedings. Any such action shall be without prejudice to any right
to claim a Pay Out Event or a Default or Event of Default under this Indenture
and to proceed thereafter as provided in Article V.
                                         ---------

     Section 8.2. Rights of Noteholders. The Collateral shall secure the rights
                  ---------------------
of the Holders of the Notes of each Series to receive the portion of Collections
allocable to the Noteholders of such Series pursuant to this Indenture and the
related Indenture Supplement, funds and other property credited to the
Collection Account and the Excess Funding Account (or any subaccount thereof)
allocable to the Noteholders of such Series pursuant to this Indenture and such
Indenture Supplement, funds and other property credited to any related Series
Account and funds available pursuant to any related Series Enhancement, it being
understood that, except as specifically set forth in the Indenture Supplement
with respect thereto, the Notes of any Series or Class shall not be secured by
any interest in any Series Account or Series Enhancement pledged for the benefit
of any other Series or Class.

     Section 8.3. Establishment of Collection Account and Excess Funding
                  ------------------------------------------------------
Account.
-------

     (a) The Servicer, for the benefit of the Noteholders, shall establish and
maintain with the Indenture Trustee or its nominee in the name of the Indenture
Trustee, on behalf of the Issuer, a Qualified Account (including any subaccount
thereof) bearing

                                      49
<PAGE>

a designation clearly indicating that the funds and other property credited
thereto are held for the benefit of the Noteholders (the "Collection Account").
The Indenture Trustee shall possess all right, title and interest in all monies,
instruments, investment property, documents, certificates of deposit and other
property credited from time to time to the Collection Account and in all
proceeds, earnings, income, revenue, dividends and distributions thereof for the
benefit of the Noteholders.

     The Collection Account shall be under the sole dominion and control of the
Indenture Trustee for the benefit of the Noteholders. Except as expressly
provided in this Indenture and the Transfer and Servicing Agreement, the
Servicer agrees that it shall have no right of setoff or banker's lien against,
and no right to otherwise deduct from, any funds held in the Collection Account
for any amount owed to it by the Indenture Trustee, the Issuer, any Noteholder
or any Series Enhancer. If, at any time, the Collection Account ceases to be a
Qualified Account and the same is actually known to a Responsible Officer of the
Indenture Trustee, the Indenture Trustee (or the Servicer on its behalf) shall
within ten (10) Business Days (or such longer period, not to exceed thirty (30)
calendar days, as to which each Rating Agency may consent) establish a new
Collection Account meeting the conditions specified above, transfer any monies,
documents, instruments, investment property, certificates of deposit and other
property to such new Collection Account and from the date such new Collection
Account is established, it shall be the "Collection Account." Pursuant to the
                                         ------------------
authority granted to the Servicer in Section 3.1(b) of the Transfer and
                                     --------------
Servicing Agreement, the Servicer shall have the power, revocable by the
Indenture Trustee, to make withdrawals and payments from the Collection Account
and to instruct the Indenture Trustee in writing to make withdrawals and
payments from the Collection Account for the purposes of carrying out the
Servicer's or the Indenture Trustee's duties hereunder and under the Transfer
and Servicing Agreement, as applicable. The Servicer shall reduce deposits into
the Collection Account payable by the Seller on any Deposit Date to the extent
the Seller is entitled to receive funds from the Collection Account on such
Deposit Date.

     Funds on deposit in the Collection Account (other than investment earnings
and amounts deposited pursuant to Section 2.6, 6.1, or 7.1 of the Transfer and
                                  -----------  ---     ---
Servicing Agreement or Section 11.2 of this Indenture) shall at the written
                       ------------
direction of the Servicer be invested by the Indenture Trustee or its nominee in
Permitted Investments selected by the Servicer. All such Permitted Investments
shall be held by the Indenture Trustee for the benefit of the Noteholders
pursuant to Section 6.14 and 6.1(h). Investments of funds representing
            ------------     ------
Collections collected during any Monthly Period shall be invested in Permitted
Investments that will mature so that such funds will be available no later than
the close of business on each monthly Transfer Date following such Monthly
Period in amounts sufficient to the extent of such funds to make the required
distributions on the following Distribution Date. No such Permitted Investment
shall be disposed of prior to its maturity; provided, however, that the
                                            --------  -------
Indenture Trustee may sell, liquidate or dispose of any such Permitted
Investment before its maturity, at

                                      50
<PAGE>

the written direction of the Servicer, if such sale, liquidation or disposal
would not result in a loss of all or part of the principal portion of such
Permitted Investment or if, prior to the maturity of such Permitted Investment,
a default occurs in the payment of principal, interest or any other amount with
respect to such Permitted Investment. Unless directed by the Servicer in
writing, funds deposited in the Collection Account on a Transfer Date with
respect to the immediately succeeding Distribution Date are not required to be
invested overnight. On each Distribution Date, all interest and other investment
earnings (net of losses and investment expenses) on funds on deposit in the
Collection Account shall be treated as Collections of Finance Charge Receivables
with respect to the last day of the related Monthly Period, except as otherwise
specified in any Indenture Supplement. The Indenture Trustee shall bear no
responsibility or liability for any losses resulting from investment or
reinvestment of any funds in accordance with this Section 8.3 nor for the
selection of Permitted Investments in accordance with the provisions of this
Indenture and any Indenture Supplement.

