1
EXHIBIT 4.4
EXECUTION COPY

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INDENTURE

Dated as of July 1, 1994

Between

ZALE FUNDING TRUST,
as Issuer

And

BANKERS TRUST COMPANY,
as Indenture Trustee

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TABLE OF CONTENTS
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ARTICLE I

DEFINITIONS

Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II

ISSUE, EXECUTION, FORM,
REGISTRATION AND PAYMENT OF NOTES

Section 2.01. Issuance of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.02. Execution of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.03. Authentication and Delivery of Notes . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.04. Certificate of Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.05. Book-Entry Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.06. Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.07. Notices to Clearing Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.08. Letter of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.09. Definitive Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.10. Note Register; Persons Deemed Registered Noteholders . . . . . . . . . . . . . . . 6
Section 2.11. Payments of Interest; Payment to Noteholder on Record Date . . . . . . . . . . . . 7
Section 2.12. Payments of Monthly Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.13. Optional Redemptions of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.14. Exchange and Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.15. Mutilated, Defaced, Destroyed, Lost or Stolen Notes . . . . . . . . . . . . . . . . 12
Section 2.16. Cancellation of Notes; Destruction Thereof . . . . . . . . . . . . . . . . . . . . 13
Section 2.17. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.18. Appointment of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.19. Issuer and Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.20. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.21. Certain Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.22. Issuance of Additional Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

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ARTICLE III

SECURITY INTEREST

Section 3.01. Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.02. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.03. License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.04. The Issuer Remains Liable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.05. Delivery of Certain Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.06. Copies as Financing Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

ARTICLE IV

BANK ACCOUNTS AND COLLECTIONS

Section 4.01. Post Office Boxes and Collection Deposit Accounts . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.02. Collateral Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.03. Excess Funding Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.04. Optional Redemption Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.05. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.06. Other Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.07. Correction of Improper Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.08. Maintenance of Collateral Account, Excess Funding Account or Optional Redemption Account . . . 27

ARTICLE V

ALLOCATIONS, TRANSFERS AND PAYMENTS

Section 5.01. On Business Days during the Interest-Only Period . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.02. On Payment Dates during the Interest-Only Period . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.03. On Business Days During the Amortization Period . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.04. On Payment Dates During the Amortization Period . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.05. Allocation of Noteholder Charge-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.06. Final Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.07. Series Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

ARTICLE VI

SERVICING OF PURCHASED RECEIVABLES

Section 6.01. Servicing of Purchased Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

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ARTICLE VII

REPRESENTATIONS AND WARRANTIES

Section 7.01. Representations and Warranties of the Issuer . . . . . . . . . . . . . . . . . . . . . . . . 34

ARTICLE VIII

COVENANTS

Section 8.01. Affirmative Covenants of the Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.02. Negative Covenants of the Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

ARTICLE IX

REDEMPTIONS

Section 9.01. Optional Full Redemption of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.02. Partial Redemption of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.03. Mechanics of an Optional Full Redemption and Partial Redemption . . . . . . . . . . . . . . . 42
Section 9.04. Amounts Due; Premium; Notice; Partial Redemptions; Wire Transfer Payment Recipients . . . . . 44
Section 9.05. Scheduled Redemption of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.06. Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

ARTICLE X

REMEDIES OF THE TRUSTEE AND NOTEHOLDERS

Section 10.01. Early Amortization Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 10.02. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 10.03. Additional Rights Upon the Occurrence of Certain Events . . . . . . . . . . . . . . . . . . . 50
Section 10.04. Indenture Trustee May Enforce Claims Without Possession of the Notes . . . . . . . . . . . . 51
Section 10.05. Restoration of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.06. Limitations on Suits by Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.07. Control by Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.08. Indenture Trustee To Give Notice of Early Amortization Event, But May Withhold in Certain
Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

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ARTICLE XI

CONCERNING THE TRUSTEE

Section 11.01. Duties and Responsibilities of the Indenture Trustee;
Prior to Early Amortization Event; After Early Amortization Event . . . . . . . . . . . . . 53
Section 11.02. Certain Rights of the Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.03. Certificate of Authorized Officer and Opinion of Counsel . . . . . . . . . . . . . . . . . . 57
Section 11.04. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 11.05. Fees and Expenses of the Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 11.06. Acts of Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 11.07. Payments on the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 11.08. Documents and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 11.09. Application of Funds; Return of Unclaimed Funds . . . . . . . . . . . . . . . . . . . . . . 60
Section 11.10. Forwarding of Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 11.11. Notes Held by the Indenture Trustee; Rights of Indenture Trustee . . . . . . . . . . . . . . 61
Section 11.12. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 11.13. Indenture Trustee; Resignation; Removal; Successors . . . . . . . . . . . . . . . . . . . . 61
Section 11.14. Merger and Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 11.15. Separate Indenture Trustees or Co-Trustees . . . . . . . . . . . . . . . . . . . . . . . . . 64

ARTICLE XII

DISCHARGE OF INDENTURE

Section 12.01. Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . 65

ARTICLE XIII

AMENDMENTS

Section 13.01. Modification of Terms without Consent of Noteholders . . . . . . . . . . . . . . . . . . . . 65
Section 13.02. Modifications of Terms with Consent of Noteholders . . . . . . . . . . . . . . . . . . . . . 66
Section 13.03. Amendment of the Purchase and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . 67
Section 13.04. Rating Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

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Section 13.05. Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 13.06. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

ARTICLE XIV

MISCELLANEOUS

Section 14.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 14.02. No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 14.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 14.04. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 14.05. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 14.06. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 14.07. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 14.08. No Petition in Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 14.09. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 14.10. Jurisdiction; Consent to Service of Process . . . . . . . . . . . . . . . . . . . . . . . 71
Section 14.13. Independent Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Exhibits
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Exhibit A Form of Class A-1 Asset Backed Note
Exhibit B Form of Class A-2 Asset Backed Note
Exhibit C Form of Class B Asset Backed Note
Exhibit D Form of Class C Asset Backed Note
Exhibit E Form of Notice to Noteholders
Exhibit F Reserved
Exhibit G Form of Certificate of Transferor (Transfer of Beneficial Interest in Restricted Global Notes)
Exhibit H Form of Assignment (Transfer of Notes)
Exhibit I Form of Certificate of Transferor (Transfer of Notes)
Exhibit J Form of Transferee Letter (Transfer of Notes)
Exhibit K Form of Certificate of Transferor (NonRule 144A/Rule 904 Transfer of Notes)
Exhibit L Form of Certificate of Transferee (NonRule 144A/Rule 904 Transfer of Notes)
Exhibit M Form of Standing Delivery Order
Exhibit N Form of Collection Deposit Account Letter
Exhibit O Reserved

Schedules
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Schedule I Post Office Boxes, Collection Deposit Account Banks, Collection Deposit Accounts, Collateral Account,
Excess Funding Account, Optional Redemption Account, Concentration Accounts
Schedule II Reserved
Schedule III UCC Filing Jurisdictions

Annexes
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Annex I Glossary of Terms
Annex II Reserved
Annex III Calculation of Partial Redemption Premium
Annex IV Calculation of Pro Forma Net Yield

8
This INDENTURE (this "Indenture"), dated as of July 1, 1994,
between ZALE FUNDING TRUST, a Delaware business trust (the "Issuer"), and
BANKERS TRUST COMPANY, a New York banking corporation, not in its individual
capacity, but solely as Indenture Trustee (the "Indenture Trustee").

W I T N E S S E T H

WHEREAS, the Issuer, the Seller, the Servicer, the Indenture
Trustee and the Noteholders desire to enter into a receivables financing
facility pursuant to which, inter alia, (1) the Issuer shall purchase from the
Seller and the Seller shall sell to the Issuer, Receivables, (2) the Issuer
shall purchase Receivables with, inter alia, net cash proceeds received by the
Issuer from the issuance and sale of the Notes and cash collections on the
Purchased Receivables, (3) the repayment of the Notes shall be secured by a
security interest in substantially all of the assets of the Issuer, including
the Purchased Receivables, and (4) the Servicer shall service the Purchased
Receivables, in each case in accordance with the terms and conditions set forth
in the Transaction Documents;

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

ARTICLE I

DEFINITIONS

Section 1.01. Definitions. Capitalized terms used but not
otherwise defined in this Indenture are used in this Indenture with the
meanings assigned to such terms in the Glossary of Terms attached to this
Indenture as Annex I.

ARTICLE II

ISSUE, EXECUTION, FORM,
REGISTRATION AND PAYMENT OF NOTES

Section 2.01. Issuance of Notes. Upon the execution and
delivery of this Indenture, the Issuer may issue on a private placement basis,
$37,620,000 in aggregate principal amount of

Class A-1 Floating Rate Asset Backed Notes (the "Class A-1 Notes"), $294,100,000
in aggregate principal amount of Class A-2 7.325% Asset Backed Notes (the "Class
A-2 Notes"), $28,600,000 in aggregate principal amount of Class B 7.50% Asset
Backed Notes (the "Class B Notes") and $20,440,000 in aggregate principal amount
of Class C 8.15% Asset Backed Notes (the "Class C Notes" and, collectively with
the Class A-1 Notes, the Class A-2 Notes and the Class B Notes, the "Notes").
The Notes shall be issued in minimum denominations of $250,000 and in integral
multiples of $1,000 in excess thereof.

Section 2.02. Execution of Notes. The Notes shall be signed
on behalf of the Issuer by one of the Authorized Officers of the Owner Trustee
under its corporate seal which may be in facsimile form and be imprinted or
otherwise reproduced thereon. Such signatures may be the manual or facsimile
signatures of the present or any future such officers of the Owner Trustee on
behalf of the Issuer. The seal of the Issuer may be in the form of a facsimile
thereof and may be impressed, affixed, imprinted or otherwise reproduced on the
Notes. Typographical and other minor errors or defects in any such reproduction
of the seal or any such signature shall not affect the validity or
enforceability of any Note which has been duly authenticated and delivered by
the Indenture Trustee. In case any such officer of the Owner Trustee on behalf
of Issuer who shall have signed any of the Notes shall cease to be such officer
before the Note so signed shall be authenticated and delivered by the Indenture
Trustee or disposed of by the Issuer, such Note nevertheless may be
authenticated and delivered or disposed of as though the person who signed such
Note had not ceased to be such officer of the Owner Trustee on behalf of the
Issuer; and any Note may be signed on behalf of the Issuer by such officers as,
at the actual date of the execution of such Note, shall be the proper officers
of the Issuer, although at the date of the execution and delivery of this
Indenture any such officer was not such an officer.

Section 2.03. Authentication and Delivery of Notes. Notes
executed by the Owner Trustee on behalf of the Issuer as set forth in Section
2.02 of this Indenture shall be delivered to the Indenture Trustee for
authentication, and upon such delivery and written direction, an Authorized
Officer of the Indenture Trustee shall authenticate and deliver such Notes.
Each Note shall be dated the date of its authentication.

Section 2.04. Certificate of Authentication. Only such Notes
as shall bear thereon a certificate of authentication substantially in the form
set forth in the form of Class A-1 Notes, Class A-2 Notes, Class B Notes and
Class C Notes attached

to this Indenture as Exhibit A, Exhibit B, Exhibit C and Exhibit D,
respectively, authenticated by the Indenture Trustee by manual signature of one
of its Authorized Officers, shall be entitled to the benefits of this Indenture
or be valid or obligatory for any purpose. Such certificate of authentication
by the Indenture Trustee upon any Note executed by the Issuer shall be
conclusive evidence that the Note so authenticated has been duly authenticated
and delivered under this Indenture and that the Noteholder thereof is entitled
to the benefits of this Indenture.

Section 2.05. Book-Entry Notes. The Notes, upon original
issuance, will be issued in the form of one or more typewritten Notes
representing the Book-Entry Notes, to be delivered to the Depository, as the
initial Clearing Agency, by, or on behalf of, the Issuer. The Notes shall
initially be registered on the Note Register in the name of Cede & Co., the
nominee of the Depository, and no Noteholder will receive a definitive Note
representing such Noteholder's interest in the Notes, except as provided in
Section 2.09. Unless and until certificated, fully registered Notes (the
"Definitive Notes") have been issued to Noteholders pursuant to Section 2.09:

(a) the provisions of this Section 2.05 shall be in full
force and effect;

(b) the Issuer, the Servicer and the Indenture Trustee
may deal with the Clearing Agency and the Clearing Agency Participants
for all purposes (including the making of payments on the Notes) as
the authorized representative of the Noteholders;

(c) to the extent that the provisions of this Section
2.05 conflict with any other provisions of this Indenture, the
provisions of this Section 2.05 shall control; and

(d) the rights of Noteholders shall be exercised only
through the Clearing Agency and the Clearing Agency Participants and
shall be limited to those established by law and agreements between
such Noteholders and the Clearing Agency and/or the Clearing Agency
Participants. Unless and until Definitive Notes are issued pursuant
to Section 2.09, the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and
transmit distributions of principal and interest on the Notes to such
Clearing Agency Participants.

The Clearing Agency Participants shall have no rights under this
Indenture under or with respect to any of the Notes held on their behalf by the
Depositary, and the Depositary may be treated by the Issuer and the Indenture
Trustee, and any of their respective agents, employees, officers and directors,
as the absolute owner of the Notes for all purposes whatsoever.
Notwithstanding the foregoing, nothing in this Indenture shall prevent the
Issuer and the Indenture Trustee, or any of their respective agents, from
giving effect to any written certification, proxy or other authorization
furnished by the Depositary, or shall impair, as between the Depositary and the
Clearing Agency Participants, the operation of customary practices governing
the exercise of the rights of a Noteholder of any Class A-1 Notes, Class A-2
Notes, Class B Notes or Class C Notes. Subject to the foregoing provisions of
this Section 2.05, any Noteholder may grant proxies and otherwise authorize any
Person, including Clearing Agency Participants and Persons that may hold
interests through Clearing Agency Participants, to take any action which a
Noteholder is entitled to take under this Indenture or the Notes.

Section 2.06. Legends. (a) The Book-Entry Notes shall bear
a legend in substantially the following form:

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY ("DTC"), NEW YORK, NEW YORK, TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC OR
TO SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.

TRANSFERS OF THIS NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE, AND TRANSFERS OF BENEFICIAL INTERESTS IN THIS
NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO HEREIN.

(b) The Definitive Notes shall bear a legend in substantially the
following form:

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS,
AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED (AND THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES
THAT THIS NOTE MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED) EXCEPT (1) PURSUANT TO RULE 144A OR ANOTHER EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT, (2) IF SUCH OFFER FOR SALE
OR OTHER TRANSFER IS MADE IN COMPLIANCE WITH STATE SECURITIES LAWS AND
(3) IN ACCORDANCE WITH THE CONDITIONS TO TRANSFER SET FORTH IN THE
INDENTURE REFERRED TO HEREIN.

Section 2.07. Notices to Clearing Agency. Whenever notice or
other communication to the Noteholders is required under this Indenture to be
delivered as provided in Section 14.01, unless and until Definitive Notes shall
have been issued to Noteholders pursuant to Section 2.09, the Issuer, the
Indenture Trustee and the Servicer shall give all such notices and
communications specified herein to be given to Noteholders to the Clearing
Agency.

Section 2.08. Letter of Representations. Notwithstanding
anything to the contrary in this Indenture or any Series Supplement, the
parties hereto shall comply with the terms of each Letter of Representations.

Section 2.09. Definitive Notes. If (a) the Trust advises the
Indenture Trustee in writing that the Depositary is no longer willing or able to
discharge properly its responsibilities as depository with respect to such
Notes, and the Trust is unable to locate a qualified successor, or (b) after the
occurrence of a Servicer Default, Class A-1 Noteholders, Class A-2 Noteholders,
Class B Noteholders or Class C Noteholders representing not less than 50% of the
aggregate outstanding principal amount of the Class A-1 Notes, the Class A-2
Notes, the Class B Notes or the Class C Notes, collectively, as the case may be,
advise the Indenture Trustee and the Depositary (which notice may be made
through Clearing Agency Participants), in writing, that the continuation of a
book-entry system through the Depositary (or a successor thereto) is no longer
in the best interests of Noteholders of such class, the Indenture Trustee shall
notify the Clearing Agency of the occurrence of any such event and of the
availability of Definitive Notes to Noteholders requesting the same. Upon
surrender by the Depositary of the Notes representing the Class A-1 Notes, the
Class A-2 Notes, the Class B Notes or the Class C Notes, as the case may be, and
instructions by the Depositary to the Indenture Trustee for re-registration, the
Indenture Trustee will authenticate and deliver the Class A-1

Notes, the Class A-2 Notes, the Class B Notes or the Class C Notes, as the case
may be, to the Class A-1 Noteholders, the Class A-2 Noteholders, the Class B
Noteholders or the Class C Noteholders, as the case may be, or their respective
nominees, in the form of Definitive Notes, and thereafter the Indenture Trustee
will recognize the holders of such Definitive Notes as Registered Noteholders
under the Transaction Documents. Neither the Trust nor the Indenture Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be fully protected in relying on, such
instructions. Upon the issuance of Definitive Notes, all references herein to
obligations with respect to such Notes imposed upon or to be performed by the
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 holders of the Definitive
Notes as Noteholders hereunder.

Section 2.10. Note Register; Persons Deemed Registered
Noteholders. In the event any classes of Notes are issued as Definitive Notes,
the Issuer shall keep, or shall cause to be kept by the Indenture Trustee, a
note register (the "Note Register") in which, subject to reasonable regulations
as the Issuer may prescribe, the Issuer shall provide for the registration of,
and the registration of transfer and exchange of, the Notes. The Note Register
shall be the definitive record in which shall be recorded the name, address,
telephone number, facsimile number, contact person (if any) and taxpayer
identification number of each registered holder of the Class A-1 Notes (a
"Class A-1 Registered Noteholder"), the Class A-2 Notes (a "Class A-2
Registered Noteholder"), the Class B Notes (a "Class B Registered Noteholder")
and the Class C Notes (a "Class C Registered Noteholder") (the Class A-1
Registered Noteholders, the Class A-2 Registered Noteholders, the Class B
Registered Noteholders and the Class C Registered Noteholders being referred to
collectively, as the "Registered Noteholders") as provided by the Noteholders
by delivery by each Noteholder to the Indenture Trustee of a completed
Noteholder Data Sheet in substantially the form attached to this Indenture as
Exhibit F (a "Noteholder Data Sheet"), together with the numbers of the Notes,
the principal amount of each Note and details with respect to the registration
of any transfer or exchange of Notes. The Indenture Trustee shall rely on the
information set forth in Noteholder Data Sheets provided by the Noteholders
(and shall be entitled to so rely absent manifest error), as may be modified in
a written notice by any Noteholder received by the Indenture Trustee. The
Issuer and the Indenture Trustee and any of their respective agents may deem
and treat the

Noteholder of any Note as the absolute owner of such Note for the purpose of
receiving payment of the principal of and interest and premium, if any, on such
Note and for all other purposes whatsoever, whether or not such Note may be
overdue, and the Issuer and the Indenture Trustee and any of their respective
agents shall not be affected by any notice to the contrary.

Section 2.11. Payments of Interest; Payment to Noteholder on
Record Date.

The Class A-1 Notes shall bear interest at a variable rate
equal to LIBOR as in effect for the applicable Interest Period plus 0.40% (the
"Class A-1 Notes Rate") subject to a maximum Note Rate of 12.0%, calculated as
set forth below in this Section 2.11. The Class A-2 Notes shall bear interest
at a fixed rate equal to 7.325% per annum (the "Class A-2 Notes Rate"),
calculated as set forth below in this Section 2.11. The Class B Notes shall
bear interest at a fixed rate equal to 7.50% per annum (the "Class B Notes
Rate"), calculated as set forth below in this Section 2.11. The Class C Notes
shall bear interest at a fixed rate equal to 8.15% per annum (the "Class C
Notes Rate"), calculated as set forth below in this Section 2.11. Interest on
the outstanding principal amount of the Class A-1 Notes, the Class A-2 Notes,
the Class B Notes and the Class C Notes (1) shall accrue for each Interest
Period, at the Class A-1 Notes Rate, the Class A-2 Notes Rate, the Class B
Notes Rate and the Class C Notes Rate, respectively, from the end of the most
recent Interest Period for which interest has been paid or duly provided for,
or, if no interest has yet been paid or duly provided for, from the Issuance
Date, (2) except with respect to the Class A-1 Notes (with respect to which
interest shall be calculated on the basis of a 360-day year and the actual
number of days elapsed), shall be calculated on the basis of a 360-day year of
twelve 30-day months and (3) shall be payable monthly, in arrears, on each
Payment Date, commencing with the August 1994 Payment Date, in an amount equal
to the interest that accrued during the immediately preceding Interest Period
on the principal balance of the Class A-1 Notes, the Class A-2 Notes, the Class
B Notes and the Class C Notes, respectively, outstanding during such Interest
Period (from time to time and after giving effect to payments of principal and
allocations of Noteholder Charge-Offs, if any, made during such preceding
Interest Period, including payments of principal and allocations of Noteholder
Charge-Offs made on the Payment Date during such preceding Interest Period).
All payments of interest with respect to the Notes shall be paid, on each
Payment Date therefor, to the Person who is the Noteholder of the Note or Notes
(or predecessor or predecessors thereof) with respect to which such interest is
being paid as of the close of business on the

last day of the calendar month immediately preceding such Payment Date, whether
or not such date is a Business Day (the "Record Date"), notwithstanding any
transfer or exchange of such Note or Notes subsequent to the Record Date and
prior to such Payment Date; provided that, the final interest payment shall be
payable to the Person to whom principal is payable pursuant to Section 2.12 of
this Indenture. All payments of interest with respect to the Definitive Notes
of any Noteholder shall be paid (A) by wire transfer of immediately available
funds to the account maintained by such Noteholder in the United States who (1)
is an original Noteholder, (2) is a transferee that delivers to the Indenture
Trustee account payment instructions ("Account Payment Instructions") prior to
the applicable Record Date and holds an aggregate original principal amount of
at least $1,000,000 of any class of Notes or (3) is designated by the Trust and
with respect to which such Noteholder has provided to the Indenture Trustee,
prior to the applicable Record Date for such payment, Account Payment
Instructions specifying the bank account and wire transfer instructions to and
under which such payments are to be made (any such Noteholder providing such
Account Payment Instructions, a "Wire Transfer Payment Recipient") or (B) with
respect to Noteholders as to which Account Payment Instructions have not been so
received, by check of the Indenture Trustee mailed to such Noteholder at the
address of such Noteholder as set forth on the Record Date in the Note Register.
All payments of interest to Wire Transfer Payment Recipients with respect to the
Notes shall continue to be made pursuant to the applicable Account Payment
Instructions until such time, if any, that revised written Account Payment
Instructions of such Noteholder are received by the Indenture Trustee. The
Indenture Trustee and the Issuer are entitled to rely on such Account Payment
Instructions and to make payments in accordance therewith until receipt of
revised written Account Payment Instructions in accordance with this Indenture.
Payments of interest with respect to Book-Entry Notes shall be made in
accordance with Section 2.05 hereof.

Section 2.12. Payments of Monthly Principal. Payments of
Monthly Principal of the Notes shall be made on each Payment Date, commencing
with the Amortization Commencement Date, pursuant to and in accordance with
Section 2.05 of this Indenture. All payments of Monthly Principal of the
Definitive Notes shall be paid by the Indenture Trustee (1) to Noteholders that
are Wire Transfer Payment Recipients, by wire transfer of immediately available
funds to the account maintained by such Wire Payment Recipient specified in
such Wire Payment Recipient's Account Payment Instructions, and (2) to
Noteholders that are not Wire Transfer Payment Recipients, by check of the
Indenture Trustee mailed to such Noteholder at the address of such Noteholder
as set

forth in the Note Register. With respect to the final payment by the Indenture
Trustee to a Noteholder of the final installment of Monthly Principal and
accrued but unpaid interest and the Optional Full Redemption Price, if any, on
any Note, the Indenture Trustee shall make such final payment (1) to Noteholders
that are Wire Transfer Payment Recipients, by wire transfer of immediately
available funds to the account maintained by such Wire Payment Recipient in the
United States which was designated in the applicable note purchase agreement or
in later written instructions delivered to the Indenture Trustee, only upon
presentation and surrender of such Note at the Corporate Trust Office of the
Indenture Trustee on or after such date of payment, and (2) to Noteholders that
are not Wire Transfer Payment Recipients, by check of the Indenture Trustee
mailed to such Noteholder at the address of such Noteholder as set forth in the
Note Register, only upon presentation and surrender of such Note at the
Corporate Trust Office of the Indenture Trustee on or after such date of
payment. Any reduction in the principal amount of the Notes effected by any
payments of Monthly Principal or otherwise shall be binding upon all Noteholders
and all future Noteholders, whether or not any such reduction is noted upon a
Note so reduced, or a Note issued upon the registration of exchange or transfer
thereof. Payments of principal with respect to the Book-Entry Notes shall be
made in accordance with Section 2.05 hereof.

Section 2.13. Optional Redemptions of the Notes. In
connection with any Optional Full Redemption, Division Sale Optional Redemption
or Excess Funding Account Optional Redemption, the Indenture Trustee shall pay
the Optional Full Redemption Price and the Partial Redemption Price, as the
case may be, pursuant to and in accordance with Section 9.03 of this Indenture.

Section 2.14. Exchange and Transfer.

(a) Exchanges of Notes. Definitive Notes may be
exchanged for one or more Definitive Notes of any authorized denomination in an
aggregate principal amount equal to the aggregate principal amount of the
Definitive Notes surrendered, upon surrender of the Definitive Notes to be
exchanged at the Corporate Trust Office of the Indenture Trustee. Whenever any
Definitive Notes are so surrendered for exchange, the Owner Trustee, on behalf
of the Issuer shall execute, and the Indenture Trustee shall authenticate and
deliver, in exchange for the surrendered Definitive Notes, the Notes which the
Noteholder making the exchange is entitled to receive, bearing numbers not
contemporaneously outstanding.

(b) Transfers.

(1) Transfers of Beneficial Interests in the
Book-Entry Notes. Transfers of all or any part of any beneficial interest in
any of the Book-Entry Notes shall be made in accordance with the rules and
procedures of the Depositary. Unless and until Definitive Certificates are
issued pursuant to Section 2.09, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants.

(2) Transfers of Definitive Notes. Each
Noteholder of a Definitive Note may, at any time, subject to the restrictions
on transfer set forth in the Notes and this Indenture, transfer such Note, in
whole or in part, to another Person. Subject to the requirements of the Issuer
and the Indenture Trustee, upon receipt by the Indenture Trustee at its
Corporate Trust Office of (A) a Note to be transferred, (B) the form of
assignment attached to this Indenture as Exhibit H (or a written instrument of
transfer in form and substance satisfactory to the Indenture Trustee and to the
Issuer), duly executed by the Noteholder thereof or its attorney duly
authorized in writing and (C) written instructions from such Noteholder,
requesting the Indenture Trustee to authenticate and deliver, in authorized
denominations, one or more Notes of the same aggregate principal amount as the
Notes to be transferred to a designated transferee or transferees, and setting
forth appropriate delivery instructions, then, if all of the conditions set
forth in any of Sections 2.14(b)(2)(A), 2.14(b)(2)(B), 2.14(b)(2)(C) or
2.14(b)(2)(D) below are satisfied, (x) the Indenture Trustee shall cancel or
cause to be cancelled the Note to be transferred, (y) the Owner Trustee, on
behalf of the Issuer shall execute and the Indenture Trustee shall authenticate
and deliver, one or more Notes which the Noteholder or the transferee or
transferees thereof is entitled to receive in the same aggregate principal
amount as the Notes so cancelled, in accordance with the instructions referred
to above, and (z) the Indenture Trustee shall register such transfer.

