<PAGE>

                                                                    EXHIBIT 10.1


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



                       TRANSFER AND SERVICING AGREEMENT

                                     among

                   HOUSEHOLD RECEIVABLES FUNDING, INC. III,
                                  Transferor,

                        HOUSEHOLD FINANCE CORPORATION,
                                   Servicer,

                                      and

                  HOUSEHOLD CREDIT CARD MASTER NOTE TRUST I,
                                    ISSUER

                             Dated as of [.], 2000




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

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                <C>
ARTICLE I DEFINITIONS.............................................................................  1

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

Section 1.02.  Other Definitional Provisions...................................................... 13

ARTICLE II CONVEYANCE OF RECEIVABLES.............................................................. 15

Section 2.01.  Conveyance of Receivables.......................................................... 15

Section 2.02.  Acceptance by Owner Trustee........................................................ 16

Section 2.03.  Representations and Warranties of Each Transferor Relating to Such Transferor...... 17

Section 2.04.  Representations and Warranties of each Transferor Relating to the Agreement
               and Any Participation Interest Supplement and the Receivables...................... 18

Section 2.05.  Reassignment of Ineligible Receivables............................................. 19

Section 2.06.  Reassignment of Noteholders' Collateral............................................ 20

Section 2.07.  Covenants of each Transferor....................................................... 21

Section 2.08.  Covenants of each Transferor with Respect to Receivables Purchase Agreement........ 22

Section 2.09.  Addition of Accounts............................................................... 23

Section 2.10.  Removal of Accounts and Participation Interests.................................... 26

Section 2.11.  Account Allocations................................................................ 27

Section 2.12.  Discount Option.................................................................... 27

ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES........................................... 29

Section 3.01.  Acceptance of Appointment and Other Matters Relating to the Servicer............... 29

Section 3.02.  Servicing Compensation............................................................. 30

Section 3.03.  Representations, Warranties and Covenants of the Servicer.......................... 30

Section 3.04.  Reports and Records for the Owner Trustee.......................................... 32

Section 3.05.  Annual Certificate of Servicer..................................................... 33

Section 3.06.  Annual Servicing Report of Independent Public Accountants; Copies of Reports
               Available.......................................................................... 33

Section 3.07.  Tax Treatment...................................................................... 33

Section 3.08.  Notices to Household Finance Corporation........................................... 34

Section 3.09.  Adjustments........................................................................ 34

Section 3.10.  Reports to the Commission.......................................................... 34

ARTICLE IV OTHER MATTERS RELATING TO EACH TRANSFEROR.............................................. 35

Section 4.01.  Liability of each Transferor....................................................... 35

Section 4.02.  Merger or Consolidation of, or Assumption of the Obligations of, a Transferor...... 35
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                                                <C>
Section 4.03.  Limitations on Liability of Each Transferor........................................ 36

Section 4.04.  Assumption of the Transferor Obligations........................................... 36

ARTICLE V OTHER MATTERS RELATING TO THE SERVICER.................................................. 38

Section 5.01.  Liability of the Servicer.......................................................... 38

Section 5.02.  Merger or Consolidation of, or Assumption of the Obligations of, the Servicer...... 38

Section 5.03.  Limitation on Liability of the Servicer and Others................................. 38

Section 5.04.  Servicer Indemnification of the Trust, the Owner Trustee and the Indenture Trustee. 39

Section 5.05.  Resignation of the Servicer........................................................ 39

Section 5.06.  Access to Certain Documentation and Information Regarding the Receivables.......... 39

Section 5.07.  Delegation of Duties............................................................... 40

Section 5.08.  Examination of Records............................................................. 40

ARTICLE VI INSOLVENCY EVENTS...................................................................... 41

Section 6.01.  Rights upon the Occurrence of an Insolvency Event.................................. 41

ARTICLE VII SERVICER DEFAULTS..................................................................... 42

Section 7.01.  Servicer Defaults.................................................................. 42

Section 7.02.  Indenture Trustee To Act; Appointment of Successor................................. 44

Section 7.03.  Notification to Noteholders........................................................ 45

ARTICLE VIII TERMINATION.......................................................................... 46

Section 8.01.  Termination of Agreement........................................................... 46

ARTICLE IX MISCELLANEOUS PROVISIONS............................................................... 47

Section 9.01.  Amendment; Waiver of Past Defaults................................................. 47

Section 9.02.  Protection of Right, Title and Interest to Trust................................... 48

Section 9.03.  Governing Law...................................................................... 49

Section 9.04.  Notices; Payments.................................................................. 49

Section 9.05.  Severability of Provisions......................................................... 50

Section 9.06.  Further Assurances................................................................. 50

Section 9.07.  No Waiver; Cumulative Remedies..................................................... 50

Section 9.08.  Counterparts....................................................................... 50

Section 9.09.  Third-Party Beneficiaries.......................................................... 50

Section 9.10.  Actions by Noteholders............................................................. 50

Section 9.11.  Rule 144A Information.............................................................. 51

Section 9.12.  Merger and Integration............................................................. 51

Section 9.13.  Headings........................................................................... 51
</TABLE>

                                      ii
<PAGE>

                                   EXHIBITS

<TABLE>
<S>                                                                        <C>
EXHIBIT A      Form of  Assignment of Receivables in Additional Accounts.. A-1

EXHIBIT B      Form of  Reassignment of Receivables in Removed Accounts... B-1

EXHIBIT C      Form of Annual Servicer's Certificate...................... C-1

EXHIBIT D-1    Form of Opinion of Counsel with Respect to Amendments...... D-1-1

EXHIBIT D-2    Form of Opinion of Counsel with Respect to Accounts........ D-2-1

EXHIBIT D-3    Provisions to be Included in Annual Opinion of Counsel..... D-3-1

                                   SCHEDULES

SCHEDULE I     List of Accounts........................................... I-1
</TABLE>

                                      iii
<PAGE>

          TRANSFER AND SERVICING AGREEMENT dated as of [.] 2000 among HOUSEHOLD
RECEIVABLES FUNDING, INC. III, a Delaware corporation, as Transferor; HOUSEHOLD
FINANCE CORPORATION, a Delaware corporation, as Servicer; and HOUSEHOLD CREDIT
CARD MASTER NOTE TRUST I, a Delaware business trust, as Issuer.