     (b) The Servicer, for the benefit of the Noteholders, shall establish and
maintain with the Indenture Trustee or its nominee in the name of the Indenture
Trustee, on behalf of the Issuer, a Qualified Account (including any subaccounts
thereof) bearing a designation clearly indicating that the funds and other
property credited thereto are held for the benefit of the Noteholders (the
"Excess Funding Account"). The Indenture Trustee shall possess all right, title
 ----------------------
and interest in all monies, instruments, investment property, documents,
certificates of deposit and other property credited from time to time to the
Excess Funding Account and in all proceeds, dividends distributions, earnings,
income and revenue thereof for the benefit of the Noteholders. The Excess
Funding Account shall be under the sole dominion and control of the Indenture
Trustee for the benefit of the Noteholders. Except as expressly provided in this
Indenture and the Transfer and Servicing Agreement, the Servicer agrees that it
shall have no right of setoff or banker's lien against, and no right to
otherwise deduct from, any funds and other property held in the Excess Funding
Account for any amount owed to it by the Indenture Trustee, the Issuer, any
Noteholder or any Series Enhancer. If, at any time, the Excess Funding Account
ceases to be a Qualified Account and the same is actually known to a Responsible
Officer of the Indenture Trustee, the Indenture Trustee (or the Servicer on its
behalf) shall within ten (10) Business Days (or such longer period, not to
exceed thirty (30) calendar days, as to which each Rating Agency may consent)
establish a new Excess Funding Account meeting the conditions specified above,
transfer any monies, documents, instruments, investment property, certificates
of deposit and other property to such new Excess Funding Account and from the
date such new Excess Funding Account is established, it shall be the "Excess
                                                                      ------
Funding Account."
---------------

     Funds on deposit in the Excess Funding Account shall at the written
direction of the Servicer be invested by the Indenture Trustee in Permitted
Investments selected by the Servicer. All such Permitted Investments shall be
held by the Indenture Trustee or its nominee (including any securities
intermediary) for the benefit of the Noteholders pursuant to Section 6.14 and
                                                             ------------
6.1(h). Funds on deposit in the Excess Funding Account
------

                                      51
<PAGE>

on any Distribution Date will be invested in Permitted Investments that will
mature so that such funds will be available no later than the close of business
on the next succeeding Transfer Date. No such Permitted Investment shall be
disposed of prior to its maturity; provided, however, that the Indenture Trustee
                                   --------  -------
may sell, liquidate or dispose of an Permitted Investment before its maturity,
at the written direction of the Servicer, if such sale, liquidation or disposal
would not result in a loss of all or part of the principal portion of such
Permitted Investment or if, prior to the maturity of such Permitted Investment,
a default occurs in the payment of principal, interest or any other amount with
respect to such Permitted Investment. Unless directed by the Servicer in
writing, funds deposited in the Excess Funding Account on a Transfer Date with
respect to the immediately succeeding Distribution Date are not required to be
invested overnight. On each Distribution Date, all interest and other investment
earnings (net of losses and investment expenses) on funds on deposit in the
Excess Funding Account shall be treated as Collections of Finance Charge
Receivables with respect to the last day of the related Monthly Period except as
otherwise specified in the related Indenture Supplement.

     Section 8.4. Collections and Allocations. From and after the SMT
                  ---------------------------
Termination Date:

     (a) Collections. The Servicer will apply or will instruct the Indenture
         -----------
Trustee in writing to apply all funds on deposit in the Collection Account as
described in this Article VIII and in each Indenture Supplement. Except as
                  ------------
otherwise provided below, the Servicer shall deposit Collections into 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 the
Date of Processing. Subject to the express terms of any Indenture Supplement,
but notwithstanding anything else in this Indenture or the Transfer and
Servicing Agreement to the contrary, for so long as any of the following
conditions are satisfied: (i) FCNB remains the Servicer; (ii) no Pay Out Event
has occurred; or (iii) (A) FCNB maintains a long or short term rating which is
satisfactory to each Rating Agency, or (B) the Servicer delivers to the
Indenture Trustee a letter of credit or other guaranty covering the risk that
the Servicer will not deposit Collections in the Collection Account as required
herein and the Rating Agency Condition shall be satisfied with respect to such
arrangement, the Servicer need not make the daily deposits of Collections into
the Collection Account as provided in the preceding sentence, but may make a
single deposit in the Collection Account in immediately available funds not
later than 1:00 p.m., New York City time, on the Distribution Date following the
Monthly Period with respect to which such deposit relates. Subject to the first
proviso in Section 8.5, but notwithstanding anything else in this Indenture or
           -----------
the Transfer and Servicing Agreement to the contrary, with respect to any
Monthly Period, whether the Servicer is required to make deposits of Collections
pursuant to the first or the second preceding sentence, (i) the Servicer will
only be required to deposit Collections into the Collection Account up to the
aggregate amount of Collections required to be deposited into any Series Account
or, without duplication, distributed on or prior to the related

                                      52
<PAGE>

Distribution Date to Noteholders or to any Series Enhancer pursuant to the terms
of any Indenture Supplement or Enhancement Agreement, but the Servicer shall
account for Collections as if the full deposit had been made 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 and pay such amount to the Holder of the Seller Interest.
Subject to the immediately preceding sentence, the Servicer may retain its
Servicing Fee with respect to a Series and shall not be required to deposit it
in the Collection Account.