(A) Transfers at Least Three Years After
Issuance. The date of the requested transfer is at least
three (3) years after the date of original issuance of the
Note being transferred;

(B) Transfers Pursuant to Rule 144A.
Such transfer is being made pursuant to the exemption from
registration under the Securities Act provided by Rule 144A
and (i) the transferor checks the box on the form of
assignment attached to this Indenture as Exhibit H

indicating that such transfer is being made in compliance
with Rule 144A, (ii) the Indenture Trustee is provided with a
certificate of the transferor substantially to the effect set
forth in the form attached to this Indenture as Exhibit I and
(iii) the Indenture Trustee is provided with an investment
letter from the proposed transferee substantially to the
effect set forth in the form attached to this Indenture as
Exhibit J;

(C) Transfers Pursuant to Rule 904. Such
transfer is being made pursuant to the exemption from
registration under the Securities Act provided by Rule 904 and
(i) the transferor checks the box on the form of assignment
attached to this Indenture as Exhibit H indicating that such
transfer is being made in compliance with Rule 904, (ii) the
Indenture Trustee is provided with a certificate of the
transferor substantially to the effect set forth in the form
attached to this Indenture as Exhibit I and (iii) the Indenture
Trustee is provided with an investment letter from the proposed
transferee substantially to the effect set forth in the form
attached to this Indenture as Exhibit J; or

(D) Other Transfers. The proposed
transfer is not being made within three (3) years after the
date of original issuance of the Notes being transferred and
is not being made pursuant to Rule 144A or Rule 904, and the
Indenture Trustee and the Issuer shall have received: (i) an
opinion of counsel satisfactory to the Issuer, and
satisfactory in form and substance to the Issuer,
substantially to the effect that such transfer does not
require registration under the Securities Act or qualification
of this Indenture under the Trust Indenture Act, and that such
transfer shall not otherwise violate any United States Federal
or state securities laws; (ii) a certificate of the transferor
substantially to the effect set forth in the form attached to
this Indenture as Exhibit K; and (iii) a certificate of the
transferee substantially to the effect set forth in the form
attached to this Indenture as Exhibit L.

(c) General. The Noteholders shall present directly to
the Indenture Trustee all requests for registration of transfer of Notes.
In connection with any registration of exchange or transfer of Notes, (1) the
Issuer and the Indenture

Trustee may require the payment of a sum sufficient to cover any fees and
expenses (including without limitation any governmental charge or tax and the
fees) that may be imposed in connection therewith and (2) the Issuer and the
Indenture Trustee shall not be required to register the exchange or transfer of
any Note (A) for a period of fifteen (15) days immediately preceding the mailing
of a notice of redemption pursuant to Section 9.03 of this Indenture or (B)
selected, called or being called for redemption. All Notes issued upon any
exchange or transfer of Notes permitted by this Indenture (1) shall be delivered
to the Noteholder thereof at the Corporate Trust Office of the Indenture Trustee
or (at the risk of such Noteholder) sent by mail to such address as may be
specified by such Noteholder in the related request for exchange or transfer;
(2) shall be valid obligations of the Issuer, evidencing the same debt and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such exchange or transfer. All Notes presented for registration of
transfer, exchange, redemption or payment shall (if so required by the Issuer or
the Indenture Trustee) be duly endorsed by, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Issuer and the
Indenture Trustee (including the form of assignment attached to this Indenture
as Exhibit H) duly executed by, the Noteholder thereof or its attorney duly
authorized in writing.

Section 2.15. Mutilated, Defaced, Destroyed, Lost or Stolen
Notes. In case any temporary or Definitive Note shall become mutilated,
defaced, destroyed, lost or stolen, the Issuer, in its discretion, may execute,
and upon the written order of the Issuer, an authorized officer of the
Indenture Trustee shall authenticate and deliver, a new temporary or definitive
Note bearing a number not contemporaneously outstanding, evidencing the same
rights and obligations as such mutilated, defaced, destroyed, lost or stolen
Note, in exchange and substitution for the mutilated or defaced Note, or in
lieu of a substitution for the Note destroyed, lost or stolen. The applicant
for such a substituted Note shall (1) furnish to the Issuer and to the
Indenture Trustee and any agent of the Issuer or the Indenture Trustee either
(a) if the Noteholder is an original holder or an institution, an indemnity
agreement in favor of the Issuer and the Indenture Trustee in a form
satisfactory to the Issuer and the Indenture Trustee or (b) such security or
indemnity (which may be in the form of a bond) as may be required by the
Issuer, the Indenture Trustee and such agent, (2) in each case of destruction,
loss or theft, furnish to the Issuer and to the Indenture Trustee evidence to
the satisfaction of the Issuer and the Indenture Trustee of the destruction,
loss or theft of the relevant Note and the ownership thereof and (3) in each
case of mutilation or

defacing, surrender the mutilated or defaced Note to the Issuer or to the
Indenture Trustee for cancellation thereof. Upon the issuance of any
substituted Note, the Issuer and the Indenture Trustee may require the payment
of a sum sufficient to cover any fees and expenses (including without
limitation any governmental charge or tax) that may be imposed in connection
therewith. Every substitute Note issued pursuant to the provisions of this
Section 2.15 by virtue of the fact that any Note is destroyed, lost or stolen
shall constitute an additional contractual obligation of the Issuer, whether or
not the destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of and shall be subject to
all the limitations of rights set forth in this Indenture equally and
proportionately with any and all other Notes, of the class of Note destroyed,
lost or stolen, duly authenticated and delivered under this Indenture. In the
case of any Note which is mutilated, defaced, destroyed, lost or stolen within
the fifteen (15) day period prior to the Optional Redemption Date, the
Scheduled Redemption Date or Series Termination Date of such Note, the Issuer
may, instead of issuing a substitute Note, pay or authorize the payment of the
same (without surrender thereof except in the case of a mutilated or defaced
Note) if the applicant for such payment shall (1) furnish to the Issuer and to
the Indenture Trustee and any agent of the Issuer or the Indenture Trustee such
security or indemnity (which may be in the form of a bond) as may be required
by the Issuer, the Indenture Trustee and such agent and (2) in each case of
destruction, loss or theft, furnish to the Issuer and to the Indenture Trustee
evidence to the satisfaction of the Issuer and the Indenture Trustee of the
destruction, loss or theft of the relevant Note and the ownership thereof. All
Notes shall be held and owned upon the express condition that, to the extent
permitted by law, the foregoing provisions are exclusive with respect to the
replacement or payment of mutilated, defaced, destroyed, lost or stolen Notes
and shall preclude any and all other rights or remedies notwithstanding any law
or statute existing or hereafter enacted to the contrary with respect to the
replacement or payment of negotiable instruments or other securities without
the surrender thereof.

Section 2.16. Cancellation of Notes; Destruction Thereof.
All Notes surrendered for payment, redemption or registration of transfer or
exchange pursuant to any of the provisions of this Indenture, whether
surrendered to the Issuer or to any agent of the Issuer or the Indenture
Trustee, shall be delivered to the Indenture Trustee for cancellation and shall
be promptly cancelled and destroyed by the Indenture Trustee in accordance with
its standard procedures (unless previously instructed in writing by the Issuer
to do otherwise), and if

surrendered to the Indenture Trustee, shall be promptly cancelled and destroyed
by the Indenture Trustee in accordance with its standard procedures (unless
previously instructed in writing by the Issuer to do otherwise); and no Notes
shall be issued in lieu thereof except as expressly permitted by any of the
provisions of this Indenture. The Indenture Trustee shall promptly deliver a
certificate of any such cancellation and destruction to the Issuer.

Section 2.17. Temporary Notes. Pending the preparation of
definitive Notes, the Authorized Officers of the Issuer may execute and the
Indenture Trustee shall, upon the written order of the Issuer authenticate and
deliver temporary Notes (printed, lithographed, typewritten or otherwise
reproduced, in each case in form satisfactory to the Indenture Trustee).
Temporary Notes shall be issuable as registered Notes without coupons, of any
authorized denomination, and substantially in the form of the definitive Notes,
but with such omissions, insertions and variations as may be appropriate for
temporary Notes, all as may be determined by the Issuer. Temporary Notes may
contain such reference to any provisions of this Indenture as may be
appropriate. Every temporary Note shall be executed by the Issuer and be
authenticated and delivered by the Indenture Trustee upon the same conditions
and in substantially the same manner, and with like effect, as the definitive
Notes. Without unreasonable delay after the issuance of any temporary Notes,
the Issuer shall execute and shall furnish definitive Notes and thereupon
temporary Notes may be surrendered in exchange for such definitive Notes
without charge at the Indenture Trustee's Corporate Trust Office, and the
Indenture Trustee shall authenticate and deliver in exchange for such temporary
Notes a like aggregate principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall be entitled to
the same benefits under this Indenture as definitive Notes.

Section 2.18. Appointment of Indenture Trustee. Each
Noteholder, by its acceptance of a Note, shall be deemed to have consented to
the appointment of the Indenture Trustee to act, on the terms and conditions
specified in this Indenture, as Indenture Trustee for the benefit of the
Noteholders. To the extent permitted by the terms of the Notes and this
Indenture and subject to Article XI herein, the Indenture Trustee shall follow
the directions of the Seller, or if for federal income tax purposes, a
different party or parties are deemed to be the holders of the equity interests
in the Trust, the Indenture Trustee shall follow the directions of the holders
of a majority of the equity interests in the Trust.

Section 2.19. Issuer and Affiliate. Notwithstanding anything
to the contrary contained in this Indenture or the Notes, the Issuer and any
Affiliate thereof may at any time purchase any Notes, at any price or prices,
in the open market or otherwise; provided, however, that their rights and
remedies in respect of the Notes shall be subject to Section 10.13 of the
Purchase and Servicing Agreement. Any Note held by the Issuer or an Affiliate
thereof shall be deemed not to be outstanding for purposes of determining
Majority Noteholders.

Section 2.20. [Reserved]

Section 2.21. Certain Certificates. The Issuer shall furnish
the Indenture Trustee with a certificate of the Owner Trustee certifying the
incumbency and specimen signatures of officers of the Owner Trustee authorized
on behalf of the Owner Trustee to execute Notes and to give instructions or to
make certain representations to the Indenture Trustee in accordance with the
provisions of this Indenture, which certificate the Indenture Trustee shall be
entitled to conclusively rely on until such time, if any, that the Indenture
Trustee receives from the Owner Trustee a revised certificate. The Indenture
Trustee shall furnish the Owner Trustee with a certificate of the Indenture
Trustee certifying the incumbency and specimen signatures of officers of the
Indenture Trustee authorized on behalf of the Indenture Trustee to authenticate
Notes, on which certificate the Owner Trustee shall be entitled to rely.

Section 2.22. Issuance of Additional Notes. Pursuant to any
one or more Series Supplements, the Issuer may issue from time to time a new
Series, subject to the conditions described below (each such issuance or sale,
a "New Issuance"). The Issuer may designate, with respect to any newly issued
Series, the principal terms of such new Series (the "Principal Terms" of such
Series) in any such Series Supplement. The terms of each Series Supplement
may, subject to certain conditions described below, modify or amend the terms
of the Indenture solely as applied to such new Series. None of the Issuer, the
Servicer, the Indenture Trustee or the Seller is required or intends to obtain
the consent of any Noteholder of any outstanding Series to issue any additional
Series.

The Issuer may designate Principal Terms such that each Series
has a period during which accumulation of the principal amount thereof in a
principal funding account or pay-out of the principal amount thereof is
intended to occur, which may have a different length, and begin on a different
date, than such periods for any other Series. Further, one or more Series may
be in their

interest-only or pay-out periods while other Series are not. Moreover, each
Series may have the benefits of Enhancements issued by providers of Enhancement
different from the providers of Enhancement with respect to any other Series.
The Indenture Trustee shall hold any such Enhancement only on behalf of the
Series to which such Enhancement relates. With respect to each such
Enhancement, the Seller may deliver a different form of Enhancement agreement
(if any). There is no limit to the number of New Issuances that the Issuer may
issue.

A New Issuance may only occur upon the satisfaction of the
following conditions: (a) the Issuer shall have given the Indenture Trustee,
the Servicer, each Rating Agency (if any rated notes are outstanding) and each
provider of Enhancement written notice of such New Issuance and the date upon
which the New Issuance is to occur; (b) the Issuer shall have delivered to the
Indenture Trustee the related Series Supplement in form satisfactory to the
Indenture Trustee; (c) with respect to a new Series only, the Seller shall have
delivered to the Indenture Trustee any related Enhancement agreement; (d) the
Rating Agency Condition shall have been satisfied with respect to such
issuance; (e) the Issuer shall have delivered to the Indenture Trustee, each
Rating Agency (if any rated notes are outstanding) and each provider of an
Enhancement an opinion of counsel (a "Tax Opinion") acceptable to the Indenture
Trustee that for Federal income tax purposes (i) the new notes issued shall be
properly characterized as debt (or as a partnership interest) and (ii) the New
Issuance shall not adversely affect the characterization of the notes of any
outstanding Series or class as debt; (f) the Issuer shall have delivered to the
Indenture Trustee a certificate to the effect that no Early Amortization Event
(or event that if not cured within the applicable grace period would constitute
an Early Amortization Event) has occurred and is continuing and that such New
Issuance is not reasonably expected to result in an Early Amortization Event at
any time in the future; (g) the Issuer shall have delivered to the Indenture
Trustee a certificate to the effect that each of the conditions set forth
herein for the New Issuance and the execution and delivery of the related
Series Supplement has been satisfied; and (h) any other conditions specified in
any Series Supplement. Upon satisfaction of the above conditions, the Owner
Trustee on behalf of the Issuer shall execute the Series Supplement and, with
respect to a New Issuance of a Series, issue to the Issuer the notes of such
new Series for execution by the Owner Trustee on behalf of the Issuer and
deliver such notes to the Indenture Trustee for authentication.

24
ARTICLE III

SECURITY INTEREST

Section 3.01. Security Interest. The Issuer hereby assigns
and pledges to the Indenture Trustee, and the Indenture Trustee hereby accepts,
for its benefit and for the benefit of the Noteholders, a security interest in
the following collateral, whether now owned or hereafter acquired
(collectively, the "Collateral"), to secure the payment of all obligations of
the Issuer now or hereafter existing under this Indenture, whether for
principal, interest, premium, indemnities or otherwise (collectively, the
"Secured Obligations"):

(a) all right, title and interest of the Issuer in and to the
Purchased Receivables, including without limitation all
accounts, contract rights, chattel paper, instruments, general
intangibles and other obligations of any Obligor with respect
to any Purchased Receivables, now or hereafter existing,
whether or not arising out of or in connection with the sale
or lease of goods or the rendering of services, including
without limitation, the right to payment of any interest,
Finance Charges, returned check fees or late charges and other
obligations of an Obligor with respect to any Purchased
Receivables, and all rights in and to all security agreements
and other contracts securing or otherwise relating to any such
accounts, contract rights, chattel paper, instruments, general
intangibles and obligations (any and all such security
agreements and other contracts being the "Related Contracts");

(b) all guarantees, insurance and other agreements or arrangements
of whatever character from time to time supporting or securing
payment of any Purchased Receivables;

(c) the Purchase and Servicing Agreement, including without
limitation, (1) all rights of the Issuer to receive moneys due
and to become due under or pursuant to the Purchase and
Servicing Agreement, (2) all rights of the Issuer to receive
proceeds of any insurance, indemnity or warranty with respect
to the Purchase and Servicing Agreement, (3) claims of the
Issuer for damages arising out of or for breach of or default
under the Purchase and Servicing Agreement and (4) the right of
the Issuer to perform thereunder and to compel performance and
otherwise exercise all remedies thereunder;

(d) the following (the "Account Collateral"):

(1) the Post Office Boxes, the Collection Deposit
Accounts, the Collateral Account (including all
subaccounts thereof) and the Excess Funding Account,
and all funds, and all certificates and instruments,
if any, from time to time representing or evidencing
funds, held in the Post Office Boxes, the Collection
Deposit Accounts, the Collateral Account and the
Excess Funding Account;

(2) all Eligible Investments of funds in the Collateral
Account and the Excess Funding Account from time to
time, and all certificates and instruments, if any,
from time to time representing or evidencing such
Eligible Investments;

(3) all notes, certificates of deposit and other
instruments from time to time hereafter delivered to
or otherwise possessed by the Indenture Trustee for
and on behalf of the Issuer in substitution for or in
addition to any of the then existing Account
Collateral;

(4) all interest, dividends, cash, instruments and other
property from time to time received, receivable or
otherwise distributed in respect of or in exchange
for any and all of the then existing Account
Collateral; and

(5) all additional property that may from time to time
hereafter be assigned or pledged to the Indenture
Trustee for the benefit of the Noteholders by the
Issuer or by any Person on the Issuer's behalf,
including without limitation the deposit with the
Indenture Trustee of additional moneys by the Issuer;
and

(e) proceeds of any and all of the Collateral described in
Sections 3.01(a) through 3.01(d) above (including without
limitation Recoveries and proceeds that constitute property of
the types described in clauses (a) through (d) above) and, to
the extent not otherwise included, all payments under
insurance (whether or not the Indenture Trustee is the loss
payee thereof), or any indemnity, warranty or guaranty,
payable by reason of

loss or damage to or otherwise with respect to any of such
foregoing Collateral.

Section 3.02. [Reserved].

Section 3.03. License. Upon the occurrence and during the
continuance of an Early Amortization Event, the Issuer shall be deemed to have
granted to the Indenture Trustee a non-exclusive and, except to the extent
provided below in this Section 3.03, non-transferable license to use the
Licensed Names, which license to use (1) may be transferred by the Indenture
Trustee to the extent necessary to collect the Purchased Receivables in a
commercially reasonable manner, (2) is limited to (a) such uses of the Licensed
Names as are reasonably necessary to the collection by the Indenture Trustee in
a commercially reasonable manner of the Purchased Receivables and (b) actions
taken in accordance with the terms of this Indenture and (3) shall expire on
the expiration of a reasonable time for the collection of all Purchased
Receivables. Notwithstanding anything to the contrary in this Indenture or in
any other agreement between the parties, no other uses or display of the
Licensed Names shall be made by the Indenture Trustee except as granted in this
Section 3.03.

Section 3.04. The Issuer Remains Liable. Notwithstanding
anything to the contrary in this Indenture, (a) prior to foreclosure on such
Collateral, the Issuer shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein to perform all of its
duties and obligations thereunder to the same extent as if this Indenture had
not been executed and (b) neither the Indenture Trustee nor any of the
Noteholders shall, prior to foreclosure on such Collateral, have any obligation
or liability under the contracts and agreements included in the Collateral by
reason of this Indenture or be obligated to perform any of the obligations or
duties of the Issuer thereunder or to take any action to collect or enforce any
claim for payment assigned hereunder.

Section 3.05. Delivery of Certain Collateral. All
certificates or instruments, if any, representing or evidencing the Collateral
the possession of which by the Indenture Trustee is necessary to perfect the
security interest of the Indenture Trustee therein shall be delivered to and
held by or on behalf of the Indenture Trustee pursuant to this Indenture and
shall be in suitable form for transfer by delivery, or shall be accompanied by
duly executed instruments of transfer or assignment in blank. The Indenture
Trustee shall have the right, at any time in its discretion and without notice
to the Issuer, to transfer to or to register in the name of the Indenture
Trustee or any of its

nominees or custodians any or all of such Collateral. In addition, the
Indenture Trustee shall have the right at any time to exchange certificates or
instruments representing or evidencing Collateral for certificates or
instruments of smaller or larger denominations.

Section 3.06. Copies as Financing Statements. A carbon,
photographic or other reproduction of this Indenture or any financing statement
covering the Collateral or any part thereof shall be sufficient as a financing
statement where permitted by law.

ARTICLE IV

BANK ACCOUNTS AND COLLECTIONS

Section 4.01. Post Office Boxes and Collection Deposit Accounts.

(a) Post Office Boxes. The Issuer has
established or caused to be established the post office boxes listed on
Schedule I to this Indenture (such post office boxes, or any successor post
office boxes established in accordance with this Indenture, being referred to
as the "Post Office Boxes") for the collection of Mail Payments. The Issuer
(1) represents and warrants that no post office box other than the Post Office
Boxes has been established for the collection of Mail Payments, (2) agrees that
the Indenture Trustee is authorized to receive mail delivered to the Post
Office Boxes, that a Standing Delivery Order in the form attached to this
Indenture as Exhibit M has been filed with the United States Postal Service
authorizing the Indenture Trustee to receive mail delivered to the Post Office
Boxes, and that the Indenture Trustee, acting at the written direction of the
Majority Noteholders, may deny the Issuer access to the Post Office Boxes
following the occurrence and during the continuance of a Servicer Default
(provided that, no direction by the Majority Noteholders to the Indenture
Trustee to deny the Issuer access to any Post Office Box shall be effective
unless such Majority Noteholders provide prior written certification to the
Issuer and the Indenture Trustee that a Servicer Default has occurred and is
continuing) and (3) agrees that no new post office box shall be established for
the collection of Mail Payments unless and until a Standing Delivery Order has
been filed with the United States Postal Service authorizing the Indenture
Trustee to receive mail delivered to such post office box. The Servicer agrees
to pay all fees for the use of the Post Office Boxes.

(b) Establishment of Collection Deposit Accounts.
The Issuer has established or caused to be established and maintained with the
banks listed on Schedule I to this Indenture (the "Collection Deposit Account
Banks") the blocked deposit accounts listed on such Schedule I in the name of
the Indenture Trustee into which the Mail Payments shall be deposited, from the
Post Office Boxes, from time to time (all such blocked deposit accounts, or any
successor blocked deposit accounts established in accordance with this
Indenture, together with all Collections, moneys, instruments and other
property from time to time deposited therein being collectively referred to as
the "Collection Deposit Accounts"). The Issuer hereby transfers to the
Indenture Trustee the sole and exclusive dominion over and control of the
Collection Deposit Accounts. Prior to or contemporaneously with the execution
of this Indenture, the Issuer shall deliver to the Indenture Trustee fully
executed letters in the form attached to this Indenture as Exhibit N (the
"Collection Deposit Account Letters") from each of the Collection Deposit
Account Banks. To the extent the Indenture Trustee may exercise any authority
granted to it under a Collection Deposit Account Letter, it shall do so only at
the written direction of the Majority Noteholders.

(c) Termination of Collection Deposit Accounts;
Successor Collection Deposit Accounts. In the event any Collection Deposit
Account Bank shall, after the date of this Indenture, terminate a Collection
Deposit Account for any reason, or if the Indenture Trustee, acting at the
written direction of the Majority Noteholders, shall demand such termination,
the Issuer agrees to make all future deposits of Mail Payments to another
Collection Deposit Account that has not been terminated or to a successor
Collection Deposit Account established as provided below in this Section
4.01(c); provided, that, if the Indenture Trustee, acting at the written
direction of the Majority Noteholders, shall demand termination of all
Collection Deposit Accounts, the Issuer agrees to make all future deposits of
Mail Payments directly to the Collateral Account. No direction by the Majority
Noteholders to the Indenture Trustee to demand the termination of a Collection
Deposit Account shall be effective unless such Majority Noteholders give prior
written notice to the Indenture Trustee and to the Issuer that (1) an Early
Amortization Event has occurred and is continuing, (2) the subject Collection
Deposit Account Bank is not performing in all material respects under the terms
of the applicable Collection Deposit Account Letter or (3) such Majority
Noteholders reasonably believe that the Collection Deposit Account Bank at
which the subject Collection Deposit Account is maintained may become subject
to insolvency, receivership or similar proceedings (it being understood that
the Majority Noteholders shall have no obligation

to give any such notice). No new Collection Deposit Account shall be
established until and unless a successor Collection Deposit Account Bank shall
have executed and delivered to the Issuer and to the Indenture Trustee a
Collection Deposit Account Letter. The Indenture Trustee shall have sole and
exclusive dominion over and control of any such successor Collection Deposit
Account.

Section 4.02. Collateral Account.

(a) Establishment of Collateral Account;
Subaccount Structure. The Issuer has established or caused to be established
and maintained with the Indenture Trustee a collateral account identified as
such on Schedule I to this Indenture (such account, or any successor collateral
account established pursuant to this Indenture, together with all Collections,
moneys, instruments and other property from time to time deposited therein, the
"Collateral Account"), which is a segregated trust account of the Issuer in the
name of the Indenture Trustee. The Collateral Account shall include a notation
that it has been established pursuant to this Indenture. The Collateral
Account shall have the following subaccounts (which need not be separate trust
accounts): (1) an Interest Subaccount (the "Interest Subaccount") and (2) a
General Subaccount (the "General Subaccount"). All amounts initially
transferred to the Collateral Account (including collections received from Mail
Payments pursuant to Section 4.01 hereof and collections received from Store
Payments pursuant to Section 6.04 of the Purchase and Servicing Agreement)
shall be held in the General Subaccount and shall remain in the General
Subaccount unless and until withdrawn or transferred in accordance with the
instructions delivered to the Indenture Trustee pursuant to this Indenture.
Amounts held in the General Subaccount shall be available for use for all
purposes under this Indenture. On the Issuance Date, the proceeds received by
the Issuer from the issuance and sale of the Notes (which proceeds shall be in
the form of immediately available funds), less that amount of such proceeds
used to purchase Receivables pursuant to the Purchase and Servicing Agreement,
shall be deposited into the Collateral Account to effect the allocations,
transfers, applications and payments required and permitted under Article V of
this Indenture. The Issuer hereby transfers to the Indenture Trustee the sole
and exclusive dominion over and control of the Collateral Account.

(b) Investment of Collateral Account Funds.
Funds on deposit in the Collateral Account shall be invested by the Indenture
Trustee, at the written direction of the Servicer, in specified Eligible
Investments which shall mature on or prior to the Business Day preceding the
next Payment Date. Any funds in

the Collateral Account for which no permitted investment instructions are
received by the Indenture Trustee by 11:00 a.m. (New York City time) on any
Business Day shall be invested by the Indenture Trustee in such investments as
described in clause (vi) of the definition of "Eligible Investments" set forth
in Annex I hereto or, if such investment is not an Eligible Investment or is
otherwise not available, in Eligible Investments of a type specified in clause
(i) of the definition thereof. Eligible Investments shall be maintained in the
name of the Indenture Trustee or its nominee or its custodian (and, in either
case, the Indenture Trustee's books and records shall include the notation that
such Eligible Investments are maintained pursuant to this Indenture) and, if
certificated, the Indenture Trustee or custodian shall maintain possession of
the certificates. Any direction of the Servicer to the Indenture Trustee to
make an investment shall be made in writing and shall certify that the requested
investment qualifies as an Eligible Investment for purposes of this Indenture.
Any earnings (net of losses and investment expenses) on invested Collateral
Account funds shall be invested and reinvested by the Indenture Trustee, at the
written direction of the Servicer, in Eligible Investments, and all such
earnings shall be deposited to and retained in the General Subaccount as set
forth in this Indenture for subsequent application and transfer pursuant to this
Indenture. The Indenture Trustee may, at the written direction of the Servicer,
liquidate an Eligible Investment prior to maturity if such liquidation would not
result in a loss of all or part of the principal portion of such Eligible
Investment or if, prior to the maturity of such Eligible Investment, a default
occurs in the payment of principal, interest or any other amount with respect to
such Eligible Investment. The Indenture Trustee shall not be liable for any loss
or expense incurred or resulting from the investment performance of any
investment or reinvestment of moneys held in the Collateral Account in Eligible
Investments or from the sale or liquidation of any Eligible Investments in
accordance with this Indenture except for any losses or expenses resulting from
the gross negligence or willful misconduct on the part of the Indenture Trustee.