          In consideration of the mutual agreements herein contained, each party
agrees as follows for the benefit of the other parties, the Noteholders and any
Series Enhancer (as defined below) to the extent provided herein, in the
Indenture and in any Indenture Supplement:

                                   ARTICLE I

                                  DEFINITIONS

          Section 1.01.  Definitions. Whenever used in this Agreement, the
                         -----------
following words and phrases shall have the following meanings, and the
definitions of such terms are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such terms.

          "Account" shall mean (a) each Initial Account, (b) each Additional
           -------
Account (but only from and after the Addition Date with respect thereto), (c)
each Related Account, and (d) each Transferred Account, but shall exclude (i)
any Account that has been closed and terminated in accordance with the relevant
Credit Card Guidelines and (ii) any Account all the Receivables in which are (A)
after the Removal Date, removed by the Transferor pursuant to Section 2.10, (B)
reassigned to the Transferor pursuant to Section 2.05 or (C) assigned and
transferred to the Servicer pursuant to Section 3.03.

          "Account Owner" shall mean the Bank or any other entity which is the
           -------------
issuer of the revolving credit relating to an Account pursuant to a Credit
Agreement and/or a seller of Receivables to the Transferor.

          "Addition Date" shall mean (a) with respect to Aggregate Addition
           -------------
Accounts and New Accounts, the date from and after which such Aggregate Addition
Accounts and New Accounts are to be included as Accounts pursuant to subsection
2.09(a), (b) or (d), and (b) with respect to Participation Interests, the date
from and after which such Participation Interests are to be included as assets
of the Trust pursuant to subsection 2.09(a) or (b).

          "Additional Account" shall mean each New Account and each Aggregate
           ------------------
Addition Account.

          "Additional Cut-Off Date" shall mean (a) with respect to Aggregate
           -----------------------
Addition Accounts or Participation Interests, the date specified as such in the
notice delivered with respect thereto pursuant to subsection 2.09(c) and (b)
with respect to New Accounts, the later of the dates on which such New Accounts
are originated or designated pursuant to subsection 2.09(d).

          "Additional Transferor" shall have the meaning specified in subsection
           ---------------------
2.09(g).

          "Adverse Effect" shall mean, with respect to any action, that such
           --------------
action will (a) result in the occurrence of an Amortization Event, a
Reinvestment Event or an Event of Default or (b) materially adversely affect the
amount or timing of distributions to be made to the Noteholders of any Series or
Class pursuant to this Agreement, the Indenture or the related Indenture
Supplement.

<PAGE>

          "Affiliate" shall mean, with respect to any specified Person, any
           ---------
other Person controlling or controlled by or under common control with such
specified Person.  For the purposes of this definition, "control" shall mean the
                                                         -------
power to direct the management and policies of a Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
               -----------       ----------
foregoing.

          "Affinity Agreement" shall mean (a) a written agreement between the
           ------------------
Bank or other Account Owner, as the case may be, and any merchant pursuant to
which such merchant sells, assigns or otherwise transfers between the Bank or
other Account Owner, as the case may be, certain Credit Agreements between such
merchant and Obligors, including all such merchant's rights and interests in the
Accounts and Receivables arising under such Credit Agreements, or (b) a written
agreement between the Bank or other Account Owner, as the case may be, and any
merchant or co-branding participant establishing private label or co-branded
credit programs pursuant to which the Bank will enter into Credit Agreements
with Obligors.

          "Aggregate Addition" shall mean the designation of additional Eligible
           ------------------
Accounts, other than New Accounts, to be included as Accounts or of
Participation Interests to be included as Trust Assets pursuant to subsection
2.09(a) or (b).

          "Aggregate Addition Account" shall mean each Eligible Account
           --------------------------
designated pursuant to subsection 2.09(a) or (b) to be included as an Account
and identified in the computer file or microfiche list delivered to the Owner
Trustee by the Transferor pursuant to Sections 2.01 and 2.09(h).

          "Agreement" shall mean this Transfer and Servicing Agreement, as the
           ---------
same may be amended, supplemented or otherwise modified from time to time.

          "Appointment Date" shall have the meaning specified in subsection
           ----------------
6.01.

          "Amortization Event" shall have the meaning specified in the
           ------------------
Indenture.

          "Assignment" shall have the meaning specified in subsection 2.09(h).
           ----------

          "Authorized Newspaper" shall mean any newspaper or newspapers of
           --------------------
general circulation in the Borough of Manhattan, The City of New York, printed
in the English language (and, with respect to any Series or Class, if and so
long as the Notes of such Series are listed on the Luxembourg Stock Exchange and
such Exchange shall so require, in Luxembourg, printed in any language
satisfying the requirements of such exchange) and customarily published on each
business day at such place, whether or not published on Saturdays, Sundays or
holidays.

          "Bank" shall mean Household Bank (Nevada), N.A., and its successors
           ----
and permitted assigns.

          "Bankruptcy Code" shall have the meaning specified in subsection
           ---------------
4.02(a)(i)(x).

          "Bearer Notes" shall have the meaning specified in the Indenture.
           ------------

          "Business Day" shall mean any day other than (a) a Saturday or Sunday
           ------------
or (b) any other day on which national banking associations or state banking
institutions in New York City, New York, Delaware, Nevada or any other State in
which the principal executive offices of the Bank, the Servicer, the Owner
Trustee, the Indenture Trustee or other Account Owner, as the case may be, are
located, are

                                       2

<PAGE>

authorized or obligated by law, executive order or governmental decree to be
closed or (c) for purposes of any particular Series, any other day specified in
the related Indenture Supplement.

          "Cash Advance Fees" shall mean cash advance transaction fees and cash
           -----------------
advance late fees, if any, as specified in the Credit Agreement applicable to
each Account.

          "Class" shall have the meaning specified in the Indenture.
           -----

          "Closing Date" shall mean, with respect to any Series, the closing
           ------------
date specified in the related Indenture Supplement.