     (b) Series and Seller Allocations. Finance Charge Collections, Collections
         -----------------------------
of Principal Receivables and Defaulted Receivables will be allocated to each
Series of Notes and to the Holders of the Seller Interest in accordance with
this Article VIII and each Indenture Supplement, and amounts so allocated to any
     ------------
Series will not, except as specified in the related Indenture Supplement, be
available to the Noteholders of any other Series. All Finance Charge
Collections, Collections of Principal Receivables and Defaulted Receivables not
so allocated to any Series of Notes shall be allocated and (in the case of
Collections) paid to the Holder of the Seller Interest, except as otherwise
provided in Section 8.4(g).
            --------------

     (c) Allocation of Collections Between Finance Charge Receivables and
         ----------------------------------------------------------------
Principal Receivables. On each Business Day, the Servicer shall allocate
---------------------
Collections processed on the Accounts as Finance Charge Collections, or, in the
case of Discount Option Receivables, Collections as set forth in Section 2.8(b)
                                                                 --------------
of the Transfer and Servicing Agreement. In addition all Collections which
constitute Net Recoveries, investment earnings (net of investment expenses and
losses) on the Collection Account and the Excess Funding Account and Merchant
Fees deposited into the Collection Account pursuant to Section 3.8 of the
                                                       -----------
Transfer and Servicing Agreement shall be treated as Finance Charge Collections
and allocated accordingly. The balance of the Collections processed on any
Business Day shall be allocated to Principal Receivables.

     (d) Allocation of Collections of Recoveries and Defaulted Accounts. On each
         --------------------------------------------------------------
Determination Date, the Servicer shall calculate the Investor Default Amount and
the amount of Net Recoveries, if any, for the preceding Monthly Period with
respect to each Series. On or before the Transfer Date next following such
Determination Date, the Servicer shall deposit the amount of Net Recoveries, if
any, in the Collection Account and allocate such amount as provided above.

     (e) Adjustments for Miscellaneous Credits. The Servicer shall be obligated
         -------------------------------------
to reduce or adjust, as the case may be, on a net basis, the aggregate amount of
Principal Receivables used to calculate the Seller Amount as provided in this
Section 8.4(e) (a "Credit Adjustment") with respect to any Principal Receivable
--------------     -----------------
(i) which was created in respect of merchandise refused or returned by the
Obligor thereunder, (ii) which is reduced by the Servicer by any rebate, refund,
chargeback or adjustment, (iii) as to

                                      53
<PAGE>

which the Obligor thereunder has asserted a counterclaim or defense and either
(x) the Servicer has agreed such counterclaim or defense is valid or (y) a final
nonappealable judgment or decree has been entered in favor of such Obligor in
respect of such counterclaim or defense by a court or arbitral body having
jurisdiction thereof, or (iv) which the Servicer has determined was created
through a fraudulent or counterfeit charge, but only if and to the extent such
fraudulent or counterfeit charges are not included as charge-offs under the
Charge Account Guidelines.

     In the event that the exclusion of the amount of a Credit Adjustment from
the calculation of the Seller Amount would cause the Seller Amount to be less
than the Minimum Seller Amount, Seller shall make a deposit, no later than the
Business Day following the Date of Processing of such Credit Adjustment, in the
Collection Account in immediately available funds, in an amount equal to the
Shortfall Amount, after giving effect to such exclusion. Such deposit shall be
applied in accordance with this Article VIII and the Indenture Supplements and
                                ------------
treated as a Principal Collection for all purposes hereof and thereof.

     (f) Net Payments. So long as FCNB is the Servicer and FCNB, as Servicer, is
         ------------
making daily deposits to the Collection Account in accordance with Section
8.4(a), FCNB, acting as Servicer and as agent for the Holder of the Seller
Interest, may make a net payment to the Collection Account on each Deposit Date
in the amount of all Collections received by the Servicer since the previous
Deposit Date, minus all amounts payable to the Holder of the Seller Interest on
or before such day in accordance with this Article VIII and the Indenture
                                           ------------
Supplements.

     (g) Unallocated Principal Collections; Excess Funding Account. On each
         ---------------------------------------------------------
Business Day, Principal Collections allocable to the Seller Interest in an
amount equal to the Shortfall Amount shall be deposited in the Excess Funding
Account. Thereafter, amounts in the Excess Funding Account shall be treated as
Shared Principal Collections to the extent that, after giving effect to the
application of such amount as Shared Principal Collections to the extent
provided in any Supplement, the Seller Amount would equal or exceed the minimum
Seller Amount. Shared Principal Collections shall be allocated to outstanding
Series pro rata based on the Principal Shortfall, if any, for each such Series
and the Servicer shall pay any remaining Shared Principal Collections on such
Business Day to the holder of the Seller Interest.

     (h) Allocation of Deposit Obligations. If the Seller or the Servicer shall
         ---------------------------------
fail to make any Deposit Obligation, the amount thereof shall first be allocated
to reduce the Seller Amount until the Seller Amount equals the Minimum Seller
Amount. Any remaining shortfall shall be allocated to each Series ratably based
upon a fraction the numerator of which is the Allocation Percentage used by such
Series to allocate Finance Charge Collections and the denominator of which is
the sum of all such numerators of all Series outstanding (such allocated amount,
the "Series Share" of such shortfall). The Series Share of each series that
     ------------
specifies a Minimum Seller Percentage greater than zero

                                      54
<PAGE>

shall be allocated to reduce the Minimum Seller Amount and any Collections
otherwise allocable to the Seller Amount shall be available on a ratable basis
to such Series to cover any shortfalls arising from such failure. The Series
Share of each Series that specifies a Minimum Seller Percentage of zero shall be
allocated to such series.

     Section 8.5. Shared Principal Collections. On each Distribution Date, (1)
                  ----------------------------
the Servicer shall allocate Shared Principal Collections (as described below) to
each Principal Sharing Series, pro rata, in proportion to the Principal
Shortfalls, if any, with respect to each such Series and (2) the Servicer shall
withdraw from the Collection Account and pay to the Holders of the Seller
Interest an amount equal to the excess, if any, of (x) the aggregate amount for
all outstanding Series of Collections of Principal Receivables which the related
Indenture Supplements specify are to be treated as "Shared Principal
                                                    ----------------
Collections" for such Distribution Date over (y) the aggregate amount for all
-----------
outstanding Series which the related Indenture Supplements specify are
"Principal Shortfalls" for such Series and for such Distribution Date. The
 --------------------
Seller may, at its option, instruct the Indenture Trustee in writing to deposit
Shared Principal Collections which are otherwise payable to the Holders of the
Seller Interest pursuant to the provisions set forth above into the Excess
Funding Account.