(c) Termination of Collateral Account; Successor
Collateral Account. In the event the Indenture Trustee shall, after the date
of this Indenture, terminate the Collateral Account for any reason, or if the
Indenture Trustee shall, acting at the written direction of the Majority
Noteholders, demand such termination, the Issuer agrees to notify all
Collection Deposit Account Banks to cease the transfer of funds required by the
Collection Deposit Account Letters from the Collection Deposit Accounts to the
Collateral Account (and, if the Issuer fails to so

notify the Collection Deposit Account Banks, the Issuer irrevocably grants the
Indenture Trustee, acting at the written direction of the Majority Noteholders,
the authority to so notify the Collection Deposit Account Banks). No direction
by the Majority Noteholders to the Indenture Trustee to demand termination of
the Collateral Account shall be effective unless such Majority Noteholders give
prior written notice to the Issuer and to the Indenture Trustee that (1) an
Early Amortization Event has occurred and is continuing, (2) the Indenture
Trustee is not performing in all material respects to the satisfaction of the
Issuer and the Majority Noteholders under the terms of this Indenture and the
other Transaction Documents or (3) such Majority Noteholders reasonably believe
that the Indenture Trustee may become subject to insolvency, receivership or
similar proceedings (it being understood that the Majority Noteholders shall
have no obligation to give any such notice). In the event that the Collateral
Account is terminated pursuant to this Section 4.02(c), the Issuer shall
promptly establish a successor collateral account in accordance with Section
4.02(a) of this Indenture.

Section 4.03. Excess Funding Account.

(a) Establishment of Excess Funding Account. The
Issuer has established or caused to be established and maintained with the
Indenture Trustee an excess funding account identified as such on Schedule I to
this Indenture (such account, or any successor excess funding account
established pursuant to this Indenture, together with all Collections, moneys,
instruments and other property from time to time deposited therein, the "Excess
Funding Account"), which is a segregated trust account of the Issuer in the
name of the Indenture Trustee. The Excess Funding Account shall include a
notation that it has been established pursuant to this Indenture. The Issuer
hereby transfers to the Indenture Trustee the sole and exclusive dominion over
and control of the Excess Funding Account. The Issuer shall deposit to the
Excess Funding Account on the Issuance Date cash in an amount equal to the
excess of (i) $380,760,000 over (ii) the Borrowing Base as of the Issuance
Date.

(b) Investment of Excess Funding Account Funds.
Funds on deposit in the Excess Funding Account shall be invested by the
Indenture Trustee, at the written direction of the Servicer, in specified
Eligible Investments which shall mature on or prior to the Business Day
preceding the next Payment Date. Any funds in the Excess Funding Account for
which no permitted investment instructions are received by the Indenture
Trustee by 11:00 a.m. (New York City time) on any Business Day shall be
invested by the Indenture Trustee in such investments as described

in clause (vi) of the definition of "Eligible Investments" set forth in Annex I
hereto or, if such investment is not an Eligible Investment or is otherwise not
available, in Eligible Investments of a type specified in clause (i) of the
definition thereof. Eligible Investments shall be maintained in the name of
the Indenture Trustee or its nominee or custodian and, if certificated, the
Indenture Trustee or its nominee or custodian (and, in either case, the
Indenture Trustee's books and records shall include the notation that such
Eligible Investments are maintained pursuant to this Indenture) and, if
certificated, the Indenture Trustee or its custodian shall maintain possession
of the certificates. Any direction of the Servicer to the Indenture Trustee to
make an investment shall be made in writing and shall certify that the requested
investment qualifies as an Eligible Investment for purposes of this Indenture.
Any earnings (net of losses and investment expenses) on invested Excess Funding
Account funds shall be invested and reinvested by the Indenture Trustee, at the
written direction of the Servicer, in Eligible Investments, and, on the Business
Day preceding each Payment Date, all such earnings shall be deposited to and
retained in the General Subaccount for subsequent allocation and transfer
pursuant to this Indenture. The Indenture Trustee may, at the written direction
of the Servicer, liquidate an Eligible Investment prior to maturity if such
liquidation would not result in a loss of all or part of the principal portion
of such Eligible Investment or if, prior to the maturity of such Eligible
Investment, a default occurs in the payment of principal, interest or any other
amount with respect to such Eligible Investment. The Indenture Trustee shall
not be liable for any loss or expense incurred or resulting from the investment
performance of any investment or reinvestment of moneys held in the Excess
Funding Account in Eligible Investments or from the sale or liquidation of any
Eligible Investments in accordance with this Indenture except for any losses or
expenses resulting from the gross negligence or willful misconduct on the part
of the Indenture Trustee.

(c) Termination of Excess Funding Account;
Successor Excess Funding Account. In the event the Indenture Trustee shall,
after the date of this Indenture, terminate the Excess Funding Account for any
reason, or if the Indenture Trustee shall, acting at the written direction of
the Majority Noteholders, demand such termination, the Issuer shall promptly
establish a successor excess funding account in accordance with Section
4.03.(a) of this Indenture. No direction by the Majority Noteholders to the
Indenture Trustee to demand termination of the Excess Funding Account shall be
effective unless such Majority Noteholders give prior written notice to the
Issuer and to the Indenture Trustee that (1) an Early Amortization Event has

occurred and is continuing, (2) the Indenture Trustee is not performing to the
satisfaction of the Issuer and the Majority Noteholders or (3) such Majority
Noteholders reasonably believe that the Indenture Trustee may become subject to
insolvency, receivership or similar proceedings (it being understood that the
Majority Noteholders shall have no obligation to give any such notice).

(d) Borrowing Base Deficiency. If on any
Business Day during the Interest-Only Period a Borrowing Base Deficiency
exists, the Indenture Trustee shall cure such Borrowing Base Deficiency by
depositing from the General Subaccount into the Excess Funding Account an
amount equal to the Borrowing Base Deficiency. To the extent funds in the
Collateral Account are insufficient to cover the Borrowing Base Deficiency, the
Trust may deposit additional funds from its own accounts in the Excess Funding
Account in an amount not to exceed any Borrowing Base Deficiency remaining
after available funds have been transferred from the Collateral Account. If,
on any Business Day during the Interest-Only Period, the Borrowing Base exceeds
the Net Note Principal Amount, the amount of such excess on deposit in the
Excess Funding Account shall be released at the written direction of the
Servicer or as indicated in the Daily Report for deposit into the General
Subaccount.

(e) Release of Excess Funding Account Funds. On
any Business Day during the Interest-Only Period, the Indenture Trustee shall
release, from the funds on deposit in the Excess Funding Account, that amount
of funds requested to be released by the Issuer (each such action, a "Release")
(as set forth in the Daily Report), for use as set forth in Section 5.01 of
this Indenture; provided that, no such Release shall be permitted to the extent
such Release would create a Borrowing Base Deficiency.

(f) Application of Excess Funding Account Funds
on Amortization Commencement Date. Upon the Amortization Commencement Date,
all funds on deposit in the Excess Funding Account (including without
limitation all earnings thereon) shall be applied pursuant to the first
sentence of Section 5.04(c) of this Indenture.

Section 4.04. Optional Redemption Account.

(a) Establishment of Optional Redemption Account.
The Issuer has established or caused to be established and maintained with the
Indenture Trustee an optional redemption account identified as such on Schedule
I to this Indenture (such account, or any successor optional redemption account
established

pursuant to this Indenture, together with all Collections, moneys, instruments
and other property from time to time deposited therein, the "Optional Redemption
Account"), which is a segregated trust account of the Issuer in the name of the
Indenture Trustee. The Optional Redemption Account shall include a notation
that it has been established pursuant to this Indenture. The Issuer hereby
transfers to the Indenture Trustee the sole and exclusive dominion over and
control of the Optional Redemption Account.

(b) Deposits from Excess Funding Account. Funds
in the Excess Funding Account which shall be used to effect an Excess Funding
Account Optional Redemption as set forth in Section 9.02 hereof shall be
withdrawn by the Indenture Trustee from the Excess Funding Account and
deposited into the Optional Redemption Account for the period following the
Optional Redemption Announcement Date up to the Partial Redemption Date and
thereafter released to the Noteholders pursuant to Section 9.03 hereof.

Section 4.05. Reserved.

Section 4.06. Other Bank Accounts. The Issuer agrees that it
shall have no, and shall not make or maintain any deposits in any bank account,
deposit account or trust account other than the Collection Deposit Accounts,
the Collateral Account, the Excess Funding Account, the Optional Redemption
Account and such accounts as are maintained pursuant to the Trust Agreement.

Section 4.07. Correction of Improper Deposits. If the Issuer
provides the Indenture Trustee with written notice that a deposit has been made
improperly into the Collateral Account, the Excess Funding Account or the
Collection Deposit Accounts, the Indenture Trustee shall promptly release the
amount of the improper deposit, together with interest actually earned thereon
(net of related losses and investment expenses), to correct such improper
deposit.

Section 4.08. Maintenance of Collateral Account, Excess
Funding Account or Optional Redemption Account. The Collateral Account, the
Excess Funding Account and the Optional Redemption Account shall at all times
be maintained (i) with a depositary institution whose deposits are insured to
the limits provided by law by the FDIC having corporate trust powers and acting
as trustee for funds deposited therein (provided, however, that such account
need not be maintained as a segregated trust account with the corporate trust
department of such institution if at all times the certificates of deposit,
short-term deposits or commercial paper or the long-term unsecured debt
obligations (other than such obligation whose rating is based on collateral or
on the credit of

a Person other than such institution or trust company) of such depositary
institution or trust company shall have a credit rating from Standard & Poor's
of at least A-1+ and Duff-1 from Duff & Phelps in the case of the certificates
of deposit, short-term deposits or commercial paper, or a rating from Standard
& Poor's of AAA and from Duff & Phelps of AAA in the case of the long-term
unsecured debt obligations) or (ii) with a depositary institution, which may
include the Indenture Trustee, which is acceptable to the Rating Agency (in the
case of (i) and (ii), a "Qualified Institution"). If at any time, the
institution holding the Collateral Account, Excess Funding Account or Optional
Redemption Account ceases to be a Qualified Institution, the Issuer shall
direct the Servicer to establish within 10 Business Days a new Collateral
Account, Excess Funding Account or Optional Redemption Account with a Qualified
Institution, transfer any cash and/or any investments to such new Collateral
Account, Excess Funding Account or Optional Redemption Account and from the
date such new Collateral Account, Excess Funding Account or Optional Redemption
Account is established, it shall be the "Collateral Account", the "Excess
Funding Account" or the "Optional Redemption Account". The Servicer shall give
written notice to the Indenture Trustee of the location and account number of
the Collateral Account, the Excess Funding Account or the Optional Redemption
Account and shall notify the Indenture Trustee in writing prior to any
subsequent change thereof. In the event any of the Collateral Account, Excess
Funding Account or Optional Redemption Account is maintained with a bank other
than with the Indenture Trustee, the Indenture Trustee shall receive a wire
transfer of immediately available funds from such bank no later than 10:00 a.m.
on any Payment Date with respect to any amounts from any such Collateral
Account, Excess Funding Account or Optional Redemption Account which the
Indenture Trustee is required to receive in order to make the distributions
required in accordance with Article V herein.

ARTICLE V

ALLOCATIONS, TRANSFERS AND PAYMENTS

Section 5.01. On Business Days during the Interest-Only
Period. By no later than 1:00 p.m. (New York City time) on each Business Day
during the Interest-Only Period (including without limitation on Business Days
that are also Payment Dates), the Indenture Trustee shall make the following
allocations, transfers and payments based on the Daily Report covering the
Applicable Day:

(1) On each Business Day during the Interest-Only Period,
funds on deposit in the Collateral Account representing Series Allocable
Collections and Investment Proceeds shall be allocated in the following
priority:

(i) to the Interest Subaccount, an amount equal to (A)
1/10th of the aggregate Monthly Interest payable in
respect of each class of Notes on the Payment Date
occurring in the next succeeding Settlement Period,
plus (B) the amount by which deposits to the Interest
Subaccount required pursuant to clause (i)(A) exceed
amounts actually deposited therein for the period
from and including the first day of the current
Settlement Period to the date of determination, until
the amount deposited in the Interest Subaccount
equals the aggregate Monthly Interest payable in
respect of each class of Notes on the Payment Date
occurring in the next succeeding Settlement Period;

(ii) to the Interest Subaccount, an amount equal to (A)
1/10th of the Monthly Servicing Fee payable on the
Payment Date occurring in the next succeeding
Settlement Period, plus (B) the amount by which
deposits to the Interest Subaccount required pursuant
to clause (ii)(A) exceed amounts actually deposited
therein for the period from and including the first
day of the current Settlement Period to the date of
determination, until the amount deposited in the
Interest Subaccount equals the Monthly Servicing Fee
payable on the Payment Date occurring in the next
succeeding Settlement Period; and

(iii) to the Excess Funding Account, an amount equal to the
greater of (a) the portion of the Noteholder Default
Amount reported by the Servicer on such Business Day
and (b) 100% of the amount of any Borrowing Base
Deficiency.

Notwithstanding clause (i) above, the Issuer shall deposit in the
Interest Subaccount on the Issuance Date an amount equal to the Monthly Interest
payable on the August 1994 Payment Date and no other deposits to the Interest
Subaccount pursuant to clause (i) shall be required in respect of the Settlement
Period relating to the August 1994 Payment Date.

(2) All Series Allocable Collections and Investment
Proceeds remaining after application in accordance with clause (1) above,
together with funds released from the Excess Funding Account on such day
pursuant to Section 4.03(e) hereof, if any, shall be applied in the following
priority:

(i) to pay to the Seller an amount equal to the lesser of
(A) the aggregate Purchase Price for all Receivables
sold to the Issuer by the Seller on such Business Day
pursuant to and in accordance with the terms of the
Purchase and Servicing Agreement and (B) the amount
so directed by the Servicer in the applicable Daily
Report; and

(ii) solely at the Issuer's option, to individually or in
any combination and without regard to priority: (A)
to make distributions to the Trust in respect of the
Trust Interest, or (B) to pay any other Trust expenses
due and payable on such Business Day; provided that,
all funds not so paid or transferred shall be retained
in the General Subaccount.

Section 5.02. On Payment Dates during the Interest-Only
Period. By no later than 1:00 p.m. (New York City time) on each Payment Date
during the Interest-Only Period, the Indenture Trustee shall (on the basis of
the information set forth in the related Monthly Settlement Statement) use the
Series Allocable Collections and Investment Proceeds deposited in the Interest
Subaccount to make the following distributions in the following amounts,
according to the following priorities, satisfying, to the extent required and
possible, each priority before making any distribution with respect to any
succeeding priority:

(i) to the Class A-1 Noteholders and Class A-2 Noteholders,
respectively, Monthly Interest on the Class A-1 Notes and the
Class A-2 Notes on such Payment Date on a pro rata basis
(based on interest due) as between the Class A-1 Notes and the
Class A-2 Notes;

(ii) to the Class B Noteholders, Monthly Interest on the Class B
Notes on such Payment Date;

(iii) to the Class C Noteholders, Monthly Interest on the Class C
Notes on such Payment Date; and

(iv) to the Servicer, the Monthly Servicing Fee, if any.

38
Section 5.03. On Business Days During the Amortization Period.
By no later than 1:00 p.m. (New York City time) on each Business Day during the
Amortization Period (including, without limitation, on Business Days that are
also Payment Dates), the Indenture Trustee shall, upon the written direction of
the Servicer or as indicated in the Daily Report, distribute in respect of the
Trust Interest the Trust Daily Distribution Amount for such business Day;
provided, however , that if on any such Business day the Trust's Participation
Amount (after giving effect to any Principal Receivables transferred to the
Trust on such date) is less than the Aggregate Available Subordinated Amount
calculated as of the immediately preceding Determination Date (after giving
effect to the allocations, distributions, withdrawals and deposits to be made on
the Payment date immediately following such Determination Date), the Trust Daily
Distribution Amount shall be deposited in the Collateral Account.

Section 5.04. On Payment Dates During the Amortization Period.
By no later than 1:00 p.m. (New York City time) on each Payment Date commencing
with the Amortization Commencement Date, the Servicer shall instruct the
Indenture Trustee (on the basis of the information set forth in the preceding
Monthly Settlement Statement) to apply the funds deposited in the Collateral
Account and the Excess Funding Account to make the following distributions:

(a) Available Noteholder Finance Charge Collections and Investment
Proceeds, if any, in respect of the related Settlement Period shall be applied
in the following priority:

(1) an amount equal to Monthly Interest with respect to
each class of Notes for such Payment Date, in the following order of
priority: first, to the Class A-1 Notes and Class A-2 Notes, pro rata
on the basis of interest due thereon, until paid in full; second to
the Class B Notes until paid in full; and third, to the Class C Notes;

(2) an amount equal to the Monthly Servicing Fee payable
on such Payment Date shall be distributed to the Servicer;

(3) an amount equal to the Noteholder Default Amount, if
any, for such Payment Date shall be treated as a portion of Available
Noteholder Principal Collections for such Payment Date and distributed
pursuant to Subsection (c) hereof; and

(4) the balance, if any, shall constitute Excess Finance
Charge Collections and shall be distributed pursuant to subsection (b)
hereof.

(b) Excess Finance Charge Collections shall be applied in the
following priority:

(1) an amount equal to the aggregate amount of Noteholder
Charge-Offs allocated pursuant to Section 5.05 hereof that have not
been previously reimbursed (after giving effect to the allocation of
Series Allocable Miscellaneous Payments on such Payment Date) shall be
distributed to the Noteholders in reimbursement thereof in the same
priority as set forth in subsection (c) hereof; and

(2) the balance, if any, shall be distributed in respect
of the Trust Interest.

(1) an amount equal to Monthly Principal for such Payment
Date shall be paid to the Noteholders in the following order of
priority: first, to the Class A-1 Notes and the Class A-2 Notes, pro
rata on the basis of the outstanding principal amounts thereof, until
such outstanding principal amounts have been paid in full; second, to
the Class B Notes until the outstanding principal amount thereof has
been paid in full, and third, to the Class C Notes until the
outstanding principal amount thereof has been paid in full; and

(2) the balance, if any, shall be (A) paid in respect of
the Trust Interest if the Trust's Participation Amount (determined
after giving effect to any Receivables transferred to the Trust on
such date) exceeds the Aggregate Available Subordinated Amount for the
immediately preceding Determination Date (after giving effect to the
allocations, distributions, withdrawals and deposits to be made on
such Payment Date) and (B) otherwise held in such account as may be
specified with respect to any Additional Series.

(d) Available Trust's Principal Collections shall be applied in
the following priority:

(1) pursuant to subsection (a) hereof to the extent of
the Draw Amount with respect to such Payment Date, if any;

(2) in the priority set forth in subsection (c) hereof to
the extent of any required Adjustment Payments not made by the Seller;
and

(3) the balance, if any, shall be distributed in respect
of the Trust Interest.

(e) An amount equal to the excess, if any, of (i) the Excess Trust's
Percentage of Series Allocable Finance Charge Collections and Series Allocable
Principal Collections for the related Settlement Period, over (ii) the
aggregate for such Settlement Period of the Trust Daily Distribution Amounts
actually distributed in respect of the Trust Interest, shall be distributed in
respect of the Trust Interest.

Section 5.05. Allocation of Noteholder Charge-Offs.
Noteholder Charge-Offs for any Payment Date shall be applied in reduction of
the outstanding principal amount of the Notes as set forth in the Monthly
Settlement Statement (in addition to any reductions thereof in respect of
distributions of principal on such Payment Date) in the following order of
priority: first, to the Class C Notes, until the outstanding principal amount
thereof has been reduced to zero; second, to the Class B Notes, until the
outstanding principal amount thereof has been reduced to zero, and third, to
the Class A-1 Notes and the Class A-2 Notes, pro rata on the basis of the
outstanding principal amounts thereof, until the respective outstanding
principal amounts thereof have been reduced to zero.

Section 5.06. Final Payment of Notes. On the Business Day
next succeeding the day on which all amounts due under the Notes have been paid
in full, all remaining amounts on deposit in the Collateral Account and the
Excess Funding Account shall be paid to the Issuer.

Section 5.07. Series Termination Date. If, by thirty days
prior to the Series Termination Date, the outstanding principal amount of the
Notes has not been reduced to zero and the Servicer has not certified to the
Indenture Trustee that it believes, in its sole judgment, that Collections
anticipated to be available for distribution on the Series Termination Date will
be sufficient to reduce the outstanding principal balance of the Notes to zero,
the Receivables shall be sold, disposed and otherwise liquidated in a
commercially reasonable manner and on commercially reasonable terms, which shall
include the solicitation of competitive bids, by institutions acceptable to the
Indenture Trustee and the Servicer. The Servicer shall promptly after receipt
of any offer to purchase the Receivables,

inform the Seller of such offer and provide to the Seller a reasonably detailed
description of the terms of such offer. The Servicer shall, not less than three
Business Days prior to the Series Termination Date, sell such Receivables to (i)
the Seller, at the purchase price equal to the highest offer received by the
Servicer for the sale of the Receivables, or (ii) the highest bidder for the
sale of the Receivables if the Seller does not elect to purchase the
Receivables. The proceeds of any such sale shall be deposited in the Collateral
Account and shall be paid to the Noteholders on the Series Termination Date. The
proceeds of such sale shall be allocated between Finance Charge Collections and
Principal Collections in proportion to Finance Charge Receivables and Principal
Receivables of the Receivables as of the end of the preceding Settlement Period.
For all other purposes the proceeds of such sale shall be treated as Collections
and shall be allocated among Series and distributed to Noteholders pursuant to
this Article V.

ARTICLE VI

SERVICING OF PURCHASED RECEIVABLES

Section 6.01. Servicing of Purchased Receivables. The
Indenture Trustee, on behalf of the noteholders of all Series, consents to the
appointment of Jewelers Financial Services, Inc. as Servicer of the Purchased
Receivables pursuant to, and in accordance with the terms of, the Purchase and
Servicing Agreement.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

Section 7.01. Representations and Warranties of the Issuer.
On and as of each Purchase Date, the Issuer represents and warrants to the
Noteholders that:

(a) Organization; Powers. The Issuer (1) is a
business trust duly organized, validly existing and in good standing under the
laws of Delaware, (2) has all requisite power and authority to own its property
and assets and to carry on its business as now conducted and as proposed to be
conducted, (3) is qualified to do business in every jurisdiction where such
qualification is required, except where the failure to so qualify would not
reasonably be expected to have a Material Adverse Effect and (4) has the power
and authority to execute, deliver and

perform its obligations under each of the Transaction Documents and each
other agreement or instrument contemplated thereby to which it is a party and
to issue the Notes.

(b) Authorization. The execution, delivery and
performance by the Issuer of each of the Transaction Documents to which it is a
party and the performance by the Issuer of the other transactions contemplated
thereby (collectively, the "Transactions") (1) have been duly authorized by the
Owner Trustee on behalf of the Issuer and (2) shall not (A) violate (i) any
provision of law, statute, rule or regulation, which violation would have a
Material Adverse Effect, (ii) any provision of the Certificate of Trust of the
Issuer, (iii) any order of any Governmental Authority or (iv) any provision of
any indenture, agreement or other instrument to which the Issuer is a party or
by which it or any of its property is or may be bound, which violation would
have a Material Adverse Effect, (B) be in conflict with, result in a breach of
or constitute (alone or with notice or lapse of time or both) a default under
any such indenture, agreement or other instrument, which conflict, breach or
default would have a Material Adverse Effect or (C) result in the creation or
imposition of any Lien upon or with respect to any property or assets now owned
or hereafter acquired by the Issuer, except the Liens created, imposed or
contemplated by any of the Transaction Documents.

(c) Enforceability. This Indenture has been duly
executed and delivered by the Issuer and constitutes, and each other
Transaction Document when executed and delivered by the Issuer shall
constitute, a legal, valid and binding obligation of the Issuer enforceable
against the Issuer in accordance with its terms, subject to general principles
of equity and to bankruptcy, insolvency, reorganization, moratorium and similar
laws now or hereafter in effect relating to creditors' rights generally.

(d) Governmental Approvals. No action, consent
or approval of, registration or filing with or any other action by any
Governmental Authority is or shall be required in connection with the
Transactions, except such as have been made or obtained and are in full force
and effect.

(e) Investment Company Act. The Issuer is not an
"investment company" as such term is defined in the Investment Company Act, and
the issuance of the Notes, the repayment thereof by the Issuer and the
consummation of the Transactions shall not violate any provision of the
Investment Company Act or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder.

(f) No Defaults. Except for payment defaults
continuing for a period of not more than one month as of the Cut-Off Date, no
default, breach, violation or event permitting acceleration under the terms of
any Receivable exists.

(g) No Fraudulent Transfer. The assignment of
pledge of the security interest in the Collateral by the Issuer to the
Indenture Trustee does not constitute a fraudulent transfer or fraudulent
conveyance under the United States Bankruptcy Code or applicable state
bankruptcy or insolvency laws or is otherwise void or voidable or subject to
subordination under similar laws or principles or for any other reason.

ARTICLE VIII

COVENANTS

Section 8.01. Affirmative Covenants of the Issuer. The
Issuer covenants and agrees that, so long as the principal of (or premium, if
any) or interest on any Notes shall be unpaid, unless the Majority Noteholders
shall otherwise consent in writing, the Issuer shall:

(a) Existence. Do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and maintain such legal existence separate from that of the Seller
and any Affiliate thereof.

(b) Obligations and Taxes. Pay its Indebtedness
and other obligations promptly before the same shall become delinquent or in
default and in accordance with their terms and pay and discharge promptly when
due all taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits or in respect of its property, before the same
shall become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise that, if unpaid, might give rise to a Lien
upon such properties or any part thereof; provided that, such payment and
discharge shall not be required with respect to any such Indebtedness,
obligation, tax, assessment, charge, levy or claim so long as the validity or
amount thereof shall be contested in good faith by appropriate proceedings and
the Issuer shall have set aside on its books adequate reserves with respect
thereto.

(1) any Early Amortization Event or Potential Early
Amortization Event, specifying the nature and extent
thereof and the corrective action (if any) proposed
to be taken with respect thereto;

(2) the filing or commencement of, or any threat or
notice of intention of any Person to file or
commence, any action, suit or proceeding, whether at
law or in equity or by or before any Governmental
Authority, against the Issuer that, if adversely
determined, would have a Material Adverse Effect;

(3) any notices received by the Issuer under the
Purchase and Servicing Agreement (together with copies
thereof); and

(4) any Lien asserted against any of the Collateral of
which it is aware (other than any Lien created,
imposed or contemplated by any of the Transaction
Documents).