          "Collections" shall mean all payments by or on behalf of Obligors
           -----------
(including Insurance Proceeds) received in respect of the Receivables, in the
form of cash, checks, wire transfers, electronic transfers, ATM transfers or any
other form of payment in accordance with a Credit Agreement in effect from time
to time and all other amounts specified by this Agreement, the Indenture or any
Indenture Supplement as constituting Collections.  As specified in any
Participation Interest Supplement or Indenture Supplement, Collections shall
include amounts received with respect to Participation Interests.  All
Recoveries with respect to Receivables previously charged-off as uncollectible
will be treated as Collections of Finance Charge and Administrative Receivables.
Collections with respect to any Due Period shall include a portion, calculated
pursuant to subsection 2.07(h), of Interchange paid to the Trust with respect to
such Due Period, to be applied as if such amount were Collections of Finance
Charge and Administrative Receivables for all purposes.

          "Commission" shall mean the Securities and Exchange Commission and its
           ----------
successors in interest.

          "Corporate Trust Office" shall have the meaning (a) when used in
           ----------------------
respect of the Owner Trustee, specified in the Trust Agreement and (b) when used
in respect of the Indenture Trustee, specified in the Indenture.

          "Coupon" shall have the meaning specified in the Indenture.
           ------

          "Credit Agreement" shall mean, with respect to a revolving credit
           ----------------
account, the agreements between an Account Owner and the Obligor governing the
terms and conditions of such account, as such agreements may be amended,
modified or otherwise changed from time to time and as distributed (including
any amendments and revisions thereto) to holders of such account.

          "Credit Guidelines" shall mean the respective policies and procedures
           -----------------
of the Bank, the Servicer, and/or any other Account Owner, as the case may be,
as such policies and procedures may be amended from time to time, (a) relating
to the operation of its credit business, which generally are applicable to its
portfolio of revolving credit accounts or, in the case of an Account Owner that
has only a portion of its portfolio subject to a Receivables Purchase Agreement,
applicable to such portion of its portfolio, and in each case which are
consistent with prudent practice, including the policies and procedures for
determining the creditworthiness of Obligors and the extension of credit to
Obligors, and (b) relating to the maintenance of credit accounts and collection
of receivables created thereunder.

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

                                       3
<PAGE>

          "Defaulted Amount" shall mean, with respect to any Due Period, an
           ----------------
amount (which shall not be less than zero) equal to (a) the amount of Principal
Receivables which became Defaulted Receivables in such Due Period, minus (b) the
amount of any Defaulted Receivables of which the Transferor or the Servicer
became obligated to accept reassignment or assignment in accordance with the
terms of this Agreement during such Due Period; provided, however, that, if an
Insolvency Event occurs with respect to the Transferor, the amount of such
Defaulted Receivables which are subject to reassignment to the Transferor in
accordance with the terms of this Agreement shall not be added to the sum so
subtracted and, if any of the events described in subsection 7.01(d) occur with
respect to the Servicer, the amount of such Defaulted Receivables which are
subject to reassignment or assignment to the Servicer in accordance with the
terms of this Agreement shall not be added to the sum so subtracted.

          "Defaulted Receivables" shall mean, with respect to any Due Period and
           ---------------------
any Pool and related Group, all Principal Receivables which are charged off as
uncollectible in such Due Period in accordance with the Credit Guidelines and
the Servicer's customary and usual servicing procedures for servicing revolving
credit accounts.  A Principal Receivable shall become a Defaulted Receivable on
the day on which such Principal Receivable is recorded as charged-off on the
Servicer's computer file of revolving credit accounts.

          "Discount Option Date" shall mean each date on which a Discount
           --------------------
Percentage designated by the Transferor pursuant to Section 2.12 takes effect.

          "Discount Option Receivables" shall have the meaning specified in
           ---------------------------
Section 2.12.  The aggregate amount of Discount Option Receivables outstanding
on any Date of Processing occurring on or after the Discount Option Date shall
equal the sum of (a) the aggregate Discount Option Receivables at the end of the
prior Date of Processing (which amount, prior to the Discount Option Date, shall
be zero) plus (b) any new Discount Option Receivables created on such Date of
Processing minus (c) any Discount Option Receivables Collections received on
such Date of Processing.  Discount Option Receivables on any Date of Processing
shall mean the product of the amount of any Principal Receivables outstanding on
such Date of Processing (without giving effect to the proviso in the definition
of Principal Receivables) and the Discount Percentage.

          "Discount Option Receivable Collections" shall mean on any Date of
           --------------------------------------
Processing occurring in any Due Period succeeding the Due Period in which the
Discount Option Date occurs, the product of (a) a fraction the numerator of
which is the Discount Option Receivables and the denominator of which is the sum
of the Principal Receivables and the Discount Option Receivables in each case
(for both the numerator and the denominator) at the end of the preceding Due
Period and (b) Collections of Principal Receivables on such Date of Processing
(without giving effect to the proviso in the definition of Principal
Receivables).

          "Discount Percentage" shall mean the percentages, if any, designated
           -------------------
by the Transferor pursuant to Section 2.12.

          "Distribution Date" shall mean, with respect to any Series, the date
           -----------------
specified in the applicable Indenture Supplement.

          "Document Delivery Date" shall have the meaning specified in
           ----------------------
subsection 2.09(h).

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

          "Due Period" shall have the meaning specified in the Indenture.
           ----------

                                       4
<PAGE>

          "Eligible Account" shall mean a revolving credit account owned by the
           ----------------
Bank in the case of the Initial Accounts on the Initial Cut-Off Date, or the
Bank or other Account Owner, in the case of Additional Accounts which, as of the
Initial Cut-Off Date with respect to an Initial Account or as of the Additional
Cut-Off Date with respect to an Additional Account meets the following
requirements:

               (a) is a revolving credit account in existence and maintained by
     the Bank or other Account Owner, as the case may be;

               (b) is payable in Dollars;

               (c) has an Obligor who has provided, as his most recent billing
     address, an address located in the United States or its territories,
     possessions or military bases;

               (d) except as provided below, has an Obligor who has not been
     identified by the Servicer in its computer files as being currently
     involved in a voluntary or involuntary bankruptcy proceeding;

               (e) has not been identified as an account with respect to which
     (i) the related card, if any, has been lost or stolen or (ii) the related
     account number has been stolen;

               (f) has not been sold or pledged to any other party except for
     any sale to another Account Owner that has either entered into a
     Receivables Purchase Agreement or is an Additional Transferor;

               (g) does not have receivables which have been sold or pledged by
     the Bank or any other Account Owner, as the case may be, to any other party
     other than any Transferor pursuant to a Receivables Purchase Agreement;

               (h) with respect to the Initial Accounts, is an account in
     existence and maintained by the Bank as of the Initial Cut-Off Date or the
     Additional Cut-Off Date with respect to additional Accounts;

               (i) except as provided below, does not have any Receivables that
     are Defaulted Receivables; and

               (j) does not have any Receivables that have been identified by
     the Servicer or the relevant Obligor as having been incurred as a result of
     fraudulent use of any related credit card, if any, or related account
     number.