     Section 8.6. Excess Finance Charge Collections. On each Distribution Date,
                  ---------------------------------
(a) the Servicer shall allocate Excess Finance Charge Collections (as described
below) to each Excess Allocation Series, pro rata, in proportion to the Finance
Charge Shortfalls (as described below), if any, with respect to each such Series
and (b) the Servicer shall withdraw from the Collection Account and pay to the
Holders of the Seller Interest an amount equal to the excess, if any, of (x) the
aggregate amount for all outstanding Series of Collections of Finance Charge
Receivables which the related Supplements specify are to be treated as "Excess
                                                                        ------
Finance Charge Collections" for such Distribution Date over (y) the aggregate
--------------------------
amount for all outstanding Series which the related Supplements specify are
"Finance Charge Shortfalls" for such Series and such Distribution Date;
 -------------------------
provided, however, that the sharing of Excess Finance Charge Collections among
--------  -------
Series will continue only until such time, if any, at which the Seller shall
deliver to the Indenture Trustee an Officer's Certificate to the effect that, in
the reasonable belief of the Seller, the continued sharing of Excess Finance
Charge Collections among Series would have adverse regulatory implications with
respect to the Seller. Notwithstanding the foregoing, a Group of Series may
specify in their related Indenture Supplements that Excess Finance Charge
Collections from such Series shall be allocated as provided above but only among
the Series in such Group.

     Section 8.7. Allocation of Collateral to Series or Groups. To the extent so
                  --------------------------------------------
provided in the Indenture Supplement for any Series or in an Indenture
Supplement otherwise executed pursuant to Section 10.1, Receivables conveyed to
                                          ------------
the Issuer pursuant to Section 2.1 of the Transfer and Servicing Agreement and
                       -----------
Receivables conveyed to the Issuer pursuant to Section 2.9 of the Transfer and
                                               -----------
Servicing Agreement and all Collections received with respect thereto may be
allocated or applied in whole

                                      55
<PAGE>

or in part to one or more Series or Groups as may be provided in such Indenture
Supplement; provided, however, that any such allocation or application shall be
            --------  -------
effective only upon satisfaction of the following conditions:

          (i) on or before the fifth Business Day immediately preceding such
     allocation, the Servicer shall have given the Indenture Trustee and each
     Rating Agency written notice of such allocation;

          (ii) the Rating Agency Condition shall have been satisfied with
     respect to such allocation; and

          (iii)  the Servicer shall have delivered to the Indenture Trustee an
     Officer's Certificate, dated the date of such allocation, to the effect
     that the Servicer reasonably believes that such allocation will not have an
     Adverse Effect.

     Any such Indenture Supplement may provide that (i) such allocation to one
or more particular Series or Groups may terminate upon the occurrence of certain
events specified therein and (ii) that upon the occurrence of any such event,
such assets and any Collections with respect thereto, shall be reallocated to
other Series or Groups or to all Series, all as shall be provided in such
Indenture Supplement.

Section 8.8. Release of Collateral; Eligible Loan Documents.
             ----------------------------------------------

     (a) Upon the written direction of the Issuer, the Indenture Trustee may,
and when required by the provisions of this Indenture shall, execute instruments
to release property from the lien of this Indenture, or convey the Indenture
Trustee's interest in the same, in a manner and under circumstances which are
not inconsistent with the provisions of this Indenture. No party relying upon an
instrument executed by the Indenture Trustee as provided in this Article VIII
                                                                 ------------
shall be bound to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
monies.

     (b) In order to facilitate the servicing of the Receivables by the
Servicer, the Indenture Trustee upon Issuer Order shall authorize the Servicer
to execute in the name and on behalf of the Indenture Trustee instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
other comparable instruments with respect to the Receivables (and the Indenture
Trustee shall execute any such documents on written request of the Servicer),
subject to the obligations of the Servicer under the Transfer and Servicing
Agreement.

     (c) The Indenture Trustee shall, at such time as there are no Notes
outstanding, release and transfer, without recourse, all of the Collateral that
secured the Notes (other than any cash held for the payment of the Notes
pursuant to Section 4.2).
            -----------

                                      56
<PAGE>

The Indenture Trustee shall release property from the lien of this Indenture
pursuant to this Section 8.9(c) only upon receipt of an Issuer Order accompanied
                 --------------
by an Officer's Certificate, an Opinion of Counsel and (if required by the TIA)
Independent Certificates in accordance with TIA (S)314(c) and 314(d)(1) meeting
the applicable requirements of Section 12.1.
                               ------------

     (d) Notwithstanding anything to the contrary in this Indenture, the
Transfer and Servicing Agreement and the Trust Agreement, immediately prior to
the release of any portion of the Collateral or any funds on deposit in the
Series Accounts pursuant to this Indenture, the Indenture Trustee shall at the
written request of the Issuer remit to the Seller for its own account any funds
that, upon such release, would otherwise be remitted to the Issuer.