(d) Information to the Noteholders. On each
Payment Date, forward to the Indenture Trustee for distribution to each
Noteholder the Monthly Settlement Statement and for so long as any of the Notes
are "restricted securities" within the meaning of Rule 144 under the Securities
Act, cooperate (and direct the Servicer to cooperate) with the Indenture
Trustee to provide to any Noteholder and to any prospective purchaser of the
Notes, upon the request of such Noteholder or prospective purchaser, any
information required to be provided to such Noteholder or prospective purchaser
to satisfy the conditions, if applicable, set forth in Rule 144A(d)(4) under
the Securities Act.

(e) Daily Reports and Monthly Settlement
Statements. Prepare or direct the Servicer to prepare and deliver each Daily
Report and Monthly Settlement Statement pursuant to the Purchase and Servicing
Agreement; and prepare or direct the Servicer to prepare such other monthly
financial and statistical reports, cash flow reports and records of Purchased
Receivables performance that may be reasonably requested by the Indenture
Trustee, acting at the written direction of the Majority Noteholders.

(f) Compliance with Laws. At all times observe
and comply in all material respects with all laws, ordinances, orders,
judgments, rules, regulations, certifications, franchises, permits, licenses,
directions and requirements of any Governmental

Authority that are now or may at any time be applicable to the Issuer, except
(1) for any nonobservance or noncompliance that would not have a Material
Adverse Effect or (2) for any observance or compliance that shall be contested
in good faith and by appropriate proceedings diligently conducted by the
Issuer.

(g) Delivery of Materials for the Collection of
Purchased Receivables. Upon the occurrence and during the continuance of an
Early Amortization Event and upon the written request of the Indenture Trustee,
acting at the written direction of the Majority Noteholders, make such
arrangements with respect to the collection of the Purchased Receivables as may
be reasonably requested by the Indenture Trustee, acting at the written
direction of the Majority Noteholders.

(h) Maintenance of Office or Agency. Maintain an
office or agency within the United States of America 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 Corporate Trust Office of the Indenture
Trustee such office or agency. The Issuer shall give prompt written notice to
the Indenture Trustee 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.

(i) Inspection. From time to time, at any
reasonable time during normal business hours and, so long as no Early
Amortization Event has occurred and is continuing upon at least two (2)
Business Days' prior notice, permit representatives of the Indenture Trustee,
acting at the written direction of the Majority Noteholders, to examine and
make copies of and abstracts from its records relating to the Purchased
Receivables.

(j) Collateral Records. Maintain or direct the
Servicer to maintain satisfactory and complete records of the Collateral,
including without limitation a record of all payments received and all credits
granted with respect to the Collateral.

(k) Legend. Mark conspicuously with a legend its
computer records and credit files pertaining to the Collateral and

the Related Contracts, to evidence this Indenture and the assignment and
security interest granted hereby.

(l) Purchase and Servicing Agreement. Upon
request of the Indenture Trustee, acting at the written direction of the
Majority Noteholders, make to any counterpart to the Purchase and Servicing
Agreement such demands and requests for information and reports or for action
as the Issuer is entitled to make under the Purchase and Servicing Agreement.

(m) Further Assurances. At any time and from
time to time, at its expense, promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary
or that the Indenture Trustee, acting at the written direction of the Majority
Noteholders, may reasonably request, to perfect and protect the assignments and
security interests granted or purported to be granted by this Indenture or to
enable the Indenture Trustee to exercise and enforce its rights and remedies
under this Indenture with respect to any Collateral, including without
limitation (1) the delivery and pledge to the Indenture Trustee of any
Collateral evidenced by a promissory note or other instrument (which is not
chattel paper), duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form satisfactory to the Indenture Trustee and
(2) the execution and filing of such financing or continuation statements
pertaining to the Collateral, or amendments thereto, which the Indenture
Trustee may file without the signature of the Issuer where permitted by law
(the Indenture Trustee shall promptly send the Issuer copies of any such
financing or continuation statements that it files without the signature of the
Issuer except, in the case of filings of copies of this Indenture as financing
statements, the Indenture Trustee shall promptly send the Issuer the filing or
recordation information with respect thereto).

(n) Payment of Taxes. Pay all taxes, duties,
fees or other charges levied or imposed by any Governmental Authority on the
Issuer in respect of this Indenture or the issuance of the Notes, and pay any
stamp duty, tax, required deduction or withholding or other amount required to
be paid to introduce this document into evidence to enforce the Notes, except
for any such payments that are being contested in good faith by appropriate
proceedings and for which the Issuer shall have set aside on its books adequate
reserves.

(o) Compliance with Trust Agreement. At all
times to observe and comply in all material respects with the provisions

of the Trust Agreement and to conduct its business in accordance with the terms
of the Trust Agreement.

Section 8.02. Negative Covenants of the Issuer. The Issuer
covenants and agrees that, so long as the principal of (or premium, if any) or
interest on any Notes shall be unpaid, unless the Majority Noteholders shall
otherwise consent in writing, the Issuer shall not:

(a) Indebtedness. Incur, create, assume or
permit to exist any Indebtedness, except: (1) Indebtedness evidenced by the
Notes and the Subordinated Note; (2) Indebtedness representing fees, expenses,
indemnities and other amounts payable pursuant to and in accordance with the
Transaction Documents; and (3) Indebtedness for Issuer Expenses; provided that,
nothing in this Section 8.02(a) shall prohibit or be deemed to prohibit the
Issuer from receiving any capital contribution from the Seller.

(b) Liens. Incur, create, assume or permit to
exist any Lien on any property or assets (including stock or other securities)
now owned or hereafter acquired by it or on any income or revenues or rights in
respect of any thereof, except the Liens created, imposed or contemplated by
any of the Transaction Documents and any Lien created, imposed or contemplated
in connection with any repurchase obligation which is an Eligible Investment;
provided, that, nothing in this Section 8.02(b) shall prohibit or be deemed to
prohibit the Issuer from suffering to exist upon any of the Purchased
Receivables any Liens for municipal, local or state taxes if such taxes shall
not at the time be due and payable or if the Issuer shall currently be
contesting the validity thereof in good faith by appropriate proceedings and
shall have set aside on its books adequate reserves with respect thereto.

(d) Creditors. Create or permit to exist any
creditors other than the holders of Indebtedness permitted by Section 8.02(a)
of this Indenture.

(e) Business of Issuer. Engage at any time in
any business or business activity other than the acquisition of Receivables
pursuant to the Purchase and Servicing Agreement, the activities incidental to
the purchase and ownership of such Receivables, the issuance of the Notes, the
Transactions, the making of any investments permitted under this Indenture, the
other incidental and related transactions expressly permitted

under the Transaction Documents, and the other activities permitted by the
Trust Agreement.

(f) Mergers, Consolidations, Sales of Assets and
Acquisitions. Merge into or consolidate with any other Person, or permit any
other Person to merge into or consolidate with it, or sell, transfer, lease or
otherwise dispose of (in one transaction or in a series of transactions) any of
its assets, including the Collateral (whether now owned or hereafter acquired),
or purchase, lease or otherwise acquire (in one transaction or a series of
transactions) any of the assets of any other Person, other than the acquisition
of Receivables and the sale of Purchased Receivables pursuant to the Purchase
and Servicing Agreement and the repayment of the Notes and the Subordinated
Note pursuant to this Indenture and the Purchase and Servicing Agreement.

(g) Transactions with Affiliates. Sell or
transfer any property or assets to, or purchase or acquire any property or
assets from, or otherwise engage in any other transactions with, any of its
Affiliates except as permitted under this Indenture and the Purchase and
Servicing Agreement.

(h) Other Agreements. Enter into or be a party
to any agreement, instrument or transaction other than the Transaction
Documents and the agreements, documents, instruments and transactions related
thereto or contemplated thereby.

(i) No Powers of Attorney. Grant any powers of
attorney to any Person for any purposes except (1) for the purpose of
permitting any Person to perform any ministerial functions on behalf of the
Issuer that are not prohibited by or inconsistent with the terms of the
Transaction Documents or (2) as permitted or contemplated by the Transaction
Documents.

ARTICLE IX

REDEMPTIONS

Section 9.01. Optional Full Redemption of the Notes. The
Notes may be redeemed at the option of the Trust, in whole but not in part (an
"Optional Full Redemption"), on any Payment Date commencing with the
Amortization Commencement Date (an "Optional Full Redemption Date"). The
purchase price for an Optional Full Redemption (the "Optional Full Redemption
Price") for each Note shall equal the outstanding principal amount of each Note
to be redeemed together with accrued and unpaid interest thereon at the
applicable Note Rate to the Optional Full Redemption Date.

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Section 9.02. Partial Redemption of the Notes. The Notes
shall be redeemed at the option of the Trust in part (a "Partial Redemption"),
on the Payment Date occurring not earlier than two weeks after an Optional
Redemption Announcement Date (a "Partial Redemption Date"), pro rata in
accordance with the outstanding principal amount of each class of Notes, in an
amount equal to the Partial Redemption Amount, if (i) one of the Seller
Divisions is sold to an unaffiliated purchaser (a "Division Sale Optional
Redemption") or (ii) the amount of funds in the Excess Funding Account has
equaled or exceeded $60 million on each of the two Determination Dates
preceding such Optional Redemption Announcement Date (an "Excess Funding
Account Optional Redemption"). The redemption price for a Partial Redemption
(the "Partial Redemption Price") for each Note shall equal the sum of (i) the
outstanding principal amount of the Note so redeemed, (ii) accrued and unpaid
interest on the principal amount of such Note at the applicable Note Rate and
(iii) the Partial Redemption Premium.

Section 9.03. Mechanics of an Optional Full Redemption and
Partial Redemption. An Optional Full Redemption, a Division Sale Optional
Redemption and an Excess Funding Account Optional Redemption shall be effected
as follows:

(a) the Issuer, at its expense, shall provide a written notice
thereof to the Indenture Trustee not less than 15 Business
Days prior to the Optional Full Redemption Date or Partial
Redemption Date, as applicable (an "Optional Redemption
Notice"), which Optional Redemption Notice shall be
irrevocable and shall:

(1) identify the redemption as an Optional Full
Redemption, a Division Sale Optional Redemption or an
Excess Funding Account Optional Redemption;

(2) set forth the applicable Optional Full Redemption
Date or the Partial Redemption Date and in the case
of a Partial Optional Redemption, the aggregate
outstanding principal amount of Notes to be redeemed
for each $1,000 in original principal amount of Notes
and the Partial Redemption Premium to be paid;

(3) if such redemption is a Division Sale Optional
Redemption or an Excess Funding Account Optional
Redemption, provide that the Notes are being redeemed
on a pro rata basis; and

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(4) if Definitive Notes are outstanding, identify the
location where the Definitive Notes (or portion
thereof) being redeemed are to be surrendered for
payment;

(b) with respect to an Excess Funding Account Optional Redemption,
the Indenture Trustee shall promptly after receipt of the
Optional Redemption Notice withdraw from the Excess Funding
Account and deposit in the Optional Redemption Account an
amount equal to the aggregate outstanding principal amount of
Notes to be redeemed as set forth in the Optional Redemption
Notice;

(c) the Indenture Trustee shall provide to each Noteholder (with a
copy to the Issuer) a notice containing the information set
forth in Section 9.03(a) within 3 Business Days of the receipt
of such Optional Redemption Notice from the Issuer;

(d) the Issuer shall, not later than two (2) Business Days prior
to the Optional Full Redemption Date or any Partial Redemption
Date, provide each Noteholder and the Indenture Trustee by
facsimile transmission a written notice of the Optional Full
Redemption Price or the Partial Redemption Price, as the case
may be, including the Partial Redemption Premium, if any, for
each $1,000 in original principal amount of Notes, payable in
connection with such redemption (an "Optional Redemption
Premium Calculation"); and

(e) on the Optional Full Redemption Date or the Partial Redemption
Date, as applicable, the Optional Full Redemption Price or the
Partial Redemption Price, as the case may be, shall be paid as
follows:

(1) not later than 10:00 a.m. (New York City time) on
such Optional Full Redemption Date or Partial
Redemption Date, the Issuer shall deposit or cause to
be deposited with the Indenture Trustee, an amount of
immediately available funds that, together with funds
on deposit in the Optional Redemption Account, if
any, is sufficient to pay the Optional Full
Redemption Price or the Partial Redemption Price, as
the case may be, due and payable by the Issuer on
such Optional Full Redemption Date or Partial
Redemption Date with respect to the redemption of the
Notes (or that portion of the Notes) being redeemed;
and

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(2) after the deposit of such funds described in Section
9.03(e)(1) above, but not later than 1:00 p.m. (New
York City time) on such Optional Full Redemption Date
or Partial Redemption Date, the Indenture Trustee
shall (A) with respect to each Noteholder all or any
portion of the Notes of which are being redeemed on
such Optional Full Redemption Date or Partial
Redemption Date that is a Wire Transfer Payment
Recipient, wire transfer to such Noteholder, in
immediately available funds and pursuant to the
Account Payment Instructions of such Noteholder, that
portion of the Optional Full Redemption Price or the
Partial Redemption Price, as the case may be, due and
payable to such Noteholder with respect to such Notes
(or portion thereof) being redeemed, against
surrender by such Noteholder of such Notes; and (B)
with respect to each Noteholder all or any portion of
the Notes of which are being redeemed on such
Optional Full Redemption Date or Partial Redemption
Date that is not a Wire Transfer Payment Recipient,
make available, at the Indenture Trustee's Corporate
Trust Office, a check in the amount of that portion
of the Optional Full Redemption Price or the Partial
Redemption Price, as the case may be, due and payable
to such Noteholder with respect to such Notes (or
portion thereof) being redeemed, against surrender by
such Noteholder of such Notes.

Section 9.04. Amounts Due; Premium; Notice; Partial
Redemptions; Wire Transfer Payment Recipients. All amounts with respect to the
Notes (or that portion of the Notes) to be redeemed on any Optional Full
Redemption Date or Partial Redemption Date shall be due and payable on such
date and, from and after such date (unless the Issuer shall default on the
payment of such amounts), such Notes or portion thereof shall cease to bear
interest. The Partial Redemption Premium (1) shall be calculated by the Issuer
pursuant to the formula set forth in Annex III to this Indenture and (2) as set
forth in the Optional Redemption Premium Calculation, shall be binding upon the
Issuer and each Noteholder of the Notes. If by reason of the temporary or
permanent suspension of regular mail service or by reason of any other cause,
it shall be impracticable to give any notice prescribed by Section 9.03 of this
Indenture to the Noteholders, then such notification in lieu thereof as shall
be made by the Issuer shall constitute sufficient provision of such notice;
provided that, such notification shall, so far as may be

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practicable, approximate the terms and conditions of the notice in lieu of
which it is given. Neither the failure to give notice nor any defect in any
notice given to any particular Noteholder shall affect the sufficiency of any
notice with respect to any other Noteholder or any other Notes. Presentation
of the Notes are not required with respect to a Partial Redemption of any
Notes.

Section 9.05. Scheduled Redemption of the Notes.
(a) If the Issuer shall not have given notice by June 15, 1999 that it
will redeem the Notes in full on the Payment Date occurring in July, 1999, the
Servicer, on behalf of the Trustee and the Noteholders, will promptly solicit
bids for the purchase of all or a portion of the Receivables for a purchase
price that, together with funds on deposit in the Collateral Account and Excess
Funding Account and Investment Proceeds available for payment of the Notes on
the Scheduled Redemption Date, will be sufficient to pay in full (a) the
outstanding principal balance of the Notes, (b) Monthly Interest for each class
of Notes payable on the Scheduled Redemption Date and (c) any unpaid Servicing
Fees payable to the Servicer on or prior to the Scheduled Redemption Date. The
Servicer shall promptly, after receipt of any offer to purchase the Receivables,
inform the Seller of such offer and provide to the Seller a reasonably detailed
description of the terms of such offer. The Servicer shall, not less than three
Business Days prior to the Scheduled Redemption Date, sell such Receivables to
(i) the Seller at the purchase price equal to the highest offer received by the
Servicer for the sale of such Receivables, or (ii) the highest bidder for the
sale of such Receivables if the Seller does not purchase such Receivables. The
proceeds of any such sale of Receivables shall be deposited in the Collateral
Account and treated as Collections and shall be paid to the Noteholders on the
Scheduled Redemption Date.

(b) If the Servicer is unable to obtain a bid equal to the amount
required pursuant to subsection (a) above, an Amortization Period will commence
at the beginning of the August Cycle Month in 1999 and Collections will be
allocated on each Business Day pursuant to Section 5.03 and paid to the
Noteholders (together with funds on deposit in the Excess Funding Account
available for payment on the Payment Date occurring in September, 1999)
pursuant to Section 4.03(f).

Section 9.06. Mandatory Redemption. The Servicer shall, in
connection with any sale of a Seller Division, calculate the average of the Pro
Forma Net Yields for the three Settlement Periods immediately preceding the
Settlement Date on or immediately preceding the Optional Redemption
Announcement Date with respect to (x) all Receivables and (y) all Receivables
other

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than Receivables originated by such Seller Division. If the average of the Pro
Forma Net Yields calculated pursuant to clause (y) is less than (i) the excess
of (a) the average of the Pro Forma Net Yields calculated pursuant to clause
(x) over (b) 3.00%, or (ii) the average of (a) the Base Rates for such
Settlement Periods minus (b) 5.00%, the Issuer shall, on the Payment Date
occurring on or immediately following the date that is two weeks after the
Optional Redemption Announcement Date, redeem Notes in an aggregate outstanding
principal amount such that the remaining outstanding principal balance of the
Notes equals the Target Note Amount. The "Target Note Amount" shall equal an
amount such that, if substituted for the denominator of the Pro Forma Net
Yield, the resulting percentage equals the greater of the percentages set forth
in clauses (i) and (ii) of the preceding sentence.

ARTICLE X

REMEDIES OF THE TRUSTEE AND NOTEHOLDERS

Section 10.01. Early Amortization Events. The occurrence of
any of the following events shall constitute an "Early Amortization Event":

(a) failure to pay (1) principal of or interest on any of the
Notes (other than failure to pay the Partial Redemption Price
or Optional Full Redemption Price of any Notes) when the same
shall be due and payable, which failure continues unremedied
for three Business Days or (2) the Partial Redemption Price or
Optional Full Redemption Price of any Notes on the Partial
Redemption Date or Optional Full Redemption Date,
respectively, which failure continues unremedied for three (3)
Business Days;

(b) failure to cure a Borrowing Base Deficiency, which failure
continues unremedied for three (3) Business Days; or the
excess of (i) the aggregate principal amount of Eligible
Receivables over (ii) the Available Subordinated Amount shall
fail to equal or exceed the excess of (x) the outstanding
principal amount of the Notes over (y) the amount of funds on
deposit in the Excess Funding Account, which failure shall
continue unremedied for three (3) Business Days;

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days after the Issuer's receipt of written notice of such
breach from the Indenture Trustee;

(d) breach by the Issuer under Section 13.03 of this Indenture
(pertaining to amendments or modifications to the Purchase and
Servicing Agreement), which breach remains unremedied for
thirty days after the Issuer's receipt of written notice of
such breach from the Indenture Trustee;

(e) an involuntary petition or any other pleading shall be filed
in a court of competent jurisdiction seeking (1) relief in
respect of the Issuer, the Seller or the Servicer or of a
substantial part of the property or assets thereof, under the
Bankruptcy Code, or any other Federal or state bankruptcy,
insolvency, receivership or similar law, (2) the appointment
of a receiver, trustee, custodian, sequestrator, conservator
or similar official for the Issuer, the Seller or the Servicer
or for a substantial part of the property or assets thereof or
(3) the winding-up or liquidation of the Issuer, the Seller
or the Servicer; and such proceeding, petition or pleading
shall continue undismissed for sixty (60) days;

(f) the Issuer, the Seller or the Servicer shall (1) voluntarily
commence any proceeding or file any petition seeking relief
under the Bankruptcy Code, or any other Federal or state
bankruptcy, insolvency, receivership or similar law, (2)
consent to the institution of, or fail to contest in a timely
manner, any proceeding or the filing of any petition described
in Section 10.01(e) above, (3) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Issuer, the Seller or
the Servicer or for a substantial part of the property or
assets thereof, (4) make a general assignment for the benefit
of creditors or (5) become unable, admit in writing its
inability or fail generally to pay its debts as they become
due;

(g) the due date of the indebtedness outstanding under the Working
Capital Credit Agreement shall be accelerated or the loans
thereunder shall mature and shall be unpaid;

(h) the average of the Base Rates for the Interest Periods
relating to any three (3) consecutive Payment Dates exceeds
the average of the Net Yields for the related Settlement
Periods by more than 6.00%;

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(i) failure by the Servicer to perform in any material respect its
obligations as Servicer under the Purchase and Servicing
Agreement, which failure would have a material adverse effect
on the rights and remedies of the Noteholders;

(j) the Issuer becoming required to register as an "investment
company" under the Investment Company Act;

(k) any representation or warranty in the Purchase and Servicing
Agreement shall prove to have been false or misleading in any
material respect when made and which continues to be incorrect
in any material respect for a period of sixty (60) days after
the Issuer's receipt of written notice thereof from the
Indenture Trustee and as a result of which the interest of the
Noteholders are materially and adversely affected; and

(l) the amount of funds in the Excess Funding Account shall exceed
$100 million for five (5) consecutive Business Days and the
Issuer shall not have provided notice to the Indenture Trustee
of a Partial Redemption in accordance with Section 9.03
hereof, which Partial Redemption shall be in an amount such
that after giving effect to the withdrawal from the Excess
Funding Account pursuant to Section 4.04(b) hereof, the amount
of funds remaining in the Excess Funding Account shall be less
than $100 million.

If any event described in clauses (a)(2), (c), (d), (i) or (k)
of Section 10.01 occurs, an Early Amortization Event shall be deemed to have
occurred only if, after the applicable grace period described in such clauses,
if any, either (A) the Indenture Trustee acting under the written direction of
the Majority Noteholders, by written notice to the Seller and the Servicer or
(B) the Majority Noteholders by written notice to the Issuer and the Indenture
Trustee declare that an Early Amortization Event has occurred as of the date of
such notice. If any event described in clauses (a)(1), (b), (e), (f), (g),
(h), (j) or (l) of Section 10.01 occurs, an Early Amortization Event shall be
deemed to have occurred immediately upon the occurrence of such event, without
any notice or other action on the part of the Indenture Trustee or the
Noteholders. The Early Amortization Period shall commence as of the day on
which the Early Amortization Event occurs.

Notwithstanding the foregoing, a delay in or failure in
performance referred to in clauses (a)(1) and (2) above for a

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period of ten (10) Business Days after the applicable grace period, or in
clauses (c), (h) or (j) above for a period of thirty (30) Business Days after
the applicable grace period, shall not constitute an Early Amortization Event
until the expiration of such additional ten (10) or thirty (30) Business Days,
respectively, if such delay or failure could not be prevented by the exercise
of reasonable diligence by the Issuer or the Servicer and such delay or failure
was caused by a Force Majeure. The Issuer and the Servicer shall nevertheless
be required to use their best efforts to perform their obligations in a timely
manner in accordance with the terms of the transaction documents, and the
Issuer and/or the Servicer, as applicable, shall promptly give the Indenture
Trustee and, in the case of such delay or failure in performance by the
Servicer, the Issuer, any provider of Enhancement, the Seller and noteholders
of each Series issued and outstanding prompt notice of such failure or delay by
it, together with a description of the cause of such failure or delay and its
efforts to perform its obligations.

Section 10.02. Remedies.

(a) Following the occurrence of an Early Amortization Event,
the Indenture Trustee, acting at the written direction of the Majority
Noteholders, may apply all or any part of the Collections to the payment of the
Secured Obligations of the Issuer under this Indenture or under any of the
other Transaction Documents, as provided herein, and all rights and remedies
provided under all other applicable laws, which rights, in the case of each and
all of the foregoing, shall be cumulative.

(b) The Issuer shall be deemed to have appointed the
Indenture Trustee its attorney-in-fact with full authority in its place and
stead, and in its name, to take any action and to execute any instrument
necessary to accomplish the purposes of this Indenture pursuant to and in
accordance with the terms of this Indenture, including without limitation to
(1) ask, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in
connection with the Collateral, (2) settle, compromise, compound, prosecute or
defend any action or proceeding with respect to the Collateral, (3) receive,
endorse and collect all drafts or other instruments and documents made payable
to the Issuer in connection therewith or representing any payment, dividend or
other distribution in respect of the Collateral or any part or proceeds
thereof, and give full discharge for the same or (4) extend the time of payment
of or make any allowance or adjustment with respect to any or all of the
Collateral.

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Section 10.03. Additional Rights Upon the Occurrence of
Certain Events. (a) If an Insolvency Event shall occur with respect to the
Seller, this Agreement and the Trust shall be deemed to have terminated on the
sixty-first day following the Publication Date subject to the last paragraph of
this subsection (a); provided, that within fifteen days of the date of written
notice to an Authorized Officer of the Indenture Trustee of such Insolvency
Event, the Indenture Trustee shall:

(i) publish a notice in an Authorized Newspaper that an
Insolvency Event has occurred with respect to the Seller and that the
Indenture Trustee intends to sell, dispose of or otherwise liquidate
the Receivables and the related transferred assets pursuant to this
Indenture in a commercially reasonable manner and on commercially
reasonable terms, which shall include the solicitation of competitive
bids (a "Disposition"); and

(ii) send written notice substantially in the form set forth
in Exhibit E hereto via Federal Express or another similar overnight
courier to the Noteholders describing the provisions of this Section
10.03 and requesting each Noteholder to advise the Indenture Trustee
in writing whether or not it wishes the Indenture Trustee to instruct
the Servicer not to effectuate a Disposition.

If, after sixty (60) days from the day notice pursuant to
clause (a)(i) is first published (the "Publication Date"), the Indenture
Trustee shall not have received the written instruction described in clause
(a)(ii) above from a majority in aggregate principal amount of the noteholders
of any class, the Indenture Trustee shall instruct the Servicer to effectuate a
Disposition, and the Servicer shall proceed to consummate a Disposition. If,
however, a majority in the aggregate principal amount of the noteholders of any
class instruct the Indenture Trustee not to effectuate a Disposition, the Trust
shall continue pursuant to the terms of this Agreement.

(b) Notwithstanding the termination of this Agreement and the
Trust pursuant to clause (a), the proceeds from any Disposition of the
Receivables and the related transferred assets pursuant to clause (a) shall be
treated as Collections on the Receivables and shall be deposited in the
Collateral Account.

(c) The Indenture Trustee may appoint an agent or agents to
assist with its responsibilities pursuant to this Section 10.03 with respect to
competitive bids.

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(d) The Seller or any of its Affiliates shall be permitted to
bid for the Receivables and the related transferred assets. The Indenture
Trustee may obtain a prior determination from any bankruptcy trustee, receiver
or liquidator that the terms and manner of any proposed Disposition are
commercially reasonable.