          Eligible Accounts may include Accounts, the Receivables of which have
been charged off, or with respect to which the Servicer believes the related
Obligor is bankrupt, in each case as of the Initial Cut-Off Date, with respect
to the Initial Accounts, and as of the related Additional Cut-Off Date, with
respect to Additional Accounts; provided, that (a) the balance of all
Receivables included in such Accounts is reflected on the books and records of
such Transferor (and is treated for purposes of this Agreement) as "zero" and
(b) charging privileges with respect to all such Accounts have been canceled in
accordance with the relevant Credit Guidelines.

          "Eligible Receivable" shall mean each Receivable, including, where
           -------------------
applicable, the underlying receivable:

               (a) which has arisen in an Eligible Account;

                                       5
<PAGE>

               (b) which was created in compliance in all material respects with
     all Requirements of Law applicable to the institution which owned such
     Receivable at the time of its creation and pursuant to a Credit Agreement
     which complies in all material respects with all Requirements of Law
     applicable to the Bank or other Account Owner, as the case may be;

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

               (d) as to which at the time of the transfer of such Receivable to
     the Trust, the Transferor or the Trust will have good and marketable title
     thereto and which itself is, and the underlying receivables are, free and
     clear of all Liens (other than any Lien for municipal or other local taxes
     if such taxes are not then due and payable or if the Transferor is then
     contesting the validity thereof in good faith by appropriate proceedings
     and has set aside on its books adequate reserves with respect thereto);

               (e) which has been the subject of either a valid transfer and
     assignment from the Transferor to the Trust of all the Transferor's right,
     title and interest therein (including any proceeds thereof), or the grant
     of a first priority perfected security interest therein (and in the
     proceeds thereof), effective until the termination of the Trust;

               (f) which at all times will be the legal, valid and binding
     payment obligation of the Obligor thereon enforceable against such Obligor
     in accordance with its terms, except as such enforceability may be limited
     by applicable bankruptcy, insolvency, reorganization, moratorium or other
     similar laws, now or hereafter in effect, affecting the enforcement of
     creditors' rights in general and except as such enforceability may be
     limited by general principles of equity (whether considered in a suit at
     law or in equity);

               (g) which, at the time of transfer to the Trust, has not been
     waived or modified except as permitted in accordance with the Credit
     Guidelines and which waiver or modification is reflected in the Servicer's
     computer file of revolving credit accounts;

               (h) which, at the time of transfer to the Trust, is not subject
     to any right of rescission, setoff, counterclaim or any other defense
     (including defenses arising out of violations of usury laws) of the
     Obligor, other than defenses arising out of applicable bankruptcy,
     insolvency, reorganization, moratorium or other similar laws affecting the
     enforcement of creditors' rights in general;

               (i) as to which, at the time of transfer to the Trust, the Bank
     or other Account Owner, as the case may be, have satisfied all their
     obligations required to be satisfied by such time;

               (j) as to which, at the time of transfer to the Trust, none of
     the Transferor, the Bank or any other Account Owner, as the case may be,
     has taken any action which would impair, or omitted to take any action the
     omission of which would impair, the rights of the Trust or the Noteholders
     therein; and

                                       6
<PAGE>

               (k) which constitutes either an "account" or a "general
     intangible" under and as defined in Article 9 of the UCC as then in effect
     in the States of Delaware and any other state where the filing of a
     financing statement is required to perfect the Trust's interest in the
     Receivables and the proceeds thereof.

          "Eligible Servicer" shall mean the Indenture Trustee or, if the
           -----------------
Indenture Trustee is not acting as Servicer, an entity which, at the time of its
appointment as Servicer, (a) is servicing a portfolio of revolving credit
accounts, (b) is legally qualified and has the capacity to service the Accounts,
(c) in the sole determination of the Indenture Trustee, which determination
shall be conclusive and binding, has demonstrated the ability to service
professionally and competently a portfolio of similar accounts in accordance
with high standards of skill and care, (d) is qualified to use the software that
is then being used to service the Accounts or obtains the right to use or has
its own software which is adequate to perform its duties under this Agreement
and (e) has a net worth of at least $50,000,000 as of the end of its most recent
fiscal quarter.

          "Event of Default" shall have the meaning specified in the Indenture.
           ----------------

          "FDIA" shall mean the Federal Deposit Insurance Act, as amended by the
           ----
Financial Institutions Reform, Recovery and Enforcement Act of 1989 and as
further amended from time to time.

          "FDIC" shall mean the Federal Deposit Insurance Corporation or any
           ----
successor.

          "Finance Charge and Administrative Receivables" shall mean with
           ---------------------------------------------
respect to any Pool, all amounts billed to the Obligors on any Account in
respect of (a) all Periodic Rate Finance Charges, (b) Cash Advance Fees, (c)
annual membership fees and annual service charges, (d) Late Fees, (e) Overlimit
Fees, (f) Discount Option Receivables and (g) any other fees with respect to the
Accounts designated by the Transferor at any time and from time to time to be
included as Finance Charge and Administrative Receivables.  Finance Charge and
Administrative Receivables shall also include the interest portion of
Participation Interests as shall be determined pursuant to, and only if so
provided in, the applicable Participation Interest Supplement or Indenture
Supplement for any Series.