     Section 8.9. Opinion of Counsel. The Indenture Trustee shall receive at
                  ------------------
least seven (7) days notice when requested by the Issuer to take any action
pursuant to Section 8.8(a), accompanied by copies of any instruments involved,
            --------------
and the Indenture Trustee shall also require, as a condition to such action, an
Opinion of Counsel, in form and substance reasonably satisfactory to the
Indenture Trustee, stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with and such action
will not materially and adversely impair the security for the Notes or the
rights of the Noteholders in contravention of the provisions of this Indenture;
provided, however, that such Opinion of Counsel shall not be required to express
--------  -------
an opinion as to the fair value of the Collateral. The Indenture Trustee and
counsel rendering any such opinion may conclusively rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Indenture Trustee in connection with any such
action.

                                  ARTICLE IX

                   DISTRIBUTIONS AND REPORTS TO NOTEHOLDERS

     Distributions shall be made to, and reports shall be provided to,
Noteholders as set forth in the applicable Indenture Supplement. The identity of
the Noteholders with respect to distributions and reports shall be determined
according to the immediately preceding Record Date.

                                      57
<PAGE>

                                   ARTICLE X

                            SUPPLEMENTAL INDENTURES

     Section 10.1. Supplemental Indentures Without Consent of Noteholders.
                   ------------------------------------------------------

     (a) Without the consent of the Holders of any Notes but with prior notice
to the Rating Agencies with respect to the Notes of all Series, the Issuer and
the Indenture Trustee, when authorized by an Issuer Order, at any time and from
time to time, may enter into one or more indentures supplemental hereto (which
shall conform to the provisions of the TIA as in force at the date of the
execution thereof), in form satisfactory to the Indenture Trustee, for any of
the following purposes:

          (i) to correct or amplify the description of any property at any
     time subject to the lien of this Indenture, or better to assure, convey and
     confirm unto the Indenture Trustee any property subject or required to be
     subjected to the lien of this Indenture, or to subject to the lien of this
     Indenture additional property;

          (ii)  to evidence the succession, in compliance with Section 3.11,
                                                               ------------
     of another person to the Issuer, and the assumption by any such successor
     of the covenants of the Issuer contained herein and in the Notes;

          (iii) to add to the covenants of the Issuer, for the benefit of
     the Holders of the Notes, or to surrender any right or power herein
     conferred upon the Issuer;

          (iv)  to convey, transfer, assign, mortgage or pledge any property
     to or with the Indenture Trustee;

          (v)   to cure any ambiguity, to correct or supplement any provision
     herein or in any supplemental indenture that may be inconsistent with any
     other provision herein or in any supplemental indenture or to make any
     other provisions with respect to matters or questions arising under this
     Indenture or in any supplemental indenture; provided that such action shall
                                                 --------
     not adversely affect the interests of the Holders of the Notes;

          (vi) to evidence and provide for the acceptance of the
     appointment hereunder by a successor indenture trustee with respect to the
     Notes and to add to or change any of the provisions of this Indenture as
     shall be necessary to facilitate the administration of the trusts hereunder
     by more than one indenture trustee, pursuant to the requirements of Article
                                                                         -------
     VI;
     --

          (vii)  to modify, eliminate or add to the provisions of this
     Indenture to such extent as shall be necessary to effect the qualification
     of this Indenture

                                      58
<PAGE>

     under the TIA or under any similar federal statute hereafter enacted and to
     add to this Indenture such other provisions as may be expressly required by
     the TIA;

          (viii) to provide for the issuance of one or more new Series of
     Notes, in accordance with the provisions of Section 2.12; or

          (ix)   to provide for the termination of any interest rate swap
     agreement or other form of credit enhancement or maturity guarantee
     agreement in accordance with the provisions of the related Indenture
     Supplement.

     The Indenture Trustee is hereby authorized to join in the execution of any
such supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.

     (b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any Noteholders of any Series then
Outstanding but upon satisfaction of the Rating Agency Condition with respect to
the Notes of all Series, enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Holders of the Notes under this Indenture; provided,
                                                                    --------
however that the Seller shall have delivered to the Owner Trustee and the
-------
Indenture Trustee an Officer's Certificate, dated the date of any such action,
stating that all requirements for such amendments contained in the Agreement
have been met and the Seller reasonably believes that such action will not have
an Adverse Effect. Additionally, notwithstanding the preceding sentence, the
Issuer and the Indenture Trustee, when authorized by an Issuer Order, may,
without the consent of any Noteholders of any Series then Outstanding or the
Series Enhancers for any Series, enter into an indenture or indentures
supplemental hereto to add, modify or eliminate such provisions as may be
necessary or advisable in order to enable all or a portion of the Issuer (i) to
qualify as, and to permit an election to be made to cause the Issuer to be
treated as, a "financial asset securitization investment trust" as described in
the provisions of Section 860L of the Code, and (ii) to avoid the imposition of
state or local income or franchise taxes imposed on the Issuer's property or its
income; provided, however, that (i) the Seller delivers to the Indenture Trustee
        --------  -------
and the Owner Trustee an Officer's Certificate to the effect that the proposed
amendments meet the requirements set forth in this Section 10.1(b), (ii) the
                                                   ---------------
Rating Agency Condition will have been satisfied and (iii) such amendment does
not affect the rights, duties, protections, indemnities, immunities or
obligations of the Indenture Trustee or the Owner Trustee hereunder. The
amendments which the Seller may make without the consent of Noteholders pursuant
to the preceding sentence may include the addition of a sale of Receivables.