(e) Notwithstanding the termination of this Indenture and the
Trust pursuant to clause (a), the Indenture Trustee shall continue to have the
rights described in Section 10.02 and Article XI, and be subject to direction
on terms consistent with those set out in Section 10.07, pending the completion
of any Disposition and/or the reconstitution of the Trust.

Section 10.04. Indenture Trustee May Enforce Claims Without
Possession of the Notes. All rights of action and claims under this Indenture
and the Notes may be prosecuted and enforced by the Indenture Trustee without
the possession of any of the Notes or the production thereof in any Proceeding
relating thereto, and any such Proceeding instituted by the Indenture Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee, be
for the ratable benefit of the Noteholders. In any Proceedings brought by the
Indenture Trustee (including without limitation any Proceeding involving the
interpretation of any provision of this Indenture), the Indenture Trustee shall
be held to represent all the Noteholders, and it shall not be necessary to make
any Noteholders parties to any such Proceeding.

Section 10.05. Restoration of Rights. In the event the
Indenture Trustee or any Noteholder has instituted any Proceeding to enforce
any right or remedy under this Indenture, and such Proceeding shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely to the Indenture Trustee or such Noteholder, then and in every such
case the Issuer, the Indenture Trustee and the Noteholders shall, subject to
any determination in such Proceeding, be restored severally and respectively to
their former positions and rights under this Indenture, and all rights,
remedies and powers of the Issuer, the Indenture Trustee and the Noteholders
shall continue as though no such Proceeding had been instituted.

Section 10.06. Limitations on Suits by Noteholders. No
Noteholder shall have any right to institute any Proceeding, judicial or
otherwise, upon, under or with respect to this Indenture or the Notes, or for
the appointment of a receiver,

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trustee, custodian, sequestrator, conservator or similar official, or for any
other remedy under this Indenture or the Notes, unless:

(a) such Noteholder shall have previously given written notice to
the Indenture Trustee and to the Issuer of a continuing Early
Amortization Event;

(b) the Majority Noteholders shall have previously (1) made
written request to the Indenture Trustee to institute, or to
cause the institution of, Proceedings in respect of such Early
Amortization Event in its own name as Indenture Trustee under
this Indenture and (2) offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and
liabilities that may reasonably be incurred by the Indenture
Trustee in compliance with such request;

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

(d) no direction inconsistent with such request has been given to
the Indenture Trustee during such sixty (60) day period by the
Majority Noteholders;

it being understood and intended that no Noteholder or Noteholders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture or the Notes to affect, disturb or prejudice the rights of
any other Noteholder or Noteholders, or to obtain or to seek to obtain priority
or preference over any other such Noteholder or Noteholders (except as set
forth in this Indenture) or to enforce any right under this Indenture or the
Notes, except in the manner provided in this Indenture and for the equal and
proportionate benefit of all the Noteholders.

Section 10.07. Control by Noteholders. Pursuant to the terms
and provisions of this Indenture, the Majority Noteholders are authorized to
direct the Indenture Trustee to take all actions on behalf of the Noteholders
under this Indenture, the Notes and the other Transaction Documents and to
direct the time, method and place of conducting any Proceeding for any remedy
available to the Indenture Trustee or the Noteholders, or the exercising of any
trust or power conferred on the Indenture Trustee under this Indenture, the
Notes or the other Transaction Documents; provided that, such direction shall
not conflict with any rule of law or this Indenture, the Notes or the other
Transaction Documents; and provided further that, subject to the provisions of
Section 11.01

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of this Indenture, the Indenture Trustee shall have the right to decline to
follow any such direction (1) if the Indenture Trustee is advised pursuant to
the advice or an opinion of counsel that the action or Proceeding so directed
may not lawfully be taken or (2) if an Authorized Officer of the Indenture
Trustee determines in good faith that the action or Proceeding so directed
would involve the Indenture Trustee in personal liability. Nothing in this
Indenture shall impair the right of the Indenture Trustee in its discretion to
take any action deemed proper by the Indenture Trustee and which is not
inconsistent with any direction by the Majority Noteholders.

Section 10.08. Indenture Trustee To Give Notice of Early
Amortization Event, But May Withhold in Certain Circumstances. The Indenture
Trustee shall transmit to the Noteholders and each Rating Agency notice of any
Early Amortization Event known to an Authorized Officer of the Indenture
Trustee, such notice to be transmitted within fifteen (15) days after the
occurrence thereof; provided, however, that the Indenture Trustee shall not be
required to transmit to the Noteholders such notice if such Early Amortization
Event shall have been cured before the giving of such notice.

ARTICLE XI

CONCERNING THE TRUSTEE

Section 11.01. Duties and Responsibilities of the Indenture
Trustee; Prior to Early Amortization Event; After Early Amortization Event.
Except as otherwise required by law, the Indenture Trustee, prior to the
occurrence of an Early Amortization Event and after the curing or waiving of
all Early Amortization Events which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Indenture. Except as otherwise required by law, prior to the occurrence of an
Early Amortization Event and after the curing or waiving of all Early
Amortization Events which may have occurred, the Indenture Trustee shall at all
times exercise reasonable care with respect to the Collateral. The Indenture
Trustee shall be deemed to have exercised reasonable care with respect to the
Collateral if the Collateral is accorded treatment substantially equal to that
which the Indenture Trustee accords its own property. If an Early Amortization
Event of which an Authorized Officer has knowledge of has occurred (which has
not been cured or waived), 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 man would

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exercise or use under the circumstances in the conduct of his own affairs. If
an Early Amortization Event of which an Authorized Officer has knowledge of has
occurred (which has not been cured or waived), the Indenture Trustee shall at
all times exercise such care with respect to the Collateral as a prudent man
would exercise with respect to his own property. 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
wilful misconduct, provided that:

(a) prior to the occurrence of an Early Amortization Event and
after the curing or waiving of all such Early Amortization
Events which may have occurred:

(1) the duties and obligations of the Indenture Trustee
shall be determined solely by the express provisions
of this Indenture, and the Indenture Trustee shall
not be liable except for the performance of such
duties and obligations 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

(2) in the absence of bad faith on the part of the
Indenture Trustee, the Indenture Trustee may
conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed
therein, upon any statements, certificates or
opinions furnished to the Indenture Trustee and
conforming to the requirements of this Indenture; but
in the case of any such statements, certificates or
opinions which by any provision of this Indenture are
specifically required to be furnished to the
Indenture Trustee, the Indenture Trustee shall be
under a duty to examine the same to determine whether
or not they conform to the requirements of this
Indenture;

(b) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by an Authorized Officer of the
Indenture Trustee, unless it shall be proved that the
Indenture Trustee was negligent in ascertaining the pertinent
facts;

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faith in accordance with the written direction of the Majority
Noteholders relating to the time, method and place of
conducting any Proceeding for any remedy available to the
Indenture Trustee, or exercising any trust or power conferred
upon the Indenture Trustee, under this Indenture or any Series
Supplement;

(d) the Indenture Trustee shall not be charged with knowledge of
any failure by the Servicer to comply with any of its
obligations under the Purchase and Servicing Agreement unless
an Authorized Officer of the Indenture Trustee obtains actual
knowledge of such failure or the Indenture Trustee receives
written notice of such failure;

(e) the Indenture Trustee shall not be charged with knowledge of
an Early Amortization Event unless an Authorized Officer
obtains actual knowledge of such event or the Indenture
Trustee receives written notice of such event from the
Servicer or the Majority Noteholders;

(f) the Indenture Trustee shall have no duty to monitor the
performance of the Servicer, nor shall it have any liability
in connection with malfeasance or nonfeasance by the Servicer
provided, however, that the Trustee shall forward to the
Noteholders any reports, certificates, or other documents
required to be delivered pursuant to this Indenture and the
Purchase and Servicing Agreement; the Indenture Trustee shall
have no liability in connection with compliance of the
Servicer or the Seller with statutory or regulatory
requirements related to the Receivables; the Indenture Trustee
shall not make or be deemed to have made any representations
or warranties with respect to the Receivables or the validity
or sufficiency of any assignment of the Receivables to the
Trust or the Indenture Trustee; and

(g) the Indenture Trustee shall not be required to expend or risk
its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or under any
Series Supplement or in the exercise of any of its rights or
powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.

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Section 11.02. Certain Rights of the Indenture Trustee.
Subject to Section 11.01 of this Indenture:

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

(b) unless expressly required otherwise, any request or direction
of the Issuer mentioned in this Indenture shall be
sufficiently evidenced by a written request or order signed by
an Authorized Officer of the Owner Trustee;

(c) whenever in the administration of this Indenture the Indenture
Trustee shall deem it desirable that a matter (including
without limitation an Early Amortization Event) 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, rely upon a certificate of a Financial
Officer of the Servicer;

(d) the Indenture Trustee may consult with counsel and the advice
of such 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;

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

(f) prior to the occurrence of an Early Amortization Event and
after the curing or waiving of all such Early Amortization
Events which may have occurred, the Indenture Trustee shall
not be bound to make any investigation into the facts or
matters stated in any

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resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture or other paper or document, unless so requested in
writing by the Majority Noteholders, but the Indenture
Trustee, 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, upon two (2) Business Days prior notice and during
normal business hours, the books, records and premises of the
Issuer, Seller or Servicer, personally or by agent or
attorney;

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

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

(i) the Indenture Trustee shall not be required to make any
initial or periodic examination of any documents or records
related to the Receivables for the purpose of establishing the
presence or absence of defects, the compliance by the Seller
with its representations and warranties or for any other
purpose; and

(j) when the Indenture Trustee incurs expenses or renders services
in connection with an Insolvency Event, such expenses
(including the fees and expenses of its counsel) and the
compensation for such services are intended to constitute
expenses of administration under any bankruptcy law.

Section 11.03. Certificate of Authorized Officer and Opinion
of Counsel. 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 a certificate of an Authorized Officer
of the Issuer stating that

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all conditions precedent, if any (including any covenants compliance with which
constitutes a condition precedent), provided for in this Indenture relating to
the proposed action have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any
(including any covenants compliance with which constitutes a condition
precedent), have been complied with, 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 relating to such
particular application or request, 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 (1) a
statement that each individual signing such certificate or opinion has read
such covenant or condition and the definitions in this Indenture relating
thereto, (2) 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, (3) a statement that, in the opinion of each
such individual, he has made such examination or investigation as is necessary
to enable him to express an informed opinion as to whether or not such covenant
or condition has been complied with and (4) a statement as to whether, in the
opinion of each such individual, such condition or covenant has been complied
with.

Section 11.04. Indemnification.

The Issuer agrees to indemnify and hold harmless the Indenture
Trustee and each Noteholder and each of its respective directors, officers,
employees and agents from and against any and all liabilities, losses, claims,
damages, actions, suits, judgments, demands, costs and expenses (including
reasonable legal fees and expenses) sustained by reason of any acts, omissions
or alleged acts or omissions relating to or arising out of the activities of
the Trust or the Indenture Trustee pursuant to this Indenture or in connection
with the Issuer's performance under this Indenture or the Purchase and
Servicing Agreement, except to the extent such liabilities, losses, claims,
damages, actions, suits, judgments, demands, costs or expenses are caused by
the gross negligence or wilful misconduct of the Indenture Trustee or any of
its directors, officers, employees or agents. Notwithstanding the foregoing,
the rights of the Indenture Trustee hereunder to indemnification from the
Issuer shall be subordinated to the rights of the Noteholders to
indemnification hereunder from the Issuer and payments to the Indenture Trustee
in respect of such indemnification shall be payable solely from amounts
available for distribution to the Trust pursuant to Article V hereof. The
Indenture Trustee's rights and remedies in respect of

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claims for indemnification from the Issuer hereunder shall be subject to the
provisions of Section 14.08 hereof. The indemnity set forth in this Section
11.04 shall survive the resignation or removal of the Indenture Trustee and the
satisfaction or discharge termination of this Indenture.

Section 11.05. Fees and Expenses of the Indenture Trustee.
The fees and expenses of the Indenture Trustee will be paid out of the
Servicing Fee paid to the Servicer pursuant to Section 6.02 of the Purchase and
Servicing Agreement.

Section 11.06. Acts of Noteholders. 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 an agent duly appointed in writing; 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 or any other
Person. Proof of execution of any such instrument or of a writing appointing
any such agent shall be sufficient for any purpose of this Indenture or any
other Transaction Document and (subject to Section 11.01 of this Indenture)
conclusive in favor of the Indenture Trustee and the Issuer, if made in the
manner provided in this Section 11.06. The fact and date of the execution by
any Person of any such instrument or writing may be proved by the affidavit of
a witness to such execution or by the certificate of any notary public or other
officer authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. Where such execution is by an officer of a corporation or a member of
a partnership, on behalf of such corporation or partnership, such certificate
shall also constitute sufficient proof of his authority. The fact and date of
the execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner that the Indenture
Trustee deems sufficient. Any request, demand, authorization, direction,
notice, consent, waiver or other action by any Noteholder shall bind the
Noteholder of every Note issued upon the transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done 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. The ownership of a Note for
the purpose of this Section 11.06 shall be proved by the Note Register.

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Section 11.07. Payments on the Notes. On each Payment Date
(whether during the Interest-Only Period or the Amortization Period), the
Indenture Trustee shall effect all payments with respect to the Notes pursuant
to and in accordance with the terms of this Indenture.

Section 11.08. Documents and Information. Whenever the
Indenture Trustee has the right to require the delivery of information pursuant
to this Indenture or any other Transaction Document, the Indenture Trustee
shall, acting at the written direction of the Majority Noteholders, request the
delivery of such information pursuant to such document. The Indenture Trustee
shall make available copies of any document, report or schedule delivered to it
pursuant to this Indenture or any other Transaction Document for inspection
upon the written request of any of the Noteholders, and shall forward a copy of
any such document, report or schedule to any Noteholder, at such Noteholder's
expense, upon the written request of such Noteholder. The Indenture Trustee
shall also furnish a copy of any such document, report or schedule to each
Rating Agency at the expense of the Issuer. The Indenture Trustee shall, upon
a Noteholder's written request, advise the Noteholder to the extent then known
of (1) the amount of interest and Monthly Principal due on the next Payment
Date with respect to each $1,000 in principal amount of the Notes and with
respect to the outstanding principal amount of all Notes, and (2) the
outstanding principal amount of each Note and the outstanding principal amount
of all Notes.

Section 11.09. Application of Funds; Return of Unclaimed
Funds. Until used or applied as provided in this Indenture, all funds received
by the Indenture Trustee under this Indenture shall be held in trust for the
purposes for which they were received, shall be uninvested for as long as such
funds are held in trust (unless otherwise provided by this Indenture) and shall
be segregated from other funds of the Indenture Trustee to the extent required
by law and under this Indenture. The Indenture Trustee shall be under no
liability for interest on any funds received by it except as otherwise agreed
with the Issuer. Any funds deposited with the Indenture Trustee for the
payment of principal of, and premium (if any) or interest on, the Notes, and
remaining unclaimed for two years after the date upon which such principal,
premium or interest became due and payable, shall be repaid to the Issuer by
the Indenture Trustee upon demand, and any Noteholder to which such deposit
related previously entitled to receive payment thereof shall thereafter, as an
unsecured general creditor, look only to the Issuer for the payment thereof,
and all liability of the Indenture Trustee with respect to such funds shall
thereupon cease.

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Section 11.10. Forwarding of Notices. If the Indenture
Trustee shall receive any notice, demand or other written communication from
any Noteholder pursuant or related to this Indenture, the Notes or any other
Transaction Documents, the Indenture Trustee shall promptly forward a copy of
such notice, demand or other written communication to the Issuer.

Section 11.11. Notes Held by the Indenture Trustee; Rights of
Indenture Trustee. The Indenture Trustee, in its individual or other capacity,
may become the owner or pledgee of the Notes with the same rights it would have
if it were not acting as Indenture Trustee under this Indenture. The Indenture
Trustee may become a creditor, directly or indirectly, of the Issuer or any of
its Affiliates or agencies, make any loan or loans thereto, hold or become a
pledgee of any form of indebtedness thereof (including without limitation the
Notes), own, accept or negotiate any drafts, bills of exchange, acceptances or
obligations thereof, make disbursements therefor and enter into any commercial
or business arrangement therewith without limitation, all without any liability
on the part of the Indenture Trustee under this Indenture for any real or
apparent conflict of interest by reason of any such dealing.

Section 11.12. Inspection. Upon reasonable notice to the
Indenture Trustee, the Issuer may, at its sole cost and expense, during normal
business hours, inspect and photocopy any Notes held by the Indenture Trustee,
any books of registration and transfer relating to the Notes, and any other
books and records maintained by the Indenture Trustee under this Indenture or
any other Transaction Document. Upon reasonable notice to the Indenture
Trustee, the Noteholders may, at their sole cost and expense, during normal
business hours, inspect and photocopy all relevant books, records and notices
furnished to or available to the Indenture Trustee under or in connection with
this Indenture.

Section 11.13. Indenture Trustee; Resignation; Removal;
Successors. The Issuer agrees, for the benefit of the Noteholders, that there
shall at all times be a Indenture Trustee under this Indenture until such time
as there are no longer any Notes outstanding under this Indenture, which
Indenture Trustee (1) shall be a bank or trust company organized, doing
business and in good standing under the laws of the United States of America or
of the State of New York with a combined capital and surplus of at least $250
million, (2) shall have a long-term debt rating not less than BBB by Standard
& Poor's and, if rated by Duff & Phelps, BBB by Duff & Phelps, or shall
otherwise be acceptable to Standard & Poor's and to Duff & Phelps, (3) shall
have its principal place of business in the Borough of Manhattan, the City of
New York and

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(4) shall be authorized under the laws of the United States of America or of the
State of New York to exercise corporate trust powers. The Indenture Trustee may
at any time resign by giving written notice to the Issuer and the Noteholders of
its resignation (which notice shall also be delivered to each Rating Agency),
specifying the date on which its resignation shall become effective (which shall
not be less than sixty (60) days after the date on which such notice is given
unless the Issuer and the Majority Noteholders shall agree to a shorter period);
provided that, no resignation shall take effect until the appointment of a
successor Indenture Trustee and the acceptance of such appointment by such
successor Indenture Trustee in accordance with this Section 11.13. The
Indenture Trustee may at any time be removed by the Majority Noteholders by
written notice (which notice shall also be delivered to each Rating Agency) from
the Majority Noteholders to the Issuer and the Indenture Trustee specifying the
date on which such removal shall become effective; provided that, no removal
shall take effect until the appointment of a successor Indenture Trustee and the
acceptance of such appointment by such successor Indenture Trustee in accordance
with this Section 11.13. If at any time the Indenture Trustee shall resign, or
shall be removed, or shall become incapable of acting, or shall be adjudged a
bankrupt or insolvent, or shall file a voluntary petition in bankruptcy or make
an assignment for the benefit of its creditors or consent to the appointment of
a receiver or conservator of all or any substantial part of its property, or
shall generally not be paying its debts as they become due, or if an order of
any court shall be entered approving any petition filed by or against it under
the provisions of Chapter 7 or 11 of Title 11 of the Bankruptcy Code or under
the provisions of any similar legislation, or if a receiver or custodian of it
or of all or any substantial part of its property shall be appointed, or if any
public officer shall have taken charge or control of the Indenture Trustee or of
its property or affairs, for the purpose of rehabilitation, conservation or
liquidation, a successor Indenture Trustee, qualified as aforesaid, shall be
appointed as follows:

(a) (1) so long as no Early Amortization Event shall have
occurred and be continuing at the time of receipt by
the Issuer of such resignation notice or removal
notice, or the time of such incapability of acting,
adjudication, filing, assignment, consent, nonpayment
of debts, entry of court order, appointment, or
taking of charge or control, as the case may be, the
successor Indenture Trustee shall be appointed by the
Issuer, with the consent of the Majority Noteholders
(which consent shall not be

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unreasonably withheld); provided that, if the Issuer
and the Majority Noteholders fail to agree on a
successor Indenture Trustee within thirty (30) days
after such receipt, incapability of acting,
adjudication, filing, assignment, consent, nonpayment
of debts, entry of court order, appointment, or taking
of charge or control, as the case may be, the
successor Indenture Trustee shall be appointed by the
Majority Noteholders; and

(2) so long as an Early Amortization Event shall have
occurred and be continuing at the time of receipt by
the Issuer of such resignation notice or removal
notice, or the time of such incapability of acting,
adjudication, filing, assignment, consent, nonpayment
of debts, entry of court order, appointment, or
taking of charge or control, as the case may be, the
successor Indenture Trustee shall be appointed by the
Majority Noteholders; and

(b) the successor Indenture Trustee shall accept its appointment
as Indenture Trustee under this Indenture by the execution and
delivery of an instrument of appointment, acceptance and
succession, whereupon (1) the predecessor Indenture Trustee
shall (A) cease to be Indenture Trustee under this Indenture
and (B) at the written direction of the Issuer and the
Majority Noteholders deliver and pay over to the successor
Indenture Trustee any and all securities, moneys and any other
properties then in its possession as Indenture Trustee, and
execute all such documents and take all such other actions as
may be necessary or advisable to effect the succession and (2)
the successor Indenture Trustee, without any further act, deed
or conveyance, shall succeed to and become vested with all the
authority, rights, powers, trusts, immunities, duties and
obligations of such predecessor Indenture Trustee, with like
effect as if originally named as such Indenture Trustee under
this Indenture.

If no successor Indenture Trustee shall have been so appointed and shall have
accepted such appointment within sixty (60) days after the receipt by the
Issuer of the predecessor Indenture Trustee's notice of resignation, the
predecessor Indenture Trustee may, on behalf of the Majority Noteholders,
appoint a successor Indenture Trustee, which shall be qualified as required in
this Section

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11.13. Upon any succession of the Indenture Trustee under this Indenture
(notice of which shall be provided to each Rating Agency), the predecessor
Indenture Trustee shall be entitled to the payment of compensation and
reimbursement agreed to under this Indenture for services rendered and expenses
incurred. After any succession of the Indenture Trustee under this Indenture,
the provisions of Section 11.04 of this Indenture shall inure to the benefit of
the predecessor Indenture Trustee as to any action taken or omitted to be taken
by it while it was Indenture Trustee under this Indenture. The Majority
Noteholders shall give prompt written notice of the appointment of a successor
Indenture Trustee to all of the Noteholders. No Indenture Trustee under this
Indenture shall be personally liable for any action or omission of any
successor Indenture Trustee.

Section 11.14. Merger and Consolidation. Any corporation
into which the Indenture Trustee may be merged or converted or with which it
may be consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Indenture Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Indenture Trustee, shall be the successor of the Indenture
Trustee under this Indenture, without the execution or filing of any paper or
any further act on the part of any of the parties hereto and shall be required
to meet the requirements of Section 11.13 of this Indenture. In case any Notes
shall have been authenticated, but not delivered, by the Indenture Trustee then
in office, any successor by merger, conversion or consolidation to such
authenticating Indenture Trustee may adopt such authentication and deliver the
Notes so authenticated with the same effect as if such successor Indenture
Trustee had itself authenticated such Notes.

Section 11.15. Separate Indenture Trustees or Co-Trustees.
For purposes of meeting the legal requirements of certain local jurisdictions,
the Indenture Trustee shall have the power to appoint a co-trustee or separate
trustees of all or any part of the Issuer. In the event of such appointment,
all rights, powers, duties and obligations conferred or imposed upon the
Indenture Trustee by the Indenture shall be conferred or imposed upon the
Indenture Trustee and such separate trustee or co-trustee jointly, or, in any
jurisdiction in which the Indenture Trustee shall be incompetent or unqualified
to perform certain acts, singly upon such separate trustee or co-trustee who
shall exercise and perform such rights, powers, duties and obligations solely
at the direction of the Indenture Trustee.

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ARTICLE XII

DISCHARGE OF INDENTURE

Section 12.01. Satisfaction and Discharge of Indenture. This
Indenture shall cease to be of further effect, and the Indenture Trustee, on
demand of and at the expense of the Issuer, shall execute all proper
instruments acknowledging satisfaction and discharge of this Indenture, when
either (1) all Notes theretofore authenticated and delivered (other than Notes
which have been destroyed, lost or stolen and which have been replaced, and
Notes for payment of which money has theretofore been deposited with the
Indenture Trustee at the direction of the Issuer and held in trust by the
Indenture Trustee and thereafter repaid to the Issuer and discharged from such
trust, as provided in Section 11.09 of this Indenture) have been delivered to
the Indenture Trustee canceled or for cancellation and the Issuer has paid all
sums payable by it under this Indenture, any Series Supplement and under such
Notes with respect to such Notes or (2) the Issuer has deposited or caused to
be deposited with the Indenture Trustee as funds in trust for the benefit of
the Noteholders an amount sufficient (without giving effect to any income or
earnings therefrom), in the written opinion of a firm of nationally recognized,
independent certified public accountants (which firm may also render other
services to the Issuer or any Affiliate thereof) delivered to the Indenture
Trustee, to pay and discharge the entire indebtedness on the Notes for
principal and interest and premium, if any, and the Issuer has delivered to the
Indenture Trustee an Opinion of Counsel stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture with respect to the Notes have been complied with. Notwithstanding
the satisfaction and discharge of this Indenture with respect to the Notes, the
obligations under Sections 11.04, 11.05 and 11.09 of this Indenture shall
survive such satisfaction and discharge.

ARTICLE XIII

AMENDMENTS

Section 13.01. Modification of Terms without Consent of
Noteholders. Modifications of and amendments to this Indenture or the Notes
may be made by the Issuer and the Indenture Trustee without the consent of any
Noteholder for the purpose of curing any ambiguity, or curing, correcting or
supplementing any provisions contained in this Indenture or the Notes that may
be defective or inconsistent with any other provision contained in

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this Indenture or the Notes or in any other manner which the Issuer and the
Indenture Trustee may deem necessary or desirable and which shall not adversely
affect the interests of the Noteholders. In addition, except for the items set
forth in Section 13.02 below, modifications of and amendments to this Indenture
or the Notes may be made by the Issuer and the Indenture Trustee without the
consent of any Noteholder (a) if each of the Rating Agencies have provided
confirmation to the Issuer and the Indenture Trustee that such amendment or
waiver shall not result in a reduction or removal of the rating of any class of
the Notes or (b) in order to maintain the rating of the Notes. Any such
modifications or waivers of or amendments to this Indenture or the Notes shall
be conclusive and binding on all Noteholders and on all future Noteholders,
whether or not notation of such modifications, waivers or amendments is made
upon the Notes.