          "Fitch" shall mean Fitch IBCA, Inc. or its successors.
           -----

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

          "HRF" shall mean Household Receivables Funding, Inc. III, a Delaware
           ---
corporation, and its successors and permitted assigns.

          "Household Finance Corporation" shall mean Household Finance
           -----------------------------
Corporation, a Delaware corporation, and its successors and permitted assigns.

          "Household International" shall mean Household International, Inc., a
           -----------------------
Delaware corporation and its successors and assigns.

          "Indenture" shall mean the Master Indenture, dated as of [.], 2000,
           ---------
between the Issuer and the Indenture Trustee, as the same may be amended,
supplemented or otherwise modified from time to time.

          "Indenture Supplement" shall have the meaning specified in the
           --------------------
Indenture.

                                       7
<PAGE>

          "Indenture Trustee" shall mean Wells Fargo Bank Minnesota, N.A., a
           -----------------
national banking association, in its capacity as trustee under the Indenture,
its successors in interest and any successor indenture trustee under the
Indenture.

          "Ineligible Receivables" shall have the meaning specified in
           ----------------------
subsection 2.05(a).

          "Initial Account" shall mean each MasterCard(R) and VISA(R)1/
           ---------------
consumer revolving credit account established pursuant to a Credit Agreement
between the Bank and any Person, which account is identified in the computer
file or microfiche list delivered to the Owner Trustee by the Transferor
pursuant to Section 2.01 on the Initial Issuance Date.


          "Initial Cut-Off Date" shall mean [.], 2000.
           --------------------

          "Initial Issuance Date" shall mean [.], 2000, the date the
           ---------------------
Transferor's Certificate is delivered by the Trust to the Transferor pursuant to
the Trust Agreement.

          "Insolvency Event" shall have the meaning specified in subsection
           ----------------
6.01.

          "Insurance Proceeds" shall mean any amounts received pursuant to the
           ------------------
payment of benefits under any credit life insurance policies, credit disability
or unemployment insurance policies covering any Obligor with respect to
Receivables under such Obligor's Account.

          "Interchange" shall mean interchange fees payable to the Bank or any
           -----------
other Account Owner, in its capacity as credit issuer, through MasterCard or
VISA or any similar entity or organization with respect to any type of revolving
credit accounts included as Accounts (except as otherwise provided in the
initial Assignment with respect to any such type of Accounts), in connection
with Obligor charges for goods or services with respect to the Accounts, as
calculated pursuant to the related Indenture Supplement for any Series.  Any
reference in this Agreement, the Indenture or any Indenture Supplement to
Interchange shall refer to only the fractional undivided interest in the
interchange fees that are transferred by the Bank or an Account Owner to a
Transferor pursuant to a Receivables Purchase Agreement, which fractional
undivided interest may be less than a 100% interest therein.

          "Invested Amount" shall mean, with respect to any Series and for any
           ---------------
date, an amount equal to the invested amount or adjusted invested amount, as
applicable, specified in the related Indenture Supplement.

          "Issuer" shall mean the Trust.
           ------

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

          "Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
           ----
assignment, deposit arrangement, equity interest, encumbrance, lien (statutory
or other), preference, participation interest, priority or other the Bank
security agreement or preferential arrangement of any kind or nature whatsoever,
including any conditional sale or other title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing and
the filing of any financing statement under the UCC or comparable law of any
jurisdiction to evidence any of the foregoing; provided,

------------------
1/ MasterCard and VISA are registered trademarks of MasterCard International
Incorporated and VISA USA, Inc., respectively.

                                       8
<PAGE>

however, that any assignment permitted by Section 3.06(b) of the Trust Agreement
or Section 4.02 of, and the lien created by, this Agreement shall not be deemed
to constitute a Lien.

          "MasterCard" shall mean MasterCard International Incorporated, and its
           ----------
successors in interest.

          "Monthly Servicing Fee" shall have the meaning specified in Section
           ---------------------
3.02.

          "Moody's" shall mean Moody's Investors Service, Inc., or its
           -------
successor.

          "New Account" shall mean each MasterCard and VISA consumer revolving
           -----------
credit account established pursuant to a Credit Agreement, which account is
designated pursuant to subsection 2.09(d) to be included as an Account and is
identified in the computer file or microfiche list delivered to the Owner
Trustee by the Transferor pursuant to Section 2.01 and subsection 2.09(h).

          "Note Interest Rate" shall have the meaning specified in the
           ------------------
Indenture.

          "Note Owner" shall have the meaning specified in the Indenture.
           ----------

          "Note Register" shall have the meaning specified in the Indenture.
           -------------

          "Noteholder" or "Holder" shall have the meaning specified in the
           ----------      ------
Indenture.

          "Noteholders' Collateral" shall have the meaning specified in the
           -----------------------
Indenture.

          "Notices" shall have the meaning specified in subsection 9.04(a).
           -------

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

          "Officer's Certificate" shall have the meaning specified in the
           ---------------------
Indenture.

          "Opinion of Counsel" shall have the meaning specified in the
           ------------------
Indenture.

          "Overlimit Fees" shall have the meaning specified in the Credit
           --------------
Agreement applicable to each Account for overlimit fees or similar terms if such
fees are provided for with respect to such Account.

          "Owner Trustee" shall mean Wilmington Trust Company in its capacity as
           -------------
owner trustee under the Trust Agreement, its successors in interest and any
successor owner trustee under the Trust Agreement.

          "Participation Interest Supplement" shall mean a supplement to this
           ---------------------------------
Agreement entered into pursuant to subsection 2.09(a)(ii) or (b) in connection
with the conveyance of Participation Interests to the Trust.

          "Participation Interests" shall have the meaning specified in
           -----------------------
subsection 2.09(a)(ii).

          "Paying Agent" shall have the meaning specified in the Indenture.
           ------------

                                       9
<PAGE>

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

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

          "Principal Receivables" shall mean with respect to any Pool all
           ---------------------
Receivables other than Finance Charge and Administrative Receivables or
Defaulted Receivables; provided, however, that after the Discount Option Date,
Principal Receivables on any Date of Processing thereafter shall mean Principal
Receivables as otherwise determined pursuant to this definition minus the amount
of any Discount Option Receivables.  Principal Receivables shall also include
the principal portion of Participation Interests as shall be determined pursuant
to, and only if so provided in, the applicable Participation Interest Supplement
or Indenture Supplement for any Series.  In calculating the aggregate amount of
Principal Receivables on any day, the amount of Principal Receivables shall be
reduced by the aggregate amount of credit balances in the Accounts on such day.
Any Principal Receivables which the Transferor is unable to transfer as provided
in Section 2.11 shall not be included in calculating the amount of Principal
Receivables.