                                      59
<PAGE>

     Section 10.2. Supplemental Indentures with Consent of Noteholders. The
                   ---------------------------------------------------
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior notice to the Rating Agencies and with the consent of the Holders of
Notes representing more than 50% of the Outstanding Amount of each adversely
affected Series, by Act of such Holders delivered to the Issuer and the
Indenture Trustee, enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to, changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any manner the rights
of such Noteholders under this Indenture; provided, however that no such
                                          --------  -------
supplemental indenture shall, without the consent of the Holder of each
outstanding Note affected thereby:

     (a) change the due date of any installment of principal of or interest
on any Note, or reduce the principal amount thereof, the interest rate specified
thereon or the redemption price with respect thereto or change any place of
payment where, or the coin or currency in which, any Note or any interest
thereon is payable;

     (b) impair the right to institute suit for the enforcement of the
provisions of this Indenture requiring the application of funds available
therefor, as provided in Article V, to the payment of any such amount due on the
                         ---------
Notes on or after the respective due dates thereof (or, in the case of
redemption, on or after the Redemption Date);

     (c) reduce the percentage of the Outstanding Amount of any Series the
consent of the Holders of which is required for any such supplemental indenture,
or the consent of the Holders of which is required for any waiver of compliance
with certain provisions of this Indenture or certain defaults hereunder and
their consequences as provided for in this Indenture;

     (d) reduce the percentage of the Outstanding Amount of any Series, the
consent of the Holders of which is required to direct the Indenture Trustee to
sell or liquidate the Collateral if the proceeds of such sale would be
insufficient to pay the principal amount and accrued but unpaid interest on the
outstanding Notes of such Series;

     (e) decrease the percentage of the Outstanding Amount required to
amend the sections of this Indenture which specify the applicable percentage of
the Outstanding Amount of the Notes of any Series necessary to amend the
Indenture or any Transaction Documents which require such consent;

     (f) modify or alter the provisions of this Indenture prohibiting the voting
of Notes held by the Issuer, any other Obligor on the Notes, a Seller or any
affiliate thereof; or

                                      60
<PAGE>

     (g) permit the creation of any Lien ranking prior to or on a parity with
the lien of this Indenture with respect to any part of the Collateral for any
Notes or, except as otherwise permitted or contemplated herein, terminate the
Lien of this Indenture on any such Collateral at any time subject hereto or
deprive the Holder of any Note of the security provided by the Lien of this
Indenture.

     The Indenture Trustee may in its discretion determine whether or not
any Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.

     It shall not be necessary for any Act of Noteholders under this Section
                                                                     -------
10.2 to approve the particular form of any proposed supplemental indenture, but
----
it shall be sufficient if such Act shall approve the substance thereof.

     Promptly after the execution by the Issuer and the Indenture Trustee of any
Supplement Indenture pursuant to this Section 10.2, the Indenture Trustee shall
                                      ------------
mail to the Holders of the Notes to which such amendment or supplemental
indenture relates written notice setting forth in general terms the substance of
such Supplement Indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.

     Section 10.3. Execution of Supplemental Indentures. In executing, or
                   ------------------------------------
permitting the additional trusts created by, any supplemental indenture
permitted by this Article X or the modification thereby of the trusts created by
                  ---------
this Indenture, the Indenture Trustee shall be entitled to receive, and shall be
fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture and stating that all requisite consents have been obtained or that no
consents are required and stating that such supplemental indenture or
modification constitutes the legal, valid and binding obligation of the Issuer
in accordance with its terms. The Indenture Trustee may, but shall not be
obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.

     Section 10.4. Effect of Supplemental Indenture. Upon the execution of any
                   --------------------------------
supplemental indenture under this Article X, this Indenture shall be modified in
                                  ---------
accordance therewith, and such supplemental indenture shall form a part of this
Indenture for all purposes, and every Holder of Notes theretofore or thereafter
authenticated and delivered hereunder shall be bound thereby.  This Section 10.4
does not apply to Indenture Supplements.

                                      61
<PAGE>

     Section 10.5. Conformity With Trust Indenture Act. Every amendment of this
                   -----------------------------------
Indenture and every supplemental indenture executed pursuant to this Article X
shall conform to the requirements of the TIA as then in effect so long as this
Indenture shall then be qualified under the TIA.

     Section 10.6. Reference in Notes to Supplemental Indentures. Notes
                   ---------------------------------------------
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article X may, and if required by the Indenture Trustee shall,
                 ---------
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer shall so determine,
new Notes so modified as to conform, in the opinion of the Indenture Trustee and
the Issuer, to any such supplemental indenture may be prepared and executed by
the Issuer and authenticated and delivered by the Indenture Trustee in exchange
for the outstanding Notes.

                                  ARTICLE XI

                                  TERMINATION

     Section 11.1. Termination of Issuer. The Issuer and the respective
                   ---------------------
obligations and responsibilities of the Indenture Trustee created hereby (other
than the obligation of the Indenture Trustee to make payments to Noteholders as
hereinafter set forth) shall terminate, except with respect to the duties
described in Section 11.2(b), as provided in the Trust Agreement.

     Section 11.2. Final Distribution.
                   ------------------

(a) The Servicer shall give the Indenture Trustee at least thirty (30) days
prior written notice of the Distribution Date on which the Noteholders of any
Series or Class may surrender their Notes for payment of the final distribution
on and cancellation of such Notes (or, in the event of a final distribution
resulting from the application of Section 2.6 of the Transfer and Servicing
Agreement, notice of such Distribution Date promptly after the Servicer has
determined that a final distribution will occur, if such determination is made
less than thirty (30) days prior to such Distribution Date). Such notice shall
be accompanied by an Officer's Certificate setting forth the information
specified in Section 3.5 of the Transfer and Servicing Agreement covering the
period during the then-current calendar year through the date of such notice.
Not later than the fifth day of the month in which the final distribution in
respect of such Series or Class is payable to Noteholders, the Indenture Trustee
shall provide notice to Noteholders of such Series or Class specifying (i) the
date upon which final payment of such Series or Class will be made upon
presentation and surrender of Notes of such Series or Class at the office or
offices therein designated, (ii) the amount of any such final payment and (iii)
that the Record Date otherwise applicable to such payment date is not
applicable, payments being made only upon presentation and surrender of such
Notes at the office or offices therein specified (which in the case of Bearer
Notes shall be outside the

                                      62
<PAGE>

United States). The Indenture Trustee shall give such notice to the Transfer
Agent and Registrar and the Paying Agent at the time such notice is given to
Noteholders.