Section 13.02. Modifications of Terms with Consent of
Noteholders. Modifications of and amendments to this Indenture or the Notes
may also be made, and future compliance therewith or past default by the Issuer
thereunder may be waived, with the consent of the Majority Noteholders;
provided that, no such modification or amendment to the Indenture or any Note,
and no waiver of the terms and conditions of the Indenture or any Note, may,
without the consent of the Noteholder of each such Note affected thereby, (1)
change the Scheduled Redemption Date or a Series Termination Date or the method
of determining the required amounts of principal payments on, any Note, (2)
reduce the amount of Monthly Principal, premium (if any) or interest payable
with respect to such Note, (3) change the date of payment of principal, premium
(if any) or interest with respect to such Note, (4) change the currency in
which the payment of principal, premium (if any) or interest with respect to
such Note is payable, (5) impair the right to institute suit for the
enforcement of any payment due and payable with respect to such Note, (6)
reduce the above-stated percentage of the outstanding principal amount of
Notes, the consent of whose Noteholders is necessary to modify or amend this
Indenture or the Notes or to waive future compliance therewith or past default
thereunder, (7) change the method of calculating the Optional Full Redemption
Price, (8) change any provision with respect to the optional redemption of the
Notes or (9) change any provision regarding the law governing the Transaction
Documents. Any such modifications of or amendments to, or waivers with respect
to, this Indenture or the Notes shall be conclusive and binding on all
Noteholders and on all future Noteholders, whether or not notation of such
modifications, amendments or waivers is made upon the Notes. Any instrument
given by or on behalf of any Noteholder of a Note in connection with any
consent to any such modification, amendment or waiver shall be irrevocable once
given

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and shall be conclusive and binding on all subsequent Noteholders of such Note.
Any amendment or modification consented to by the Noteholders shall be not be
effective unless each of the Rating Agencies has provided confirmation to the
Issuer and the Indenture Trustee that such amendment or waiver shall not result
in reduction or removal of the rating of any class of the Notes.

Section 13.03. Amendment of the Purchase and Servicing
Agreement. Except as expressly provided otherwise in this Indenture, no
amendment shall be made to the Purchase and Servicing Agreement that would
adversely affect in any material respect the interests of the Noteholders or
the Indenture Trustee unless the Majority Noteholders or Indenture Trustee, as
applicable, have consented to such amendment; provided, however, that such
amendment shall be deemed to not adversely affect in any material respect the
interests of the Noteholders or the Indenture Trustee (a) if each of the Rating
Agencies has provided confirmation to the Issuer and the Indenture Trustee that
such amendment or waiver shall not result in reduction or removal of the rating
of any class of the Notes or (b) if such amendment is necessary to maintain the
ratings of the Notes; provided, further, that such amendment or waiver shall
not have a material adverse effect against the Indenture Trustee's interest.

Section 13.04. Rating Agencies. This Agreement may not be
amended unless the Issuer shall have delivered the proposed amendment or any
Series Supplement to each Rating Agency at least ten Business Days (or such
shorter period as shall be acceptable to each of them) prior to the execution
and delivery thereof.

Section 13.05. Indenture Trustee. In accepting any
additional trusts created by any modification of or amendment to this Indenture
or the Notes, the Indenture Trustee shall be entitled to receive, and shall be
fully protected in relying upon, an opinion of counsel stating that such
modification or amendment is authorized or permitted by this Indenture. The
Indenture Trustee may, but shall not be obligated to, enter into any such
modified or amended Indenture or authenticate any such modified or amended
Note, in either case that affects the Indenture Trustee's own rights, duties or
immunities under this Indenture or otherwise.

Section 13.06. Notes. Notes to be authenticated and
delivered after the modification of, amendment to or waiver under this
Indenture permitted by this Indenture may, and shall if required by the
Indenture Trustee or the Noteholders thereof, bear a notation in form approved
by the Indenture Trustee and the Issuer as to any matter provided for in
connection with such

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modification, amendment or waiver. If the Indenture Trustee or the Majority
Noteholders shall so determine, new Notes so modified as to conform, in the
opinion of the Indenture Trustee, the Majority Noteholders and the Issuer, to
any such modification, amendment or waiver may be prepared and executed by the
Issuer and authenticated and delivered by the Indenture Trustee in connection
with any registered transfer or exchange of Notes.

ARTICLE XIV

MISCELLANEOUS

Section 14.01. Notices. All notices and other communications
provided under this Indenture shall be in writing (including telegraphic,
telex, facsimile or cable communication) and shall be delivered in hand, mailed
by United States certified or registered first class mail, sent by overnight
courier, telegraphed, telexed, transmitted, telecopied or cabled:

(a) If to the Issuer, to it at:

Zale Funding Trust
c/o Wilmington Trust Company, as Trustee
1100 North Market Street
Wilmington, Delaware 19890

Attention: Corporate Trust Administration

Telephone: (302) 651-1000
Telecopy: (302) 651-8882

with separate copies to:

General Counsel and Secretary
and

Treasurer, Finance Department
Zale Corporation
901 West Walnut Hill Lane
Irving, Texas 75038

Telephone: (214) 580-4576
Telecopy: (214) 580-5336

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(b) If to Bankers Trust Company, to it at:

Four Albany Street
New York, New York 10006

Attention: Corporate Trust and Agency Group,
Structured Finance Team

Telephone: (212) 250-6137
Telecopy: (212) 250-6439

or, as to each such party, at such other address as shall be designated by such
party in a written notice to the other party. All notices and other
communications given under this Indenture in accordance with the provisions of
this Indenture shall be deemed to have been given (1) on the date of receipt if
delivered by hand or overnight courier service or cabled or sent by telex,
telecopy or other telegraphic communications equipment of the sender or (2) on
the date five (5) Business Days after dispatch by certified or registered mail
if mailed, in each case delivered, sent or mailed (properly addressed) to such
party as provided in this Section 14.01 or in accordance with the latest
unrevoked direction from such party given in accordance with this Section
14.01. Except as set forth in Section 10.08 of this Indenture, the Indenture
Trustee shall promptly forward to each Noteholder a copy of each notice it
receives pursuant to this Indenture or any other Transaction Document. All
such notices to Noteholders shall be given at the addresses set forth in the
Note Register. In addition, upon the receipt thereof, the Indenture Trustee
shall promptly forward to each Noteholder a copy of any proposed and final
amendment, modification or waiver that the Indenture Trustee receives with
respect to this Indenture or any other Transaction Document. In any case where
notice to Noteholders is given by first-class mail, postage prepaid, 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 any other Noteholder. Where this Indenture or any Note provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice.

Section 14.02. No Waiver; Remedies Cumulative. No failure on
the part of any party to this Indenture to exercise, and no delay by any such
party in exercising, any right under this Indenture shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right preclude
any other or further exercise thereof or the exercise of any other right. The

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remedies herein provided are cumulative and not exclusive of any remedies
provided by law.

Section 14.03. Binding Effect. This Indenture shall become
effective, as of the date first written above, when it shall have been executed
by the Issuer and the Indenture Trustee. From and after the date this
Indenture shall have so become effective, this Indenture shall be binding upon
and inure to the benefit of the Issuer and the Indenture Trustee, and their
respective successors and assigns; provided that, the Issuer shall not have the
right to assign its rights under this Indenture or any interest in this
Indenture without the prior written consent of the Indenture Trustee, and the
Indenture Trustee shall not have the right to assign its rights under this
Indenture or any interest in this Indenture without the prior written consent
of the Issuer and the Majority Noteholders, except as may be otherwise
expressly provided in Section 11.13 of this Indenture with respect to a
successor Indenture Trustee. This Indenture is solely for the benefit of the
parties hereto, their successors and permitted assigns and the Noteholders, and
no other Person shall acquire or have any right hereunder or by virtue hereof.
Upon the payment in full of the Notes, the Issuer shall be entitled to the
prompt return, upon its request and at its expense, of such of the Collateral
as shall not have been sold or otherwise applied pursuant to the terms of this
Indenture, and upon such request the Indenture Trustee shall promptly reassign
and deliver to the Issuer, or to such Person or Persons as the Issuer shall
designate, against receipt, such of the Collateral as shall not have been sold
or otherwise applied pursuant to the terms of this Indenture, together with
appropriate instruments of reassignment and release.

Section 14.04. GOVERNING LAW. THIS INDENTURE SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT
TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST GRANTED
HEREUNDER OR REMEDIES HEREUNDER IN RESPECT OF ANY COLLATERAL, ARE GOVERNED BY
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.

Section 14.05. Headings. All section and subsection headings
and the Table of Contents used in this Indenture are for convenience of
reference only and shall not affect the construction or interpretation of this
Indenture.

Section 14.06. WAIVER OF JURY TRIAL. EACH PARTY TO THIS
INDENTURE WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN

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RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS INDENTURE. EACH PARTY TO THIS INDENTURE (1) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF SUCH
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (2) ACKNOWLEDGES THAT IT
AND THE OTHER PARTY HERETO HAVE BEEN INDUCED TO ENTER INTO THIS INDENTURE BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
14.06.

Section 14.07. Severability. In the event any one or more of
the provisions contained in this Indenture should be held invalid, illegal or
unenforceable in any respect, the validity, legality or enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby, and the parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid, legal and enforceable provisions, the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable provisions.

Section 14.08. No Petition in Bankruptcy. The Indenture
Trustee covenants and agrees that it shall not institute against, or join any
other Person in instituting against, the Issuer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States.

Section 14.09. Counterparts. This Indenture may be executed
in one or more counterparts, each of which shall constitute an original but all
of which when taken together shall constitute but one contract.

Section 14.10. Jurisdiction; Consent to Service of Process.
Each party to this Indenture hereby irrevocably and unconditionally (1)
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York State court or Federal court of the United States of America for the
Southern District of New York, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Indenture, or for
recognition or enforcement of any judgment arising out of or relating to this
Indenture; (2) agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, Federal court; (3) agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law;
(4) consents that any such action or proceeding

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may be brought in such courts and waives any objection it may now or hereafter
have to the laying of venue of any such action or proceeding in any such court
and any objection it may now or hereafter have that such action or proceeding
was brought in an inconvenient court, and agrees not to plead or claim the
same; (5) consents to service of process in the manner provided for notices in
Section 14.01 of this Indenture (provided that, nothing in this Indenture shall
affect the right of any such party to serve process in any other manner
permitted by law); and (6) waives, to the maximum extent not prohibited by law,
any right it may have to claim or recover in any such action or proceeding any
special, exemplary, punitive or consequential damages.

Section 14.11. No Recourse. The obligations of the Issuer under
this Indenture, the Notes and each other agreement, instrument, document or
certificate executed and delivered or issued by the Issuer in connection
herewith or therewith are solely the corporate obligations of the Issuer.
Except as expressly provided for in Sections 7.03, 7.08 or 8.04(b) of the Trust
Agreement, no recourse shall be had for the payment of any fee or any other
obligations or claim arising out of or based upon this Indenture, the Notes or
any other agreement, instrument, document or certificate executed and delivered
or issued by the Issuer in connection herewith or therewith against any holder
of a Trust Certificate, employee, officer, director, incorporator or agent of
the Issuer or any Affiliate of the Issuer.

Section 14.12. Limitation of Liability. It is expressly
understood and agreed by the parties hereto that (a) this Indenture is executed
and delivered by Wilmington Trust Company, not individually or personally but
solely as the Owner Trustee of the Issuer under the Trust Agreement, in the
exercise of the powers and authority conferred and vested in it, (b) each of
the representations, undertakings and agreements herein made on the part of the
Issuer is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
of binding only the Issuer, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company, individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the Indenture Trustee and by any
Person claiming by through or under the Indenture Trustee and (d) under no
circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Issuer under this Indenture or the other Transaction
Documents.

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80

Section 14.13. Independent Investigation. Each of the
Noteholders, by its purchase of the Notes, acknowledges that it has
independently and without reliance upon any of the other Noteholders, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Issuer, the Seller
and the Servicer, and made its own decision to enter into the Transaction
Documents to which it is a party and to consummate the transactions
contemplated thereby.

73
81

IN WITNESS WHEREOF, each of the parties to this Indenture has
caused this Indenture to be executed on its behalf by its officers thereunto
duly authorized, all as of the day and year first above written.

ZALE FUNDING TRUST

By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
under the Amended and Restated
Trust Agreement dated as of July
1, 1994

By: /S/ EMMETT R. HARMON
---------------------------------
Name: EMMETT R. HARMON
----------------------------
Title: VICE PRESIDENT
---------------------------

BANKERS TRUST COMPANY, not in its
individual capacity, but solely as
Indenture Trustee

By: /S/ LOUIS BODI
---------------------------------
Name: LOUIS BODI
----------------------------
Title: ASSISTANT VICE PRESIDENT
---------------------------

74
82

EXHIBIT A

Form of Class A-1 Asset Backed Note

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY ("DTC"), A NEW YORK CORPORATION, TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC OR TO SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.

TRANSFERS OF THIS NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART,
TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE, AND
TRANSFERS OF BENEFICIAL INTERESTS IN THIS NOTE SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO
HEREIN.

PRINCIPAL PAYMENTS OF THIS NOTE MAY BE MADE PRIOR TO THE Series Termination Date
UNDER CERTAIN CONDITIONS AS SET FORTH IN THE INDENTURE REFERRED TO HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.

ZALE FUNDING TRUST

CLASS A-1 FLOATING RATE ASSET BACKED NOTES

NO. 1
PRINCIPAL AMOUNT: $ 37,620,000
ISSUANCE DATE: July 15, 1994
SERIES TERMINATION DATE: March 15, 2003
CLASS A-1 NOTE RATE: LIBOR plus 0.40% (but not to exceed
12%) Per Annum

ZALE FUNDING TRUST (the "Issuer"), for value received, hereby
promises to pay to CEDE & CO., or its registered assigns, the principal amount
of Thirty-Seven Million Six Hundred Twenty Thousand Dollars (as may be reduced
by any payment of Monthly Principal), on the Series Termination Date. The
Issuer agrees to pay the principal amount, if any, which is the Monthly
Principal,

on the fifteenth day of each calendar month or, if such fifteenth day is not a
Business Day, the next succeeding Business Day (each, a "Payment Date"),
commencing with the Amortization Commencement Date, until the outstanding
principal amount hereof is paid or reduced to zero pursuant to the terms of the
Indenture or payment therefor is made available pursuant to the Indenture (as
referred to below). The Issuer further agrees to pay interest at the rate of
LIBOR plus 0.40% (but not to exceed 12% per annum) (the "Class A-1 Note Rate"),
calculated on the basis of the actual number of days elapsed and a 360-day year
on each Payment Date, commencing with August 15, 1994, equal to the interest
that accrued during the preceding Floating Rate Interest Period on the
principal balance of this Note outstanding during such calendar month after
giving effect to payments of principal, if any, made on the preceding Payment
Date. Interest on this Note will accrue from and including the previous
Payment Date (or, in the case of the first Payment Date, from and including the
Issuance Date) to and including the day preceding such Payment Date.

Interest for any Payment Date due but not paid on such Payment
Date will be due on the next succeeding Payment Date together with additional
interest on such amount at the Class A-1 Note Rate.

The principal of, premium if any, and interest on this Note
are payable in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts. All
payments made by the Issuer with respect to this Note shall be applied first to
interest due and payable on this Note as provided above and then to the unpaid
principal (and premium, if any) of this Note.

This Note is one of the Notes referred to in the Indenture
dated as of July 1, 1994 (the "Indenture"), between the Issuer and Bankers
Trust Company, as Indenture Trustee which, among other things contains
provisions for the acceleration of the maturity hereof upon the occurrence of
certain events, for the optional redemption of this Note by the Issuer and for
the amendment or waiver of certain provisions of the Indenture, all upon the
terms and conditions therein specified. Capitalized terms which are used
herein that are not defined shall have the meaning assigned to such terms in
the Indenture. Upon written request, the Indenture Trustee shall provide a
copy of such Indenture to the holder of this Note. This Note shall not be
subject to optional prepayment except as provided in the Indenture.

Any funds deposited with the Indenture Trustee for the payment
of principal of, and premium (if any) or interest on, the Notes, and remaining
unclaimed for two years after the date upon which such principal, premium or
interest became due and payable, shall be repaid to the Issuer by the Indenture
Trustee upon demand, and any Noteholder to which such deposit related
previously entitled to receive payment thereof shall thereafter, as an
unsecured general creditor, look only to the Issuer for the payment thereof,
and all liability of the Indenture Trustee with respect to such funds shall
thereupon cease.

It is the intention of the Issuer to conform strictly to
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law (including the laws of the State of
Delaware and the laws of the United States of America), then, in that event,
notwithstanding anything to the contrary in any agreement entered into in
connection with this Note, it is agreed as follows: (i) the aggregate of all
consideration that constitutes interest, if any, under applicable law that is
taken, reserved, contracted for, charged or received under this Note or any
other agreement or document executed in connection with this Note shall under
no circumstances exceed the maximum amount of interest allowed by applicable
law, and any excess shall be credited to other amounts due under this Note by
the holder hereof (or if this Note shall have been paid in full, refunded to
the Issuer); and (ii) in the event that maturity of this Note is accelerated by
reason of any election by the holder hereof resulting from any default
hereunder or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest may never include
more than the maximum amount allowed by applicable law, and excess interest, if
any, provided for in this Note or otherwise shall be cancelled automatically as
of the date of such acceleration or prepayment and, if theretofore prepaid,
shall be credited to other amounts due under this Note (or if this Note shall
have been paid in full, refunded to the Issuer). In the event that applicable
law provides for a ceiling on the rate of interest, if any, chargeable
hereunder, that ceiling shall be the indicated rate ceiling.

This Note shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have been manually
signed by or on behalf of the Indenture Trustee under the Indenture.

THIS NOTE SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, ZALE FUNDING TRUST has caused this
instrument to be signed in its name by an Authorized Officer and its seal to be
imprinted, manually or in facsimile, hereon.

Dated: July 15, 1994

ZALE FUNDING TRUST

By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
under the Amended and Restated
Trust Agreement dated as of July
15, 1994

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

CERTIFICATE OF AUTHENTICATION

This Note is one of the Class A-1 Notes referred to in the
within-mentioned Indenture.

BANKERS TRUST COMPANY,
as Indenture Trustee

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

Dated: July 15, 1994
[to come]

EXHIBIT B

Form of Class A-2 Asset Backed Note

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY ("DTC"), A NEW YORK CORPORATION, TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC OR TO SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO
CEDE & CO.), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

PRINCIPAL PAYMENTS OF THIS NOTE MAY BE MADE PRIOR TO THE
SERIES TERMINATION DATE UNDER CERTAIN CONDITIONS AS SET FORTH IN THE
INDENTURE REFERRED TO HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL
AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON
THE FACE HEREOF.

ZALE FUNDING TRUST

CLASS A-2 7.325% ASSET BACKED NOTES

NO. 1
PRINCIPAL AMOUNT: $294,100,000
ISSUANCE DATE: July 15, 1994
SERIES TERMINATION DATE: March 15, 2003
CLASS A-2 NOTE RATE: 7.325% Per Annum

ZALE FUNDING TRUST (the "Issuer"), for value received, hereby
promises to pay to CEDE & CO., or its registered assigns,

the principal amount of Two Hundred Ninety-Four Million One Hundred Thousand
Dollars (as may be reduced by any payment of Monthly Principal), on the Series
Termination Date. The Issuer agrees to pay the principal amount, if any, which
is the Monthly Principal, on the fifteenth day of each calendar month or, if
such fifteenth day is not a Business Day, the next succeeding Business Day
(each, a "Payment Date"), commencing with the Amortization Commencement Date,
until the outstanding principal amount hereof is paid or reduced to zero
pursuant to the terms of the Indenture or payment therefor is made available
pursuant to the Indenture (as referred to below). The Issuer further agrees to
pay interest at the rate of 7.325% per annum (the "Class A-2 Note Rate"),
calculated on the basis of a 360-day year consisting of twelve 30-day months on
each Payment Date, commencing with August 15, 1994, equal to the interest that
accrued during the preceding Fixed Rate Interest Period on the principal
balance of this Note outstanding during such calendar month after giving effect
to payments of principal, if any, made on the preceding Payment Date. Interest
on this Note will accrue from and including the 15th day of the month preceding
the month in which such Payment Date occurs (or, in the case of the first
Payment Date, from and including the Issuance Date) to and including the 14th
day of the month in which such Payment Date occurs.

Interest for any Payment Date due but not paid on such Payment
Date will be due on the next succeeding Payment Date together with additional
interest on such amount at the Class A-2 Note Rate.

subject to optional prepayment except as provided in the Indenture.

THIS NOTE SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, ZALE FUNDING TRUST has caused this
instrument to be signed in its name by an Authorized Officer and its seal to be
imprinted, manually or in facsimile, hereon.

Dated: July 15, 1994

ZALE FUNDING TRUST

By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
under the Amended and Restated
Trust Agreement dated as of July
1, 1994

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

CERTIFICATE OF AUTHENTICATION

This Note is one of the Class A-2 Notes referred to in the
within-mentioned Indenture.

BANKERS TRUST COMPANY,
as Indenture Trustee

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

Dated: July 15, 1994

EXHIBIT C

Form of Class B Asset Backed Note

THIS CLASS B NOTE IS SUBORDINATED IN RIGHT OF PAYMENT
TO CERTAIN OTHER CLASSES OF NOTES OF THIS SERIES TO
THE EXTENT DESCRIBED IN THE INDENTURE REFERRED TO HEREIN.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY ("DTC"), A NEW YORK CORPORATION, TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC OR TO SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO
CEDE & CO.), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

ZALE FUNDING TRUST

CLASS B 7.50% ASSET BACKED NOTES

NO. 1
PRINCIPAL AMOUNT: $28,600,000
ISSUANCE DATE: July 15, 1994
SERIES TERMINATION DATE: March 15, 2003
CLASS B NOTE RATE: 7.50% Per Annum

ZALE FUNDING TRUST (the "Issuer"), for value received, hereby
promises to pay to CEDE & CO., or its registered assigns, the principal amount
of Twenty-Eight Million Six Hundred Thousand Dollars (as may be reduced by any
payment of Monthly Principal), on the Series Termination Date. The Issuer
agrees to pay the principal amount, if any, which is the Monthly Principal, on
the fifteenth day of each calendar month or, if such fifteenth day is not a
Business Day, the next succeeding Business Day (each, a "Payment Date"),
commencing with the Amortization Commencement Date, until the outstanding
principal amount hereof is paid or reduced to zero pursuant to the terms of the
Indenture or payment therefor is made available pursuant to the Indenture (as
referred to below). The Issuer further agrees to pay interest at the rate of
7.50% per annum (the "Class B Note Rate"), calculated on the basis of a 360-day
year consisting of twelve 30-day months on each Payment Date, commencing with
August 15, 1994, equal to the interest that accrued during the preceding Fixed
Rate Interest Period on the principal balance of this Note outstanding during
such calendar month after giving effect to payments of principal, if any, made
on the preceding Payment Date. Interest on this Note will accrue from and
including the 15th day of the month preceding the month in which such Payment
Date occurs (or, in the case of the first Payment Date, from and including the
Issuance Date) to and including the 14th day of the month in which such Payment
Date occurs.

Interest for any Payment Date due but not paid on such Payment
Date will be due on the next succeeding Payment Date together with additional
interest on such amount at the Class B Note Rate.

request, the Indenture Trustee shall provide a copy of such Indenture to the
holder of this Note. This Note shall not be subject to optional prepayment
except as provided in the Indenture.

THIS NOTE SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, ZALE FUNDING TRUST has caused this
instrument to be signed in its name by an Authorized Officer and its seal to be
imprinted, manually or in facsimile, hereon.

Dated: July 15, 1994

ZALE FUNDING TRUST

By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
under the Amended and Restated
Trust Agreement dated as of July
1, 1994

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

CERTIFICATE OF AUTHENTICATION

This Note is one of the Class B Notes referred to in the within-
mentioned Indenture.

BANKERS TRUST COMPANY,
as Indenture Trustee

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

Dated: July 15, 1994

EXHIBIT D

Form of Class C Asset Backed Note

THIS CLASS C NOTE IS SUBORDINATED IN RIGHT OF PAYMENT
TO CERTAIN OTHER CLASSES OF NOTES OF THIS SERIES TO
THE EXTENT DESCRIBED IN THE INDENTURE REFERRED TO HEREIN.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY ("DTC"), A NEW YORK CORPORATION, TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC OR TO SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO
CEDE & CO.), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

PRINCIPAL PAYMENTS OF THIS NOTE MAY BE MADE PRIOR TO THE
Series Termination Date UNDER CERTAIN CONDITIONS AS SET FORTH IN THE
INDENTURE REFERRED TO HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL
AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON
THE FACE HEREOF.

ZALE FUNDING TRUST

CLASS C 8.15% ASSET BACKED NOTES

NO. 1
PRINCIPAL AMOUNT: $20,440,000
ISSUANCE DATE: July 15, 1994
SERIES TERMINATION DATE: March 15, 2003
CLASS C NOTE RATE: 8.15% Per Annum

ZALE FUNDING TRUST (the "Issuer"), for value received, hereby
promises to pay to CEDE & CO., or its registered assigns, the principal amount
of Twenty Million Four Hundred Forty Thousand Dollars (as may be reduced by any
payment of Monthly Principal), on the Series Termination Date. The Issuer
agrees to pay the principal amount, if any, which is the Monthly Principal, on
the fifteenth day of each calendar month or, if such fifteenth day is not a
Business Day, the next succeeding Business Day (each, a "Payment Date"),
commencing with the Amortization Commencement Date, until the outstanding
principal amount hereof is paid or reduced to zero pursuant to the terms of the
Indenture or payment therefor is made available pursuant to the Indenture (as
referred to below). The Issuer further agrees to pay interest at the rate of
8.15% per annum (the "Class C Note Rate"), calculated on the basis of a 360-day
year consisting of twelve 30-day months on each Payment Date, commencing with
August 15, 1994, equal to the interest that accrued during the preceding Fixed
Rate Interest Period on the principal balance of this Note outstanding during
such calendar month after giving effect to payments of principal, if any, made
on the preceding Payment Date. Interest on this Note will accrue from and
including the 15th day of the month preceding the month in which such Payment
Date occurs (or, in the case of the first Payment Date, from and including the
Issuance Date) to and including the 14th day of the month in which such Payment
Date occurs.

Interest for any Payment Date due but not paid on such Payment
Date will be due on the next succeeding Payment Date together with additional
interest on such amount at the Class C Note Rate.

request, the Indenture Trustee shall provide a copy of such Indenture to the
holder of this Note. This Note shall not be subject to optional prepayment
except as provided in the Indenture.

THIS NOTE SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, ZALE FUNDING TRUST has caused this
instrument to be signed in its name by an Authorized Officer and its seal to be
imprinted, manually or in facsimile, hereon.

Dated: July 15, 1994

ZALE FUNDING TRUST

By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
under the Amended and Restated
Trust Agreement dated as of July
1, 1994

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

CERTIFICATE OF AUTHENTICATION

This Note is one of the Class C Notes referred to in the
within-mentioned Indenture.

BANKERS TRUST COMPANY,
as Indenture Trustee

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

Dated: July 15, 1994

99
EXECUTION COPY

ANNEX I
[INDENTURE/PURCHASE AND SERVICING AGREEMENT]

Glossary of Terms

As used in the document to which this Annex I is attached,
unless specified to the contrary in such document, the definitions set forth or
referred to below (1) shall apply equally to both the singular and plural forms
of the terms defined; (2) whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms; (3) the words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation"; (4) all terms used in Article 9 of the UCC as in
effect in State of New York that are used but not defined herein shall have the
meaning assigned to such terms therein; and (5) in the computation of a period
of time from a specified date to a later specified date, the word "from" means
"from and including", and the words "to" and "until" each mean "to but
excluding".

"Account" shall mean each individual private label revolving
credit card account that exists on the Cut-Off Date or that is established
after the Cut-Off Date pursuant to a Credit Card Agreement between the Seller,
Zale Puerto Rico or Dobbins (or any of their respective predecessors in
interest) and an Obligor, including without limitation all Accounts which, as
of the Cut-Off Date, are identified in the Account Schedule.