          "Rating Agency" shall have the meaning specified in the Indenture.
           -------------

          "Rating Agency Condition" shall have the meaning specified in the
           -----------------------
Indenture.

          "Reassignment" shall have the meaning specified in Section 2.10.
           ------------

          "Receivables" shall mean all amounts shown on the Servicer's records
           -----------
as amounts payable by Obligors on any Account from time to time, including
amounts payable for Principal Receivables and Finance Charge and Administrative
Receivables.  Receivables which become Defaulted Receivables will cease to be
included as Receivables as of the day on which they become Defaulted
Receivables.  Receivables, where applicable, shall include also the interest and
principal portion of Participation Interests.  Unless the context otherwise
requires (whether or not there is a specific reference to the underlying
receivable), any reference in this Agreement, the Indenture or any Indenture
Supplement to a Receivable (including any Principal Receivable, Finance Charge
Receivable or Defaulted Receivable) and any Collections thereon or other amounts
recoverable with respect thereto (including any Insurance Proceeds or Recoveries
with respect thereto) shall refer to only the fractional undivided interest in
the amounts paid or payable by Obligors on the Accounts that are transferred by
the Bank or an Account Owner to a Transferor pursuant to a Receivables Purchase
Agreement, which undivided interest may be less than a 100% undivided interest
therein.  Any reference in this Agreement, the Indenture or any Indenture
Supplement to the "underlying receivable" with respect to a Receivable shall
refer to the receivable in which such Receivable represents an undivided
interest.

          "Receivables Purchase Agreement" shall mean the receivables purchase
           ------------------------------
agreement dated as of [.], 2000, between the Bank and the Transferor, as amended
from time to time, and includes any receivables purchase agreement,
substantially in the form of such agreement entered into between the Transferor
and an Account Owner or other Affiliated entity in the future.

          "Recoveries" shall mean all amounts received (net of out-of-pocket
           ----------
costs of collection) including Insurance Proceeds, which is reasonably estimated
by the Transferor to be attributable to Defaulted Receivables, including the net
proceeds of any sale of such Defaulted Receivables by the Transferor.

                                      10
<PAGE>

          "Registered Notes" shall have the meaning specified in the Indenture.
           ----------------

          "Reinvestment Event" shall have the meaning specified in the
           ------------------
Indenture.

          "Related Account" shall mean an Account with respect to which a new
           ---------------
account number has been issued by the applicable Account Owner or Servicer or
the applicable Transferor under circumstances resulting from a lost or stolen
credit card or account number, and not requiring standard application and credit
evaluation procedures under the Credit Guidelines.

          "Removal Date" shall have the meaning specified in Section 2.10.
           ------------

          "Removed Accounts" shall have the meaning specified in Section 2.10.
           ----------------

          "Removed Participation Interests" shall have the meaning specified in
           -------------------------------
Section 2.10.

          "Required Delivery Date" shall have the meaning specified in
           ----------------------
subsection 2.01(c).

          "Required Designation Date" shall have the meaning specified in
           -------------------------
subsection 2.09(a).

          "Required Minimum Principal Balance" shall mean, unless otherwise
           ----------------------------------
provided in an Indenture Supplement relating to a Series having a Paired Series,
with respect to any date and any Pool (a) the sum of the Series Adjusted
Invested Amounts for each Series outstanding on such date in such Pool plus the
Required Transferor Amount on such date, minus (b) the Special Funding Amount.

          "Required Transferor Amount" shall have the meaning specified in the
           --------------------------
Indenture.

          "Requirements of Law" shall mean any law, treaty, rule or regulation,
           -------------------
or determination of an arbitrator or Governmental Authority, whether Federal,
state or local (including usury laws, the Federal Truth in Lending Act and
Regulation B and Regulation Z of the Board of Governors of the Federal Reserve
System), and, when used with respect to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person.

          "Revolving Credit Agreement" shall mean the revolving credit agreement
           --------------------------
by and between the Transferor and Household Finance Corporation, dated as of
[.], 2000, as such agreement may be amended from time to time in accordance
therewith, and any substantially similar agreement entered into between any
lender and the Transferor or any Additional Transferor in the future in
accordance with the provisions hereof.

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

          "Series" shall have the meaning specified in the Indenture.
           ------

          "Series Account" shall have the meaning specified in the Indenture.
           --------------

          "Series Adjusted Invested Amount" shall have the meaning specified in
           -------------------------------
the related Indenture Supplement.

          "Series Enhancement" shall have the meaning specified in the
           ------------------
Indenture.

          "Series Enhancer" shall have the meaning specified in the Indenture.
           ---------------

                                      11
<PAGE>

          "Series Portfolio Yield" shall have the meaning specified in the
           ----------------------
related Indenture Supplement.

          "Service Transfer" shall have the meaning specified in Section 7.01.
           ----------------

          "Servicer" shall mean Household Finance Corporation, in its capacity
           --------
as Servicer pursuant to this Agreement, and, after any Service Transfer, the
Successor Servicer.

          "Servicer Default" shall have the meaning specified in Section 7.01.
           ----------------

          "Servicing Fee" shall have the meaning specified in Section 3.02.
           -------------

          "Servicing Fee Rate" shall mean, with respect to any Series, the
           ------------------
servicing fee rate specified in the related Indenture Supplement.

          "Small Balance Account" shall have the meaning established in
           ---------------------
accordance with the Credit Guidelines.

          "Special Funding Account" shall have the meaning specified in the
           -----------------------
Indenture.

          "Special Funding Amount" shall have the meaning specified in the
           ----------------------
Indenture.

          "Standard & Poor's" shall mean Standard & Poor's Ratings Group, or its
           -----------------
successor.

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

          "Supplemental Certificate" shall have the meaning specified in the
           ------------------------
Trust Agreement.