     (b)  Notwithstanding a final distribution to the Noteholders of any Series
or Class (or the termination of the Issuer), except as otherwise provided in
this paragraph, all funds then on deposit in the Collection Account and any
Series Account allocated to such Noteholders shall continue to be held in trust
for the benefit of such Noteholders and the Paying Agent or the Indenture
Trustee shall pay such funds to such Noteholders upon surrender of their Notes,
if certificated (and any excess shall be paid in accordance with the terms of
any Enhancement Agreement). In the event that all such Noteholders shall not
surrender their Notes for cancellation within six (6) months after the date
specified in the notice from the Indenture Trustee described in paragraph (a),
the Indenture Trustee shall give a second notice to the remaining such
Noteholders to surrender their Notes for cancellation and receive the final
distribution with respect thereto (which surrender and payment, in the case of
Bearer Notes, shall be outside the United States). If within one year after the
second notice all such Notes shall not have been surrendered for cancellation,
the Indenture Trustee may take appropriate steps, or may appoint an agent to
take appropriate steps, to contact the remaining such Noteholders concerning
surrender of their Notes, and the cost thereof shall be paid out of the funds in
the Collection Account or any Series Account held for the benefit of such
Noteholders. The Indenture Trustee and, upon the written request of the
Servicer, the Paying Agent shall pay to the Issuer any monies held by them for
the payment of principal or interest that remains unclaimed for two (2) years.
After payment to the Issuer, Noteholders entitled to the money must look to the
Issuer for payment as general creditors unless an applicable abandoned property
law designates another Person.

     Section 11.3. Issuer's Termination Rights. Upon the termination of the
                   ---------------------------
Issuer pursuant to the terms of the Trust Agreement and upon the written
direction of the Issuer, the Indenture Trustee shall assign and convey to the
Holders of the Seller Interest or any of their designees, without recourse,
representation or warranty, all right, title and interest of the Issuer in the
Receivables, whether then existing or thereafter created, all Recoveries related
thereto all monies due or to become due and all amounts received or receivable
with respect thereto (including all moneys then held in the Collection Account
or any Series Account) and all proceeds thereof, except for amounts held by the
Indenture Trustee pursuant to Section 11.2(b). The Indenture Trustee shall
                              ---------------
execute and deliver such instruments of transfer and assignment, in each case
without recourse, as shall be reasonably requested in writing by the Holders of
the Seller Interest to vest in the Holders of the Seller Interest or any of
their designees all right, title and interest which the Indenture Trustee had in
the Collateral and such other property.

                                      63
<PAGE>

                                 ARTICLE XII

                                 MISCELLANEOUS

     Section 12.1. Compliance Certificates and Opinions etc.
                   ----------------------------------------

     (a)  Upon any application or request by the Issuer to the Indenture Trustee
to take any action under any provision of this Indenture, the Issuer shall
furnish to the Indenture Trustee (i) an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section 12.1, except that, in the case of any such application or request
     ------------
as to which the furnishing of such documents is specifically required by any
provision of this Indenture, no additional certificate or opinion need be
furnished.

     Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:

          (i)   a statement that each signatory of such certificate or opinion
     has read or has caused to be read such covenant or condition and the
     definitions herein relating thereto;

          (ii)  a brief statement as to the nature and scope of the examination
     or investigation upon which the statements or opinions contained in such
     certificate or opinion are based;

          (iii) a statement that, in the opinion of each such signatory, such
     signatory has made such examination or investigation as is necessary to
     enable such signatory to express an informed opinion as to whether or not
     such covenant or condition has been complied with; and

          (iv)  a statement as to whether, in the opinion of each such
     signatory, such condition or covenant has been complied with.

     (b)  Other than with respect to the release of any Receivables in Removed
Accounts, whenever any property or investment property is to be released from
the lien of this Indenture, the Issuer shall also furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within ninety (90) days of
such release) of the property or securities proposed to be released and stating
that in the opinion of such person the proposed

                                      64
<PAGE>

release will not impair the security under this Indenture in contravention of
the provisions hereof.

          (i)  Notwithstanding Section 2.11 or any other provision of this
                               ------------
     Section 12.1, the Issuer may (A) collect, liquidate, sell or otherwise
     ------------
     dispose of Receivables as and to the extent permitted or required by the
     Transaction Documents and (B) make cash payments out of the Series Accounts
     as and to the extent permitted or required by the Transaction Documents.

     Section 12.2. Form of Documents Delivered to Indenture Trustee. In any case
                   ------------------------------------------------
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.

     Any certificate or opinion of a Responsible Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous. Any such certificate of a Responsible Officer or Opinion of
Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Servicer, a Seller, the Issuer or the Administrator, stating that the
information with respect to such factual matters is in the possession of the
Servicer, a Seller, the Issuer or the Administrator, unless such Responsible
Officer or Counsel has actual knowledge that the certificate or opinion or
representations with respect to such matters are erroneous.