"Account Collateral" shall have the meaning assigned to such
term in Section 3.01(e) of the Indenture.

"Account Payment Instructions" shall have the meaning assigned
to such term in Section 2.11 of the Indenture.

"Account Schedule" shall mean the account schedule listing all
the Accounts and the balances thereof, on the Issuance Date (which may be in
the form of a computer file or microfiche list) in the form of Schedule I to
the Purchase and Servicing Agreement.
100

"Adjusted Eligible Receivables Balance" shall mean, as of any
date of determination, the product of (i) the aggregate principal balance of
the Eligible Receivables as set forth in the Daily Report delivered on such
day, (ii) the applicable Series Allocation Percentage and (iii) the applicable
Seasonality Factor.

"Adjusted Note Principal Amount" shall mean, with respect to
the Notes for any date, an amount equal to the sum of (a) the Initial Net Note
Principal Amount, minus unreimbursed Noteholder Charge-Offs and (b) the
applicable Available Subordinated Amount (after giving effect to the
allocations, distributions, withdrawals and deposits to be made on the Payment
Date during the Settlement Period in which such date occurs).

"Adjustment Payment" shall have the meaning assigned to such
term in Section 2.06 of the Purchase and Servicing Agreement.

"Advance Rate" shall mean, as of any date of determination,
the percentage equivalent of a fraction, the numerator of which is the sum of
(i) the product of (a) 0.84 minus the Advance Rate Adjustment, if any, and (b)
the Base Amount, and (ii) the product of (a) 0.66 minus the Advance Rate
Adjustment, if any, and (b) the Excess Amount, and the denominator of which is
the sum of the Base Amount and the Excess Amount.

"Advance Rate Adjustment" shall mean, as of any date of
determination, the product of (a) 1.5 and (b) the excess, if any, of (i) the
Base Rate for the Interest Period relating to the immediately preceding Payment
Date (or, with respect to the determination of the Advance Rate Adjustment on
any Payment Date, such Payment Date), over (ii) the sum of (x) the Net Yield
for the Settlement Period related to the Payment Date referred to in clause (i)
and (y) 1.5%.

"Affiliate" shall mean, when used with respect to a specified
Person, another Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with
the Person specified.

"Aggregate Available Subordinated Amount" shall mean the sum
of the Available Subordinated Amount and the aggregate available subordinated
amounts for all other outstanding Series.

2
101
"Aggregate Adjusted Note Principal Amount" shall mean, with
respect to any Settlement Period, the sum of the Adjusted Note Principal Amount
and the adjusted note principal amounts for all other outstanding Series.

"Amortization Commencement Date" shall mean the earlier to
occur of (i) the Early Amortization Commencement Date and (ii) the Payment Date
occurring in September 1999.

"Amortization Period" shall be the period commencing on the
earlier of (i) the commencement of an Early Amortization Period or (ii) the
commencement of the August 1999 Cycle Month and ending on the date on which the
outstanding principal amount of the Notes has been reduced to zero or the
Indenture has otherwise terminated.

"Applicable Day" shall mean the day or days covered by a Daily
Report which have not been covered by a previously delivered Daily Report.

"Applicable Rating Agency" shall mean, with respect to any
Eligible Investment, Standard & Poor's and, if such Eligible Investment is
rated by Duff & Phelps, Duff & Phelps.

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

"Authorized Officer" means, with respect to the Issuer or the
Trust, any Co-Trustee or officer or agent of the Owner Trustee who is
authorized to act for the Owner Trustee in matters relating to, and binding
upon, the Issuer, and with respect to the Indenture Trustee, shall mean any
officer within the Corporate Trust Office of the Indenture Trustee including
any Vice President, Assistant Vice President, Assistant Treasurer, Assistant
Secretary or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers
and also, with respect to a particular matter, any other officer to whom such
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.

"Available Final Distribution Amount" means, the amount which
would be available in the Collateral Account on

3
102
the Final Maturity Date of the Notes for distribution to the Noteholders.

"Available Noteholder Finance Charge Collections" shall mean,
for any Payment Date, an amount equal to the product of (a) 100% less the
Excess Trust's Percentage with respect to the related Settlement Period, and
(b) Series Allocable Finance Charge Collections for the related Settlement
Period.

"Available Noteholder Principal Collections" shall mean, for
any Payment Date, the sum of (a) the product of (i) the Principal Allocation
Percentage for the related Settlement Period and (ii) Series Allocable
Principal Collections deposited in the Collateral Account for the related
Settlement Period; (b) the amount, if any, of Available Noteholder Finance
Charge Collections, Available Trust's Principal Collections and Excess Finance
Charge Collections allocated to cover the Noteholder Default Amount or to
reimburse Noteholder Charge-Offs; (c) Series Allocable Miscellaneous Payments
on deposit in the Collateral Account for such Payment Date; and (d) the amount,
if any, of funds withdrawn from the Excess Funding Account in connection with
the Early Amortization Commencement Date.

"Available Subordinated Amount" shall mean (1) with respect to
any date of determination during the Interest-Only Period, the excess of (i)
the Net Note Principal Amount divided by the product of (a) the applicable
Advance Rate and (b) the applicable Seasonality Factor, over (ii) the Net Note
Principal Amount, (2) with respect to the Amortization Commencement Date, the
Available Subordinated Amount as of the end of the Interest-Only Period, and
(3) with respect to any Payment Date following the Amortization Commencement
Date, the Available Subordinated Amount as of the preceding Payment Date less
the sum of (a) the amount of Available Trust's Principal Collections applied
pursuant to Section 5.04(d)(1) of the Indenture for the prior Payment Date and
(b) the lesser of (x) the amount, if any, by which the Deficiency Amount for
the preceding Payment Date exceeded the Available Trust's Principal Collections
for the preceding Payment Date and (y) the sum of the Noteholder Default Amount
for the preceding Payment Date and the amount of Available Trust's Principal
Collections applied pursuant to Section 5.04(d)(2) of the Indenture on the
preceding Payment Date, plus Excess Finance Charge Collections distributed in
respect of the Trust Interest pursuant to Section 5.04(b)(2); provided,
however, that the Available Subordinated Amount for

4
103
any Payment Date on or after the Amortization Commencement Date may not exceed
the Available Subordinated Amount as of the end of the Interest-Only Period.

"Available Trust's Principal Collections" shall mean, for any
Settlement Period, an amount equal to the product of (a) the excess of (i) the
Trust's Percentage for the related Settlement Period over (ii) the Excess
Trust's Percentage for such Settlement Period and (b) the Series Allocable
Principal Collections for such Settlement Period.

"Bankruptcy Code" shall mean the Bankruptcy Reform Act of
1978, as amended from time to time, and as codified at 11 U.S.C. Sections 101
et seq.

"Base Amount" shall mean as of any date of determination, the
lesser of (i) the Adjusted Eligible Receivables Balance as of such date and
(ii) a fraction, the numerator of which is the aggregate outstanding principal
amount of the Class A-2, Class B and Class C Notes and the denominator of which
is 0.84 minus the Advance Rate Adjustment, if any.

"Base Rate" shall mean, with respect to any Interest Period,
the sum of (i) the weighted average of the applicable Note Rates (weighted on
the basis of the unpaid principal amount of each class) and (ii) 2.00%.

"Bear Stearns" shall mean Bear, Stearns & Co. Inc.

"Billing Cycle" shall mean, with respect to any Account, the
monthly billing cycle for such Account as determined in accordance with the
Credit Card Guidelines.

"Board" shall mean the Board of Governors of the Federal
Reserve System of the United States.

"Book-Entry Notes" shall mean any Notes, the ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 2.05 of the Indenture; provided, however, that after the
occurrence of a condition whereupon book-entry registration and transfer are no
longer permitted and Definitive Notes are to be issued to the Noteholders, such
notes shall no longer be "Book-Entry Notes".

"Borrowing Base" shall mean, as of any date of determination,
the product of (i) the sum of the Base Amount

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on such date and the Excess Amount and (ii) the applicable Advance Rate.

"Borrowing Base Deficiency" shall mean, on any date, the
excess, if any, of (1) the Net Note Principal Amount (prior to giving effect to
any deposits to the Excess Funding Account, if any, on such day) on such date
over (2) the Borrowing Base on such date.

"Business Day" shall mean any day (other than a day that is a
Saturday, Sunday or legal holiday in the State of New York or the State of
Texas) on which banks are open for business in New York City, New York, Dallas,
Texas and the state in which the Concentration Account is maintained.

"Capital Lease Obligations" shall mean, with respect to any
Person, the obligations of such Person to pay rent or other amounts under any
lease of (or other arrangement conveying the right to use) real or personal
property, or a combination thereof, which obligations are required to be
classified and accounted for as capital leases on a balance sheet of such
Person under GAAP and, for the purposes of the Indenture, the amount of such
obligations at any time shall be the capitalized amount thereof at such time
determined in accordance with GAAP.

"Cardholder" shall mean a holder of a Proprietary Label Credit
Card under which the Receivables are originated.

"Certificate of Trust" shall mean the Certificate of Trust of
the Issuer filed with the Secretary of State of the State of Delaware on June
10, 1994.

"Class A-1 Notes" shall have the meaning assigned to such term
in Section 2.01 of the Indenture.

"Class A-1 Note Rate" shall have the meaning assigned to such
term in Section 2.11 of the Indenture.

"Class A-1 Registered Noteholders" shall have the meaning
assigned to such term in Section 2.10 of the Indenture.

"Class A-2 Notes" shall have the meaning assigned to such term
in Section 2.01 of the Indenture.

"Class A-2 Note Rate" shall have the meaning assigned to such
term in Section 2.11 of the Indenture.

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"Class A-2 Registered Noteholders" shall have the meaning
assigned to such term in Section 2.10 of the Indenture.

"Class B Notes" shall have the meaning assigned to such term
in Section 2.01 of the Indenture.

"Class B Note Rate" shall have the meaning assigned to such
term in Section 2.11 of the Indenture.

"Class B Registered Noteholders" shall have the meaning
assigned to such term in Section 2.10 of the Indenture.

"Class C Notes" shall have the meaning assigned to such term
in Section 2.01 of the Indenture.

"Class C Note Rate" shall have the meaning assigned to such
term in Section 2.11 of the Indenture.

"Class C Registered Noteholders" shall have the meaning
assigned to such term in Section 2.10 of the Indenture.

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

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

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

"Collateral" shall have the meaning assigned to such term in
Section 3.01 of the Indenture.

"Collateral Account" shall have the meaning assigned to such
term in Section 4.02(a) of the Indenture.

"Collection Deposit Accounts" shall have the meaning assigned
to such term in Section 4.01(b) of the Indenture.

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"Collection Deposit Account Banks" shall have the meaning
assigned to such term in Section 4.01(b) of the Indenture.

"Collection Deposit Account Banks Fee" shall mean the fees
payable with respect to the maintenance of the Collection Deposit Accounts and
the services of the Collection Deposit Account Banks.

"Collection Deposit Account Letters" shall have the meaning
assigned to such term in Section 4.01(b) of the Indenture.

"Collections" shall mean all payments on Receivables received
from or on behalf of any Obligor including Insurance Proceeds, if any, and
including Recoveries in respect of the Receivables, whether in the form of
cash, checks, wire transfers, automated teller machine transfers or other forms
of payment in accordance with the Credit Card Agreements as in effect on the
date of the Indenture and as amended in accordance with the terms of the
Purchase and Servicing Agreement and the Indenture. Prior to commencement of
the Amortization Period, payments made by the Seller to the Issuer pursuant to
Section 2.05 or Section 2.06 of the Purchase and Servicing Agreement shall
constitute Collections. Any portion of a Collection processed on an Account in
excess of the aggregate amount of Receivables in such Account shall be credited
to such Account or refunded to the Obligor by the Servicer in accordance with
the Credit Card Guidelines and applicable law.

"Comparable U.S. Treasury Security" shall mean the 6 3/8% U.S.
Treasury Security maturing on July 15, 1999.

"Concentration Account" shall have the meaning assigned to
such term in Section 6.04(a) of the Purchase and Servicing Agreement.

"Control" shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise, and "Controlling" and "Controlled" shall have meanings correlative
thereto.

"Corporate Trust Office" means the principal office of the
Indenture Trustee in New York City at which at any particular time its
corporate trust business shall be

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principally administered, which office on the Issuance Date is located at Four
Albany Street, Tenth Floor, New York, New York 10006.

"Co-Trustee" means each of the co-trustees appointed by the
Indenture Trustee pursuant to Section 11.15 of the Indenture, and any
successors thereto.

"Credit Adjustment" shall have the meaning assigned to such
term in Section 2.06 of the Purchase and Servicing Agreement.

"Credit Card Agreement" shall mean, with respect to an
Account, the agreement governing such Account.

"Credit Card Guidelines" shall mean the policies and
procedures of the Seller (or its predecessors in interest) and the Servicer
relating to the operation of their credit card business, including without
limitation the policies and procedures for determining Gross Charge-Offs, the
creditworthiness of credit card customers, the extension of credit to credit
card customers, the terms on which repayments are required to be made, and the
terms relating to finance charges and the amounts thereof, to the maintenance
of credit card accounts and collection of credit card receivables and to credit
insurance, as in effect on the Issuance Date and as amended in accordance with
the terms of the Indenture and the Purchase and Servicing Agreement.

"Credit Return" shall have the meaning assigned to such term
in Section 2.06 of the Purchase and Servicing Agreement.

"Cut-Off Date" shall mean, with respect to the initial sale of
Receivables under the Purchase and Servicing Agreement, July 1, 1994.

"Cycle Month" shall mean, initially the period from and after
the Cut-Off Date to the end of the first Cycle Month in effect on the Issuance
Date, and, thereafter, the period from and after the last day of the preceding
Cycle Month to and including the day on which the final billing cycle of the
Servicer opening after the last day of the preceding Cycle Month has closed
(regardless of the calendar month in which any billing cycle contained in such
Cycle Month opens or closes); provided, however, that for any Account, each
Cycle Month will include only activity occurring in such Account during the
billing cycle for such

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Account closing in such Cycle Month, and any activity in an Account after the
close of its billing cycle but prior to the close of the Cycle Month in which
such billing cycle closes shall be attributed to the next succeeding Cycle
Month.

"Daily Report" shall mean a report substantially in the form
of Exhibit A to the Purchase and Servicing Agreement delivered pursuant to the
Purchase and Servicing Agreement.

"Date of Processing" shall mean, with respect to any
transaction, the date on which such transaction is first recorded in the
Servicer's computer files (without regard to the effective date of such
recordation).

"Defaulted Amount" shall mean for any Settlement Period an
amount (which shall not be less than zero) equal to (a) the principal amount of
Receivables that become Defaulted Receivables during the preceding Settlement
Period minus (b) the full amount of any Defaulted Receivables for which the
Seller has made an adjustment to the purchase price for new Receivables for
such Settlement Period.

"Defaulted Receivables" shall mean, on any Determination Date
all Receivables which were charged-off as uncollectible in respect of the
immediately preceding Settlement Period in accordance with the Credit Card
Guidelines.

"Deficiency Amount" shall mean, with respect to any Payment
Date, the amount, if any, by which (a) the sum of (i) Monthly Interest for all
classes of Notes for the following Payment Date, (ii) the Monthly Servicing Fee
for such Payment Date, (iii) the Noteholder Default Amount and (iv) the Series
Allocation Percentage of the amount of any Adjustment Payment required to be
deposited in the Collateral Account pursuant to Section 2.06 of the Purchase
and Servicing Agreement with respect to the related Settlement Period that has
not been so deposited as of the related Determination Date, exceeds (b) the sum
of (i) Available Noteholder Finance Charge Collections for such Payment Date
and (ii) Investment Proceeds with respect to such Payment Date.

"Definitive Notes" shall have the meaning assigned to such
term in Section 2.05 of the Indenture.

"Depositary" shall mean DTC, its nominees, and their respective
successors.

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"Determination Date" shall mean the date two Business Days
prior to the related Payment Date.

"DFC" shall mean Diamond Funding Corp., a Delaware Corporation.

"Disposition" shall have the meaning assigned to such term in
Section 10.03(a)(i) of the Indenture.

"Division" shall mean any one or more of the divisions of the
Seller, as constituted on or after the Issuance Date.

"Division Sale Optional Redemption" shall have the meaning
assigned to such term in Section 9.02 of the Indenture.

"Dobbins" shall mean Dobbins Jewelers, Inc., a Guam
corporation, and its successors and assigns.

"Documents" shall have the meaning assigned to such term in
Section 7.01(b) of the Purchase and Servicing Agreement.

"DTC" shall mean The Depositary Trust Company.

"Draw Amount" shall mean the lesser of the Deficiency Amount
and the Available Subordinated Amount.

"Duff & Phelps" shall mean Duff & Phelps Credit Rating Co.

"Early Amortization Commencement Date" shall mean the Payment
Date occurring in the month following the month in which an Early Amortization
Event occurs.

"Early Amortization Event" shall have the meaning assigned to
such term in Section 10.01 of the Indenture.

"Early Amortization Period" shall mean the period from the
date on which an Early Amortization Event occurs to the date on which the
outstanding principal amount of each class of Notes has been reduced to zero or
the Indenture has otherwise terminated.

"Eligible Account" shall mean each Account owned by an
Originator which, as of the Cut-Off Date (or, with respect to Accounts created
after the Cut-Off Date, as of the

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Purchase Date of the related Receivable) (a) was in existence and maintained
with one of the Originators, as applicable, (b) is payable in United States
dollars, (c) has as a billing address, an address located in the United States
or its territories or possessions or an armed forces post office or foreign
post office military address, (d) is an Account with respect to which the
related Cardholder is not involved in a voluntary or involuntary bankruptcy
proceeding, (e) is not an Account with respect to which the related card has
been reported as stolen, (f) has not been sold or pledged to any other party,
(g) does not have receivables which have been sold or pledged to any other
party, and (h) is an Account the cardholder of which is not deceased.

"Eligible Investments" shall mean (i) obligations fully
guaranteed by the United States, (ii) demand deposits, time deposits or
certificates of deposit of depository institutions or trust companies, the
commercial paper of which has the Highest Rating from each Applicable Rating
Agency, (iii) commercial paper having at the time of the Trust's investment, a
rating in the Highest Rating category from each Applicable Rating Agency, (iv)
demand deposits, time deposits and certificates of deposit which are fully
insured by the FDIC, (v) bankers' acceptances issued by any depository
institution or trust company described in (ii) above, (vi) investments in money
market funds (including funds for which the Indenture Trustee or any of its
affiliates is investment manager or advisor) which have the Highest Rating
from, or have otherwise been approved in writing by, each Applicable Rating
Agency, (vii) certain repurchase obligations which have the Highest Rating
from, or have otherwise been approved in writing by, each Applicable Rating
Agency, and (viii) any other investment approved by the Applicable Rating
Agency.

"Eligible Receivable" shall mean each Receivable (a) which has
arisen under an Eligible Account, (b) which was created in compliance, in all
material respects, with all requirements of law applicable to the Originator,
and pursuant to a credit card agreement which complies in all material respects
with all requirements of law applicable to the Originator, (c) with respect to
which all consents, licenses or authorizations of, or registrations with, any
governmental authority required to be obtained or given by the Originator in
connection with the creation of such Receivable or the execution, delivery,
creation and performance by the Originator or the related credit card agreement
have been duly obtained or given and are in full

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force and effect as of the date of the creation of such Receivable, except
where the failure to obtain or make such consents, licenses, authorizations or
registrations would not have a substantial likelihood of having a Material
Adverse Effect, (d) as to which, as of the Purchase Date for such Receivable,
the Originator or the Trust had good and marketable title free and clear of all
liens and security interests arising under or through the Originator (other
than certain tax liens for taxes not then due or which the Seller is
contesting), (e) which is the legal, valid and binding payment obligation of
the Cardholder thereof, legally enforceable against such Cardholder in
accordance with its terms (with certain bankruptcy-related exceptions), and (f)
which constitutes an "account" or "general intangible" or "chattel paper" under
Article 9 of the UCC as then in effect in the State of Texas. Notwithstanding
the foregoing, Receivables originated by Zale Puerto Rico shall not be Eligible
Receivables until the Trust, Z Del and Zale Puerto Rico have been licensed as
finance companies under Puerto Rico's Retail Installment Sales Act, whereupon
all Receivables originated by Zale Puerto Rico and previously transferred to
the Trust that otherwise qualify as Eligible Receivables will be deemed
Eligible Receivables.

"Enhancement" shall mean, with respect to any Series, any
surety bond, letter of credit, guaranteed rate agreement, maturity guaranty
facility, cash collateral account or guaranty, tax protection agreement,
interest rate swap or other contract or agreement for the benefit of the
noteholders of such Series. The drawing on or payment of any Enhancement for
the benefit of a Series or class of notes will not be available to the
noteholders of any other Series or class.

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

"Excess Amount" shall mean on any date, the lesser of (i) the
excess, if any, of (a) the Adjusted Eligible Receivables Balance over (b) the
Base Amount, and (ii) a fraction, the numerator of which is the aggregate
outstanding principal amount of the Class A-1 Notes and the denominator of
which is 0.66 minus the Advance Rate Adjustment, if any.

"Excess Finance Charge Collections" shall have the meaning
assigned to such term in Section 5.04(a)(4) of the Indenture.

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"Excess Funding Account" shall have the meaning assigned to
such term in Section 4.03(a) of the Indenture.

"Excess Funding Account Optional Redemption" shall have the
meaning assigned to such term in Section 9.02 of the Indenture.

"Excess Trust's Percentage" shall mean, for any Settlement
Period, a percentage (which percentage shall never be less than 0% or more than
100%) equal to 100% minus, the sum of (i) when used (a) with respect to the
allocation of Finance Charge Collections for such Settlement Period, the
applicable Floating Allocation Percentage; or (b) with respect to the
allocation of Principal Collections for such Settlement Period, the applicable
Principal Allocation Percentage and (ii) the Subordinated Percentage.

"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.

"Existing Receivables Securitization Facility" shall mean the
receivables securitization facility entered into on November 20, 1992 and
continued in effect from and after the effective date of the plan of
reorganization of Zale Corp. and its affiliated debtors, under which the Issuer
issued approximately $284,700,000 in aggregate principal amount of receivables
backed notes.

"Facilities Documents" shall mean the Transaction Documents.

"Final Maturity Date" shall mean, with respect to the
Subordinated Note, the date that on which the notes of all outstanding Series
have been paid in full in accordance with the Indenture.

"Finance Charges" shall mean, at any date, finance charges,
late charges, other fees and charges and other non- principal charges on the
Receivables.

"Finance Charge Collections" shall mean collections of Finance
Charges.

"Financial Officer" shall mean, with respect to any
corporation, the chief executive officer, the chief operating officer, the
chief financial officer, the chief accounting officer, the president, the
treasurer, any assistant treasurer, or the controller of such corporation.

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"Fixed Rate Interest Period" shall mean, with respect to any
Payment Date for the Class A-2 Notes, the Class B Notes and the Class C Notes,
the period from and including the 15th day of the month preceding the month in
which such Payment Date occurs (or, in the case of the first Payment Date, from
and including the Issuance Date) to and including the 14th day of the month in
which such Payment Date occurs (regardless of whether such dates are Business
Days).

"Floating Allocation Percentage" shall mean, for any
Settlement Period, the percentage equivalent (which shall never exceed 100%) of
a fraction, the numerator of which is the Net Note Principal Amount as of the
last day of the immediately preceding Settlement Period and the denominator of
which is the product of (x) the Pool Balance as of such last day and (y) the
Series Allocation Percentage for such Settlement Period.

"Floating Rate Interest Period" shall mean, with respect to
the Class A-1 Notes and any Payment Date, the period from and including the
previous Payment Date (or, in the case of the first Payment Date, from and
including the Issuance Date) to and including the day preceding such Payment
Date (regardless of whether such day is a Business Day).

"Force Majeure" shall mean any event or circumstances beyond a
Person's control arising from an act of God, flood, fire, riot, accident,
inability to obtain phone lines or government action.

"GAAP" shall mean generally accepted accounting principles in
the United States, applied on a consistent basis.

"General Subaccount" shall have the meaning assigned to such
term in Section 4.02(a) of the Indenture.

"Governmental Authority" shall mean any Federal, state, local
or foreign government or any court, agency, authority, instrumentality or
regulatory body thereof.

"Gross Charge-Offs" shall mean, for any period, the aggregate
balance of Receivables that are written off during such period as uncollectible
in accordance with the Credit Card Guidelines.

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"Guarantee" shall mean, with respect to any Person, any
obligation, contingent or otherwise, of such Person guaranteeing or having the
economic effect of guaranteeing any Indebtedness of any other Person (and
"primary obligor") in any manner, whether directly or indirectly, including any
direct or indirect obligation of the Issuer (1) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (2) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness of the
payment of such Indebtedness or (3) to maintain working capital, equity capital
or other financial statement condition or liquidity of the primary obligor so
as to enable the primary obligor to pay such Indebtedness; provided, that, the
term Guarantee shall not include endorsements for collection or deposit, in
either case in the ordinary course of business.

"Highest Bid" means the highest cash purchase offer for the
Notes received by the Servicer pursuant to Section 9.05 of the Indenture.

"Highest Rating" means, in the case of Standard & Poor's,
A-1+/AAA and, in the case of Duff & Phelps, Duff-1+/AAA.

"Indebtedness" shall mean, with respect to any Person, without
duplication, (1) all obligations of such Person for borrowed money or with
respect to deposits or advances of any kind, (2) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (3) all
obligations of such Person upon which interest charges are customarily paid,
(4) all obligations of such Person under conditional sale or other title
retention agreements relating to property or assets purchased by such Person,
(5) all obligations of such Person issued or assumed as the deferred purchase
price of property or services, (6) all Indebtedness of others secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the obligations secured thereby have been assumed, (7)
all Guarantees by such Person of Indebtedness of others, (8) all Capital Lease
Obligations of such Person, (9) all obligations of such Person in respect of
interest rate protection agreements, foreign currency exchange agreements or
other interest or exchange rate hedging arrangements and (10) all obligations

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of such Person as an account party in respect of letters of credit and bankers'
acceptances. The Indebtedness of any Person shall include the Indebtedness of
any partnership in which such Person is a general partner.

"Indemnified Amounts" shall have the meaning assigned to such
term in Section 8.01(b) of the Purchase and Servicing Agreement.

"Indenture" shall mean the Indenture governing the Notes,
dated as of July 1, 1994, between the Issuer and the Indenture Trustee, as
amended, supplemented or otherwise modified from time to time thereafter.

"Indenture Trustee" shall mean Bankers Trust Company, a
banking corporation organized under the laws of the state of New York.

"Index Maturity" shall mean deposits in United States dollars
having a maturity of one month.

"Ineligible Receivable" shall mean any Purchased Receivable
that was not an Eligible Receivable as of the Cut-Off Date or on its Purchase
Date, as applicable.

"Initial Net Note Principal Amount" shall mean, the portion of
the initial principal amount of the Notes that is invested in Principal
Receivables on the Issuance Date, which is expected to be approximately
$346,000,000, plus (x) the amount of any withdrawals from the Excess Funding
Account since the Issuance Date other than amounts applied to principal
payments on the Notes, minus (y) the amount of any additions to the Excess
Funding Account since the Issuance Date in respect of Borrowing Base
Deficiencies.