          "Tax Opinion" shall have the meaning specified in the Indenture.
           -----------

          "Termination Notice" shall have the meaning specified in subsection
           ------------------
7.01(d).

          "Transfer Agent and Registrar" shall have the meaning specified in the
           ----------------------------
Indenture.

          "Transfer Restriction Event" shall have the meaning specified in
           --------------------------
Section 2.11.

          "Transferor" shall mean (a) HRF, a wholly owned special purpose
           ----------
subsidiary of the Bank and incorporated in the State of Delaware, or its
successor under this Agreement and (b) any Additional Transferor or Transferors.
References to "each Transferor" shall refer to each entity mentioned in the
               ---------------
preceding sentence and references to "the Transferor" shall refer to all of such
                                      --------------
entities.

          "Transferor Amount" shall have the meaning specified in the Indenture.
           -----------------

          "Transferor Certificate" shall have the meaning specified in the Trust
           ----------------------
Agreement.

          "Transferor Certificates" shall mean, collectively, the Transferor
           -----------------------
Certificate and any outstanding Supplemental Certificates.

          "Transferor's Interest" shall have the meaning specified in the Trust
           ---------------------
Agreement.

                                      12
<PAGE>

          "Transferred Account" shall mean each account into which an Account
           -------------------
shall be transferred provided that (i) such transfer was made in accordance with
the Credit Guidelines and (ii) such account can be traced or identified as an
account into which an Account has been transferred.

          "Trust" shall mean the Household Credit Card Master Note Trust I.
           -----

          "Trust Agreement" shall mean the Trust Agreement relating to the
           ---------------
Trust, dated as of [.], 2000, between HRF and the Owner Trustee, as the same may
be amended, supplemented or otherwise modified from time to time.

          "Trust Assets" shall have the meaning specified in Section 2.01.
           ------------

          "UCC" shall mean the Uniform Commercial Code, as amended from time to
           ---
time, as in effect in any specified jurisdiction.

          "VISA" shall mean VISA USA, Inc., and its successors in interest.
           ----

          Section 1.02.  Other Definitional Provisions.
                         -----------------------------

          (a) With respect to any Series, all terms used herein and not
otherwise defined herein shall have meanings ascribed to them in the Trust
Agreement, Indenture or the related Indenture Supplement, as applicable.

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

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

          (d) The agreements, representations and warranties of HRF and the
Household Finance Corporation in this Agreement in each of their respective
capacities as Transferor and Servicer shall be deemed to be the agreements,
representations and warranties of HRF and the Household Finance Corporation
solely in each such capacity for so long as HRF and the Household Finance
Corporation act in each such capacity under this Agreement.

          (e) Any reference to each Rating Agency shall only apply to any
specific rating agency if such rating agency is then rating any outstanding
Series.
          (f) Unless otherwise specified, references to any amount as on deposit
or outstanding on any particular date shall mean such amount at the close of
business on such day.

          (g) The words "hereof," "herein" and "hereunder" and words of similar
                         ------    ------       ---------
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; references to any subsection,
Section, Schedule or Exhibit are references to subsections, Sections, Schedules
and Exhibits in or to this Agreement unless otherwise specified; and the term
"including" means "including without limitation."
 ---------         ----------------------------

                               [END OF ARTICLE I]

                                      13
<PAGE>

                                  ARTICLE II

                           CONVEYANCE OF RECEIVABLES

          Section 2.01.  Conveyance of Receivables.  (a) By execution of this
                         -------------------------
Agreement, each of HRF and, in the case of Additional Accounts, HRF or, if
applicable, any Additional Transferor does hereby transfer, assign, set over and
otherwise convey to the Trust, without recourse except as provided herein, all
its right, title and interest in, to and under the Receivables existing at the
close of business on the Initial Cut-Off Date, in the case of Receivables
arising in the Initial Accounts, and at the close of business on each Additional
Cut-Off Date, in the case of Receivables arising in the Additional Accounts, and
in each case thereafter created from time to time until the termination of the
Trust, all Interchange and Recoveries allocable to the Trust as provided herein,
all monies due or to become due and all amounts received with respect thereto
and all proceeds (including "proceeds" as defined in the UCC) thereof.  Such
property, together with all monies and other property credited to the Collection
Account, the Series Accounts and the Special Funding Account (including any
subaccounts of such account), the Preferred Stock of the Transferor issued in
the name of the Issuer, the property conveyed to the Trust under any
Participation Interest Supplement and the right to receive Recoveries attributed
to Obligor charges for merchandise and services in the Accounts shall constitute
the assets of the Trust (the "Trust Assets").  The foregoing does not constitute
                              ------------
and is not intended to result in the creation or assumption by the Trust, the
Owner Trustee, the Indenture Trustee or any Noteholder of any obligation of the
Bank or other Account Owner or the Transferor, any Additional Transferor, the
Servicer or any other Person in connection with the Accounts or the Receivables
or under any agreement or instrument relating thereto, including any obligation
to Obligors, merchant banks, merchants clearance systems, VISA, MasterCard or
insurers.  The Obligors shall not be notified in connection with the creation of
the Trust of the transfer, assignment, set-over and conveyance of the
Receivables to the Trust.  The foregoing transfer, assignment, set-over and
conveyance to the Trust shall be made to the Trust, and each reference in this
Agreement to such transfer, assignment, set-over and conveyance shall be
construed accordingly.

          (b)     Each Transferor agrees to record and file, at its own expense,
financing statements (and continuation statements when applicable) with respect
to the Receivables conveyed by such Transferor now existing and hereafter
created meeting the requirements of applicable state law in such manner and in
such jurisdictions as are necessary to perfect, and maintain the perfection of,
the transfer and assignment of its interest in such Receivables to the Trust,
and to deliver a file stamped copy of each such financing statement or other
evidence of such filing to the Owner Trustee as soon as practicable after the
first Closing Date, in the case of Receivables arising in the Initial Accounts,
and (if any additional filing is so necessary) as soon as practicable after the
applicable Addition Date, in the case of Receivables arising in Additional
Accounts.  The Owner Trustee shall be under no obligation whatsoever to file
such financing or continuation statements or to make any other filing under the
UCC in connection with such transfer and assignment.