     Where any Person is required to make, give or execute two (2) or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

     Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to conclusively rely upon the
truth and

                                      65
<PAGE>

accuracy of any statement or opinion contained in any such document as provided
in Article VI.
   ----------

     Section 12.3. Acts of Noteholders.
                   -------------------

     (a)  Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Noteholders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Noteholders in person or by their agents duly
appointed in writing and satisfying any requisite percentages as to minimum
number or dollar value of outstanding principal amount represented by such
Noteholders; and, except as herein otherwise expressly provided, such action
shall become effective when such instrument or instruments are delivered to the
Indenture Trustee, and, where it is hereby expressly required, to the Issuer.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
                                                  ---
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and conclusive in favor of the Indenture Trustee and
the Issuer, if made in the manner provided in this Section 12.3.
                                                   ------------

     (b)  The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Indenture Trustee
deems sufficient.

     (c)  The ownership of Notes shall be proved by the Note Register.

     (d)  Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder (and any
transferee thereof) of every Note issued upon the registration thereof in
exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Indenture Trustee or the Issuer in reliance thereon,
whether or not notation of such action is made upon such Note.

     Section 12.4. Notices, Etc. to Indenture Trustee and Issuer. Any request,
                   ---------------------------------------------
demand, authorization, direction, notice, consent, waiver or Act of Noteholders
or other documents provided or permitted by the Agreement to be made upon, given
or furnished to, or filed with:

     (a)  the Indenture Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to a Trustee Officer, by facsimile transmission or by other means
acceptable to the Indenture Trustee to or with the Indenture Trustee at its
Corporate Trust Office; or

     (b)  the Issuer by the Indenture Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and mailed, first-class
postage

                                      66
<PAGE>

prepaid, to the Issuer addressed to it and received by it c/o Bankers Trust
Company, Four Albany Street, 10th Floor, New York, New York 10006, Attn:
Structured Finance Group, or at any other address previously furnished in
writing to the Indenture Trustee by the Issuer. A copy of each notice to the
Issuer shall be sent in writing and mailed, first-class postage prepaid, to the
[Administrator at    ].

     Section 12.5. Notices to Noteholders; Waiver. Where the Indenture provides
                   ------------------------------
for notice to Noteholders of any event, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed by
registered or certified mail or first class postage prepaid or national
overnight courier service to each Noteholder affected by such event, at its
address as it appears on the Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice. In
any case where notice to Noteholders is given by mail, neither the failure to
mail such notice, nor any defect in any notice so mailed, to any particular
Noteholder shall affect the sufficiency of such notice with respect to other
Noteholders, and any notice which is mailed in the manner herein provided shall
conclusively be presumed to have been duly given.

     Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Indenture Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.

     In the event that, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.

     Where this Indenture provides for notice to any Rating Agency, failure to
give such notice shall not affect any other rights or obligations created
hereunder and shall not under any circumstance constitute a Default or Event of
Default.

     Section 12.6. Alternate Payment and Notice Provisions. Notwithstanding any
                   ---------------------------------------
provision of this Indenture or any of the Notes to the contrary, the Issuer,
with the prior written consent of the Indenture Trustee, may enter into any
agreement with any Holder of a Note providing for a method of payment, or notice
by the Indenture Trustee or any Paying Agent to such Holder, that is different
from the methods provided for in this Indenture for such payments or notices.
The Issuer will furnish to the Indenture Trustee a copy of each such agreement
and the Indenture Trustee will cause payments to be made and notices to be given
in accordance with such agreements.

                                      67
<PAGE>

     Section 12.7. Conflict with Trust Indenture Act. If any provision hereof
                   ---------------------------------
limits, qualifies or conflicts with another provision hereof that is required to
be included in this indenture by any of the provisions of the TIA, such required
provision shall control.

     The provisions of TIA (S)(S)310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.

     Section 12.8. 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 12.9. Successors and Assigns. All covenants and agreements in this
                   ----------------------
Indenture by the Issuer shall bind its successors and assigns, whether so
expressed or not.

     Section 12.10. Separability. In case any provision in this Indenture or in
                    ------------
the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.

     Section 12.11. Benefits of Indenture. Nothing in this Indenture or in the
                    ---------------------
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, the Servicer and the
Seller, any benefit.

     Section 12.12. Legal Holidays. In any case where the date on which any
                    --------------
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.

     Section 12.13. GOVERNING LAW. THIS INDENTURE AND EACH NOTE SHALL BE
                    -------------
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.

     Section 12.14. Counterparts. This Indenture 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.

                                      68
<PAGE>

     Section 12.15. Issuer Obligation. No recourse may be taken, directly or
                    -----------------
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) 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 Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Articles V, VI and VII of the Trust Agreement.
                                ----------  --     ---

     Section 12.16. No Petition. The Indenture Trustee, by entering into this
                    -----------
Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree
that they will not at any time institute against the Issuer, the Seller or the
Servicer, or join in instituting against the Issuer, the Seller or the Servicer,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state
bankruptcy or similar law.

                                      69
<PAGE>

     IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this
Indenture to be duly executed by their respective officers thereunto duly
authorized and attested, all as of the day and year first above written.

                              SPIEGEL CREDIT CARD MASTER NOTE TRUST,
                              as Issuer

                              By: Bankers Trust Company, not in its individual
                              capacity, but solely as Owner Trustee

                              By: ___________________________
                              Name:
                              Title:

                              THE BANK OF NEW YORK, as Indenture Trustee

                              By: ___________________________
                              Name:
                              Title:

Acknowledged and Accepted:

FIRST CONSUMERS NATIONAL BANK,
as Servicer

By: ___________________________
Name:
Title:

Acknowledged and Accepted:

SPIEGEL CREDIT CORPORATION III,
as Seller

By: ___________________________
Name:
Title:

                         [Signature Page to Indenture]

                                      70
<PAGE>

                                   ANNEX A
                                      to
                               MASTER INDENTURE

                                  DEFINITIONS
                                  -----------

                                      71

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