"Insolvency Event" shall mean the events described in Sections
10.01(e) and (f) of the Indenture.

"Insurance Proceeds" shall mean any amounts paid pursuant to
any credit insurance policies covering any Obligor with respect to Receivables
under such Obligor's Account other than proceeds of such insurance policies
used to purchase replacement property in accordance with the Credit Card
Guidelines.

"Interest-Only Period" shall mean the period commencing with
the calendar month in which the Cut-Off Date occurs to and including the
earlier of (i) the last day of

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the July 1999 Settlement Period and (ii) the day preceding the date on which an
Early Amortization Event occurs.

"Interest Period" shall mean either the Fixed Rate Interest
Period or the related Floating Rate Interest Period, as applicable.

"Interest Subaccount" shall have the meaning assigned to such
term in Section 4.02(a) of the Indenture.

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

"Investment Proceeds" shall mean, for any Payment Date, an
amount equal to the sum of (a) the Series Allocation Percentage of investment
earnings on the related Determination Date with respect to funds held in the
Collateral Account and (b) all investment income on amounts in the Excess
Funding Account or Optional Redemption Account since the preceding Payment
Date.

"Issuance Date" shall mean the closing date of the issuance of
the Class A-1 Notes, the Class A-2 Notes, the Class B Notes and the Class C
Notes by the Issuer.

"Issuer" shall mean Zale Funding Trust, a Delaware business
trust, and its successors and assigns.

"Issuer Expenses" shall mean all operating expenses incurred
by the Issuer in the ordinary course of its business (including without
limitation rent, payroll, taxes and administrative and professional expenses).

"JFS" shall mean Jewelers Financial Services, Inc., a Delaware
corporation, and its successors and assigns.

"Late Fees" shall mean charges assessed on past due payments
in certain states in accordance with applicable state law.

"Letter of Representations" shall mean the agreement among the
Issuer, the Indenture Trustee and the applicable Clearing Agency, with respect
to any Book-Entry Notes, as the same may be amended, supplemented, restated or
otherwise modified from time to time.

"LIBOR" means, with respect to any Floating Rate Interest
Period, the offered rates for deposits in United

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States dollars having the Index Maturity commencing on the related LIBOR
Determination Date which appears on the Reuters Screen LIBOR Page as of
approximately 11:00 a.m., London time, on the LIBOR Determination Date. If at
least two such offered rates appear on the Reuters Screen LIBO Page, LIBOR will
be the arithmetic mean (rounded upwards, if necessary, to the nearest
one-sixteenth of a percent) of such offered rates. If fewer than two such
quotations appear, LIBOR with respect to such Floating Rate Interest Period
will be determined at approximately 11:00 a.m., London time, on such LIBOR
Determination Date on the basis of the rate at which deposits in United States
dollars having the Index Maturity are offered to prime banks in the London
interbank market selected by the Indenture Trustee and in a principal amount
equal to an amount of not less than $1,000,000 and that is representative for a
single transaction in such market at such time. The Indenture Trustee will
request the principal London office of each of such banks to provide a
quotation of its rate. If at least two such quotations are provided, LIBOR
will be the arithmetic mean (rounded upwards as aforesaid) of such quotations.
If fewer than two quotations are provided, LIBOR with respect to such Interest
Period will be the arithmetic mean (rounded upwards as aforesaid) of the rates
quoted at approximately 11:00 a.m., New York City time, on such LIBOR
Determination Date by three major banks in New York, New York selected by the
Indenture Trustee for loans in United States dollars to leading European banks
having the Index Maturity and in a principal amount equal to the amount of not
less than $1,000,000 and that is representative for a single transaction in
such market at such time; provided, however, that if the banks selected as
aforesaid are not quoting as mentioned in this sentence, LIBOR in effect for
the applicable Floating Rate Interest Period will be LIBOR in effect for the
immediately preceding Floating Rate Interest Period.

"LIBOR Determination Date" shall mean the day that is two
London Business Days prior to the first day of such Floating Rate Interest
Period (or, in the case of the first Floating Rate Interest Period, on July 13,
1994).

"Licensed Names" shall have the meaning assigned to such term
in Section 10.08 of the Purchase and Servicing Agreement.

"Lien" shall mean, with respect to any asset, (1) any
mortgage, deed of trust, lien, pledge, claim, equity interest, participation
interest, security interest or other

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charge or encumbrance of any kind in or on such asset, (2) the interest of a
vendor or a lessor under any conditional sale agreement, capital lease or title
retention agreement relating to such asset and (3) in the case of securities,
any purchase option, call or similar right of a third party with respect to
such securities.

"Local Store Bank Account" shall mean the bank accounts used
by all retail stores of the Originators and credit centers of the Servicer.

"London Business Day" shall mean any Business Day on which
dealings in deposits in United States dollars are transacted in the London
interbank market.

"Mail Payments" shall have the meaning assigned to such term
in Section 6.04(a) of the Purchase and Servicing Agreement.

"Majority Noteholders" shall mean noteholders of a majority in
principal amount of the Notes and the notes of all other outstanding Series.

"Margin Stock" shall have the meaning assigned to such term
under Regulation U of the Board as from time to time in effect and all official
rulings and interpretations thereunder or thereof.

"Material Adverse Effect" shall mean (1) a material adverse
effect on the ability of the Issuer to perform in all material respects its
obligations under any Transaction Document to which it is a party or (2) a
material adverse effect on the rights and remedies of the Indenture Trustee or
the Noteholders under any Transaction Document.

"Miscellaneous Payments" shall mean, for any Settlement
Period, the sum of (a) Adjustment Payments and Transfer Deposit Amounts
received with respect to such Settlement Period and (b) Unallocated Principal
Collections on such Payment Date available to be treated as Miscellaneous
Payments.

"Monthly Interest" shall mean, for any Payment Date, and with
respect to any class of Notes, the sum of (A) product of (i) the Note Rate in
effect for the related Interest Period, (ii) the sum of (a) the outstanding
principal balance of such class of Notes (after giving effect to distributions
of principal on the preceding Payment Date)

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and (b) the amount of any shortfall in payment of Monthly Interest on the
immediately preceding Payment Date, and (iii) in the case of the Class A-1
Notes, a fraction, the numerator of which is the actual number of days elapsed
in such Interest Period and the denominator of which is 360 and, in the case of
each other class of Notes, 1/12th and (B) the amount specified in clause
(A)(ii)(b).

"Monthly Principal" shall mean with respect to any Payment
Date commencing with the Amortization Commencement Date, an amount equal to the
Available Noteholder Principal Collections for such Payment Date; provided,
however, that Monthly Principal shall not exceed the Net Note Principal Amount.

"Monthly Servicing Fee" means, with respect to any Payment
Date, and amount equal to 1/12th of the product of (a) the Servicing Fee Rate
and (b) the Net Note Principal Amount as of the last day of the second
preceding Settlement Period.

"Monthly Settlement Statement" shall mean a report
substantially in the form of Exhibit C to the Purchase and Servicing Agreement
prepared and delivered by the Servicer pursuant to the Purchase and Servicing
Agreement.

"Net Charge-Offs" shall mean Gross Charge-Offs, including
"repossessions" (i.e., charge-offs where merchandise is returned by the
customer voluntarily) and charge-offs resulting from fraud less Recoveries of
previously charged-off Receivables and sales tax recoveries. Charge-off data
does not include certain Accounts where the Cardholder is in Chapter 13
bankruptcy proceedings, and where a lowering of payments and/or re-aging may
occur as a result.

"Net Note Principal Amount" shall mean for any date, an amount
equal to the Initial Net Note Principal Amount, minus the amount, without
duplication, of principal payments (except principal payments made from the
Excess Funding Account) made to Noteholders prior to such date, minus the
excess, if any, of the aggregate amount of Noteholder Charge-Offs for all
Payment Dates preceding such date, over the aggregate amount of any
reimbursements of Noteholder Charge-Offs for all Payment Dates preceding such
date.

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"Net Yield" shall mean, with respect to any Settlement Period,
the annualized percentage equivalent of a fraction, the numerator of which is
the sum of (i) Available Noteholder Finance Charge Collections for such
Settlement Period and (ii) Investment Proceeds minus the product of (a) the
Default Amount for such Settlement Period and (b) the sum of the Floating
Allocation Percentage and the Subordinated Percentage for such Settlement
Period, and the denominator of which is the sum of, as of the first day of such
Settlement Period, of (x) the Net Note Principal Amount, (y) the Available
Subordinated Amount and (z) the amount of funds on deposit in the Excess
Funding Account, or any other definition as to which the Rating Agencies,
within 3 months after the Issuance Date, shall have furnished a written
confirmation that such other definition will not result in a reduction in the
rating of any class of the Notes or in a removal of the rating of any class of
the Notes.

"New Issuance" shall have the meaning assigned to such term in
Section 2.22 of the Indenture.

"Non-Purchased Receivable" shall mean with respect to any
Account containing a Purchased Receivable, a Receivable in such Account that
has not been purchased by the Issuer.

"Note" shall mean any of the Notes.

"Note Rate" shall mean the Class A-1 Notes Rate, the Class A-2
Notes Rate, the Class B Notes Rate and the Class C Notes Rate, as applicable.

"Note Register" shall have the meaning assigned to such term
in Section 2.10 of the Indenture.

"Noteholder" shall mean a Registered Noteholder.

"Noteholder Charge-Offs" shall mean, with respect to any
Payment Date, the lesser of (a) the Noteholder Default Amount for such Payment
Date, and (b) the excess, if any, of (i) the Deficiency Amount for such Payment
Date over (ii) the Available Subordinated Amount for such Payment Date.

"Noteholder Data Sheet" shall have the meaning assigned to
such term in Section 2.10 of the Indenture.

"Noteholder Default Amount" shall mean, with respect to any
Settlement Period, an amount equal to the

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product of (a) the Defaulted Amount for such Settlement Period, (b) the
applicable Series Allocation Percentage and (c) the Floating Allocation
Percentage for such Settlement Period.

"Note Purchase Agreement" shall mean the Note Purchase
Agreement, dated June 10, 1994, between Zale Delaware, Inc. and Bear Stearns,
as amended, supplemented or otherwise modified from time to time thereafter.

"Notes" shall have the meaning assigned to such term in Section
2.01 of the Indenture.

"Obligor" shall mean the Person or Persons obligated to make
payments with respect to an Account, including without limitation any guarantor
thereof.

"Opinion of Counsel" shall mean a written opinion of counsel
to the Issuer.

"Optional Full Redemption" shall have the meaning assigned to
such term in Section 9.01 of the Indenture.

"Optional Full Redemption Date" shall have the meaning
assigned to such term in Section 9.01 of the Indenture.

"Optional Full Redemption Price" shall have the meaning
assigned to such term in Section 9.01 of the Indenture.

"Optional Redemption Account" shall have the meaning assigned
to such term in Section 4.04 of the Indenture.

"Optional Redemption Announcement Date" shall mean the date
when an Optional Redemption Notice is given to Noteholders by the Owner Trustee
that a portion or all of the outstanding principal amount of their Notes will
be redeemed by the Trust.

"Optional Redemption Notice" shall have the meaning assigned
to such term in Section 9.03(a) of the Indenture.

"Optional Redemption Premium Calculation" shall have the
meaning assigned to such term in Section 9.03(d) of the Indenture.

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"Originator" shall mean any of Zale Delaware, Inc., Zale
Puerto Rico, Inc., or Dobbins Jewelers, Inc., in their capacities as
originators of Accounts.

"Owner Trustee" shall mean Wilmington Trust Company or any
successor thereof under the Trust Agreement.

"Partial Redemption" shall have the meaning assigned to such
term in Section 9.02 of the Indenture.

"Partial Redemption Amount" shall mean, in the case of a
Division Sale Optional Redemption, up to the then current principal balance of
the Receivables originated by such division as of the date which is two
Business Days prior to the closing date of the sale of such division multiplied
by 79.8%, subject to certain limitations or, in the case of an Excess Funding
Account Optional Redemption, the amount designated by the Trust up to the
amount of funds in the Excess Funding Account as of the Optional Redemption
Announcement Date.

"Partial Redemption Date" shall have the meaning assigned to
such term in Section 9.02 of the Indenture.

"Partial Redemption Premium" shall mean, for any Partial
Redemption Date, the amount computed according to the formula set forth in
Annex III to the Indenture.

"Partial Redemption Price" shall have the meaning assigned to
such term in Section 9.02 of the Indenture.

"Payment Date" shall mean, after the occurrence of the
Issuance Date and until and including the occurrence of the Final Maturity Date
with respect to all Notes, the fifteenth (15th) day of each calendar month or,
if any such day is not a Business Day, the next succeeding Business Day.

"Person" shall mean any natural person, corporation, business
trust, joint venture, association, company, partnership or government, or any
agency or political subdivision thereof.

"Pool Balance" shall mean the aggregate principal balance of
the Eligible Receivables.

"Post Office Boxes" shall have the meaning assigned to such
term in Section 4.01(a) of the Indenture.

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"Post Office Boxes Fee" shall mean the fees payable with
respect to the maintenance of the Post Office Boxes.

"Potential Early Amortization Event" shall mean any event
which with the passage of time or giving of notice or both would constitute an
Early Amortization Event.

"Preliminary Private Placement Memorandum" shall mean the
Preliminary Private Placement Memorandum dated May 31, 1994.

"Principal Allocation Percentage" shall mean, for any
Settlement Period, the percentage equivalent (which shall never exceed 100%) of
a fraction, the numerator of which is the Net Note Principal Amount as of the
last day of the Interest-Only Period and the denominator of which is the
product of (x) the Pool Balance as of the last day of the immediately preceding
Settlement Period and (y) the Series Allocation Percentage for the Settlement
Period in respect of which the Principal Allocation Percentage is being
calculated.

"Principal Collections" shall mean collections of Principal
Receivables.

"Principal Receivables" shall mean, with respect to the
Receivables, amounts charged by cardholders on the Accounts for the purchase of
merchandise and all amounts due in respect of insurance premiums.

"Principal Terms" shall have the meaning assigned to such term
in Section 2.22 of the Indenture.

"Private Placement Memorandum" shall mean the Private
Placement Memorandum dated July 12, 1994 describing the Transactions.

"Pro Forma Net Yield" shall mean, with respect to any
Settlement Period and any Receivables, the annualized percentage equivalent of
a fraction, the numerator of which is Series Allocable Finance Charge
Collections for such Settlement Period in respect of such Receivables minus the
product of (i) Gross Charge-offs for such Settlement Period in respect of such
Receivables and (ii) the applicable Series Allocation Percentage, and the
denominator of which is the outstanding principal balance of the Notes after
giving effect to any payments of principal on the Payment Date occurring in
such Settlement Period.

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"Proceeding" shall mean any suit in equity, action at law or
other judicial or administrative proceeding.

"Publication Date" shall have the meaning assigned to such
term in Section 10.03(a) of the Indenture.

"Purchase and Servicing Agreement" shall mean the Purchase and
Servicing Agreement dated as of July 2, 1994 among the Issuer, the Seller, DFC
and the Servicer, as it may from time to time be amended, supplemented or
otherwise modified.

"Purchase Date" shall have the meaning assigned to such term
in Section 2.04(a) of the Purchase and Servicing Agreement.

"Purchased Receivable" shall mean any Receivable sold to the
Issuer by the Seller or DFC (or any other Receivable which the Issuer owns or
otherwise has an interest in pursuant to, and in accordance with the terms of,
the Purchase and Servicing Agreement).

"Purchase Price" shall have the meaning assigned to such term
in Section 2.03 of the Purchase and Servicing Agreement.

"Purchase Termination Date" shall have the meaning assigned to
such term in Section 2.02 of the Purchase and Servicing Agreement.

"Rating Agency" shall mean either Standard & Poor's or Duff &
Phelps.

"Rating Agency Condition" shall mean, in the event that any
rated Series or class of Notes is outstanding, that each Rating Agency shall
have notified the Seller, the Servicer and the Indenture Trustee in writing
that the issuance of a new Series will not result in a reduction or withdrawal
of the rating of any outstanding Series or class of Notes.

"Receivable" shall mean all indebtedness of an Obligor on any
Account arising from a sale of merchandise or services (including without
limitation credit insurance services made available to an Obligor) by the
Seller, Zale Puerto Rico or Dobbins, including Finance Charges and all other
obligations of such Obligor with respect thereto.

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"Record Date" shall have the meaning assigned to such term in
Section 2.11 of the Indenture.

"Recoveries" shall mean, with respect to any Settlement
Period, the aggregate amount of all cash received by the Issuer, the Seller,
DFC or the Servicer during such Settlement Period in respect of Purchased
Receivables contained in Accounts written off as uncollectible in accordance
with the Credit Card Guidelines at any time prior to such Settlement Period
(including Accounts written off as uncollectible both before and after the
initial Purchase Date).

"Redemption Discount Rate" shall mean with respect to (i) the
Class A-1 Notes will equal LIBOR (determined as of the LIBOR Determination Date
immediately preceding the Partial Redemption Date) and (ii) the Class A-2
Notes, the Class B Notes and the Class C Notes will equal the yield (adjusted
to a mortgage-equivalent yield), determined as of the day preceding the
Determination Date immediately preceding the Partial Redemption Date, on the
Comparable U.S. Treasury Security as set forth in The Wall Street Journal on
such Determination Date, plus 0.50%.

"Registered Noteholder" shall have the meaning assigned to
such term in Section 2.10 of the Indenture.

"Regulation G" shall mean Regulation G of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.

"Regulation T" shall mean Regulation T of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.

"Regulation U" shall mean Regulation U of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.

"Regulation X" shall mean Regulation X of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.

"Related Contracts" shall have the meaning assigned to such
term in Section 3.01(a) of the Indenture.

"Release" shall have the meaning assigned to such term in
Section 4.03(e) of the Indenture.

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"Requirement of Law" shall mean, for any Person or any of its
property, the certificate of incorporation or articles of association and
bylaws or other organizational or governing documents of such Person or any of
its property, and any law, treaty, rule or regulation, or determination of an
arbitrator or Governmental Authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject, whether Federal, state, local or other (including without
limitation usury laws, the Federal Truth in Lending Act and retail installment
sales acts).

"Return Amount" shall have the meaning assigned to such term
in Section 2.06 of the Purchase and Servicing Agreement.

"Reuters Screen LIBO Page" shall mean the display designated
as page "LIBO" on the Reuters Monitor Money Rates Service (or such other page
as may replace the LIBO page on that service for the purpose of displaying
London interbank offered rates of major banks).

"Rule 144" shall mean Rule 144 as promulgated under the
Securities Act by the Securities and Exchange Commission.

"Rule 144A" shall mean Rule 144A as promulgated under the
Securities Act by the Securities and Exchange Commission.

"Rule 904" shall mean Rule 904 as promulgated under the
Securities Act by the Securities and Exchange Commission.

"Seasonality Factor" shall mean initially, 0.94 and thereafter
will be adjusted on the first day of each October, February and May to equal
0.93, 0.95 and 0.94, respectively.

"Scheduled Redemption Date" shall mean the Payment Date
occurring in July 1999.

"Secured Obligations" shall have the meaning assigned to such
term in Section 3.01 of the Indenture.

"Secured Parties" shall mean the Indenture Trustee and the
Noteholders.

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

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"Seller" shall mean Z Del or any successor thereto under the
Purchase and Servicing Agreement.

"Seller Division" shall mean any one or more of the divisions
of the Seller as constituted on or after the Issuance Date.

"Series" shall mean Series 1994-1 and any Series of Notes
issued in accordance with Section 2.22 of the Indenture.

"Series Allocable Collections" shall mean, with respect to any
date of determination, the product of (a) Collections on such date and (b) the
applicable Series Allocation Percentage.

"Series Allocable Defaulted Amount" shall mean, with respect
to the Notes for any Settlement Period, the product of the Series Allocation
Percentage for the Notes and the Defaulted Amount with respect to such
Settlement Period.

"Series Allocable Finance Charge Collections" shall mean, with
respect to the Notes for any Settlement Period, the product of the Series
Allocation Percentage for the Notes and the amount of the Finance Charge
Collections with respect to such Settlement Period.

"Series Allocable Miscellaneous Payments" shall mean, with
respect to the Notes for any Settlement Period, the product of the Series
Allocation Percentage for the Notes and the amount of the Miscellaneous
Payments with respect to such Settlement Period.

"Series Allocable Principal Collections" shall mean, with
respect to the Notes for any Settlement Period, the product of the Series
Allocation Percentage for the Notes and the amount of the Principal Collections
with respect to such Settlement Period.

"Series Allocation Percentage" shall mean, with respect to the
Notes for any Settlement Period, the percentage equivalent of a fraction, the
numerator of which is the Adjusted Note Principal Amount as of the last day of
the immediately preceding Settlement Period and the denominator of which is the
Aggregate Adjusted Note Principal Amount as of such last day.

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"Series Supplement" shall mean each supplement to the
Indenture pursuant to which a New Issuance is issued by the Issuer.

"Series Termination Date" shall mean the Payment Date
occurring in March 2003.

"Service Transfer" shall have the meaning set forth in Section
6.10(b) of the Purchase and Servicing Agreement.

"Servicer" shall mean JFS, or its successor in interest, or any
Successor Servicer.

"Servicer Default" shall have the meaning assigned to such
term in Section 6.10(b) of the Purchase and Servicing Agreement.

"Servicing Fee" shall mean the product of (i) 2% per annum and
(ii) the amount of Principal Receivables as of the last day of the second
preceding Settlement Period.

"Servicing Fee Rate" means, during the Interest-Only Period,
0% per annum if JFS is the Servicer and in all other cases, 2% per annum.

"Settlement Period" shall mean, with respect to any
Determination Date, the preceding Cycle Month of the Seller.

"Standard & Poor's" shall mean Standard & Poor's Rating Group,
a division of McGraw Hill.

"Standing Delivery Order" shall mean a duly executed and
delivered standing delivery order to the United States Postal Service in
substantially the form attached as Exhibit M to the Indenture.

"Store Payments" shall have the meaning assigned to such term
in Section 6.04(a) of the Purchase and Servicing Agreement.

"Subordinated Note" shall have the meaning assigned to such
term in Section 9.01(a) of the Purchase and Servicing Agreement.

"Subordinated Percentage" shall mean, with respect to any
Settlement Period, the percentage equivalent of a fraction, the numerator of
which is the excess of (i) the Available Subordinated Amount as of the last day
of the

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immediately preceding Settlement Period over (ii) the aggregate amount of
Excess Finance Charge Collections previously distributed to the Seller to the
extent such distributions increased the Available Subordinated Amount, and the
denominator of which is the product of (x) the Pool Balance as of the last day
of such immediately preceding Settlement Period and (y) the Series Allocation
Percentage for the Settlement Period in respect of which the Excess Trust's
Percentage is being calculated.

"Subordination Provision" shall have the meaning assigned to
such term in Section 9.01(b) of the Purchase and Servicing Agreement.

"Subsidiary" shall mean, with respect to any Person (herein
referred to as the "parent"), any corporation, association or other business
entity (whether now existing or hereafter organized) of which at least a
majority of the securities or other ownership interests having ordinary voting
power for the election of directors is, at the time as of which any
determination is being made, owned or controlled by the parent or one or more
subsidiaries of the parent.

"Successor Servicer" shall have the meaning assigned to such
term in Section 6.10(c) of the Purchase and Servicing Agreement.

"Target Note Amount" shall have the meaning assigned to such
term in Section 9.06 of the Indenture.

"Tax Opinion" shall have the meaning assigned to such term in
Section 2.22 of the Indenture.

"Transaction Documents" shall mean the Indenture, the Notes,
the Note Purchase Agreement and the Purchase and Servicing Agreement.

"Transactions" shall have the meaning assigned to such term in
Section 7.01(b) of the Indenture.

"Transfer Deposit Amount" shall have the meaning assigned to
such term in Section 2.05 of the Purchase and Servicing Agreement.

"Trust" shall mean Zale Funding Trust, a Delaware business
trust.

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"Trust Accounts" shall mean the accounts described in the
Indenture and any accounts required to be established pursuant to any Series
Supplement, that are designated as Trust Accounts in that Series Supplement.

"Trust Agreement" shall mean the Trust Agreement, dated as of
June 10, 1994, between the Seller and Wilmington Trust Company pursuant to
which the Trust was formed, as amended, supplemented or otherwise modified from
time to time thereafter.

"Trust Certificates" shall mean the certificates of beneficial
interest in the Trust which represent the entire equity interest in the Trust.

"Trust Daily Distribution Amount" shall mean, on any date
during the Early Amortization Period on which Collections are deposited in the
Collateral Account, the amount the Servicer will distribute directly to the
Trust equal to the product of (i) 100% minus the sum (not to exceed 100%) of
(x) the Principal Allocation Percentage for the related Settlement Period and
(y) the Subordinated Percentage for the related Settlement Period and (ii)
Series Allocable Collections for such date.

"Trust Indenture Act" shall mean the Trust Indenture Act of
1939, as amended.

"Trust Interest" shall mean the right to the assets of the
Trust not allocated to either the Notes or any notes of any additional Series
and is subordinated to the Notes to the limited extent provided in the
Indenture. The outstanding principal amount of the Trust Interest at any time
will equal the excess of (1) the aggregate dollar amount of Purchased
Receivables that are Eligible Receivables over (2) the sum of the Net Note
Principal Amount and the net note principal amount of all other series.

"Trust's Participation Amount" shall mean, for any date, an
amount equal to the Pool Balance on such date minus the aggregate Net Note
Principal Amount and the net note principal amounts for all other Series
outstanding on such date.

"Trust's Percentage" shall mean 100% minus (a) the Floating
Allocation Percentage, when used with respect to Finance Charge Collections and
Defaulted Receivables, or (b) the Principal Allocation Percentage, when used
with

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respect to Principal Collections during any Early Amortization Period.

"UCC" shall mean the Uniform Commercial Code as in effect from
time to time in the applicable governing jurisdiction.

"Unallocated Principal Collections" shall mean any amount of
remaining Principal Collections not paid to the Seller because the Trust's
Participation Amount does not exceed the Aggregate Available Subordinated
Amount.

"Wire Transfer Payment Recipient" shall have the meaning
assigned to such term in Section 2.11 of the Indenture.

"Working Capital Credit Agreement" shall mean the Revolving
Credit and Gold Consignment Agreement dated as of July 30, 1993, among the
Seller, Zale Corp., and the lending institutions set forth therein,as it may
from time to time be amended, supplemented or modified and any credit facility
that refinances such Revolving Credit and Gold Consignment Agreement in full,
which by its terms requires that an acceleration under such credit facility
constitutes an Early Amortization Event.

"Working Capital Lenders" shall mean the lenders under the
Working Capital Credit Agreement.

"Zale" shall mean, collectively, Zale Corp. and its
Subsidiaries, and their respective successors and assigns.

"Zale Corp." shall mean Zale Corporation, a Delaware
corporation, and its successors and assigns.

"Zale Puerto Rico" shall mean Zale Puerto Rico, Inc., a Puerto
Rico corporation, and its successors and assigns.

"Z Del" shall mean Zale Delaware, Inc., a Delaware
corporation, and its successors and assigns.