          (c)     Each Transferor further agrees, at its own expense, (i) on or
prior to (A) the first Closing Date, in the case of the Initial Accounts, (B)
the applicable Addition Date, in the case of Additional Accounts specified in
the Receivables Purchase Agreement with such Transferor, and (C) the applicable
Removal Date, in the case of Removed Accounts specified in the Receivables
Purchase Agreement with such Transferor, to indicate in the appropriate computer
files that Receivables created (or reassigned, in the case of Removed Accounts)
in connection with the Accounts have been conveyed to the Trust pursuant to this
Agreement (or conveyed to each such Transferor or its designee in accordance
with Section 2.10, in the case of Removed Accounts) by including (or deleting in
the case of Removed Accounts) in such computer files the code that identifies
each such Account and (ii) on or prior to (A) the

                                      14
<PAGE>

Closing Date, in the case of the Initial Accounts, (B) the date that is five
Business Days after the applicable Addition Date, in the case of designation of
Aggregate Addition Accounts, (C) the Distribution Date on which the Opinion of
Counsel is required to be delivered with respect to the Due Period which
includes the applicable Addition Date, in the case of New Accounts, and (D) the
date that is five Business Days after the applicable Removal Date, in the case
of Removed Accounts (the "Required Delivery Date"), to deliver to the Owner
Trustee a computer file or microfiche list containing a true and complete list
of all such Accounts specifying for each such Account, as of the Initial Cut-Off
Date, in the case of the Initial Accounts, the applicable Additional Cut-Off
Date in the case of Additional Accounts, and the applicable Removal Date in the
case of Removed Accounts, (1) its account number, (2) the aggregate amount
outstanding in such Account, and (3) the aggregate amount of Principal
Receivables outstanding in such Account. Each such file or list, as
supplemented, from time to time, to reflect Additional Accounts and Removed
Accounts, shall be marked as Schedule 1 to this Agreement and is hereby
                             ----------
incorporated into and made a part of this Agreement. Each Transferor further
agrees not to alter the code referenced in this paragraph with respect to any
Account during the term of this Agreement unless and until such Account becomes
a Removed Account.

          (d)     If the arrangements with respect to the Receivables hereunder
shall constitute a loan and not a purchase and sale of such Receivables, it is
the intention of the parties hereto that this Agreement shall constitute a
security agreement under applicable law, and that each Transferor shall be
deemed to have granted to the Trust a first priority perfected security interest
in all of such Transferor's right, title and interest, whether now owned or
hereafter acquired, in, to and under the Receivables and the other Trust Assets
conveyed by such Transferor to secure its obligations hereunder.

          Section 2.02.  Acceptance by Owner Trustee.
                         ---------------------------

          (a)     The Owner Trustee hereby acknowledges its acceptance on behalf
of the Trust of all right, title and interest to the property, now existing and
hereafter created, conveyed to the Trust pursuant to Section 2.01. The Owner
Trustee further acknowledges that, prior to or simultaneously with the execution
and delivery of this Agreement, the Transferor delivered to the Owner Trustee
the computer file or microfiche list relating to the Initial Accounts described
in the penultimate paragraph of Section 2.01. The Owner Trustee shall maintain a
copy of Schedule 1, as delivered from time to time, at the Corporate Trust
        ----------
Office.

          (b)     The Owner Trustee hereby agrees not to disclose to any Person
any of the account numbers or other information contained in the computer files
or microfiche lists marked as Schedule 1 and delivered to the Owner Trustee,
                              ----------
from time to time, except (i) to a Successor Servicer or as required by a
Requirement of Law applicable to the Owner Trustee, (ii) in connection with the
performance of the Owner Trustee's duties hereunder, (iii) to the Indenture
Trustee in connection with its duties in enforcing the rights of Noteholders or
(iv) to bona fide creditors or potential creditors of any Account Owner, the
Bank, or any Transferor for the limited purpose of enabling any such creditor to
identify Receivables or Accounts subject to this Agreement, the Receivables
Purchase Agreements. The Owner Trustee agrees to take such measures as shall be
reasonably requested by any Transferor to protect and maintain the security and
confidentiality of such information and, in connection therewith, shall allow
each Transferor or its duly authorized representatives to inspect the Owner
Trustee's security and confidentiality arrangements as they specifically relate
to the administration of the Trust from time to time during normal business
hours upon prior written notice. The Owner Trustee shall provide the applicable
Transferor with notice five Business Days prior to disclosure of any information
of the type described in this subsection 2.02(b).

                                      15
<PAGE>

          (c)     The Owner Trustee shall have no power to create, assume or
incur indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement and the Indenture.

          Section 2.03.  Representations and Warranties of Each Transferor
                         -------------------------------------------------
Relating to Such Transferor.  Each Transferor hereby severally represents and
---------------------------
warrants to the Trust (and agrees that the Owner Trustee and the Indenture
Trustee may conclusively rely on each such representation and warranty in
accepting the Receivables in trust and in authenticating the Notes,
respectively) as of each Closing Date (but only if it was a Transferor on such
date) that:

          (a)     Organization and Good Standing. Such Transferor is a
                  ------------------------------
corporation validly existing under the laws of the jurisdiction of its
organization or incorporation and has, in all material respects, full power and
authority to own its properties and conduct its business as presently owned or
conducted, and to execute, deliver and perform its obligations under this
Agreement, any Receivables Purchase Agreement to which it is a party and each
applicable Participation Interest Supplement.

          (b)     Due Qualification.  Such Transferor is duly qualified to do
                  -----------------
business and is in good standing as a foreign corporation and has obtained all
necessary licenses and approvals, in each jurisdiction in which failure to so
qualify or to obtain such licenses and approvals would (i) render any Credit
Agreement relating to an Account specified in the Receivables Purchase Agreement
with such Transferor or any Receivable conveyed to the Trust by such Transferor
unenforceable by such Transferor or the Trust or (ii) have a material adverse
effect on the Noteholders.

          (c)     Due Authorization. The execution and delivery of this
                  -----------------
Agreement, the Receivables Purchase Agreement and each Participation Interest
Supplement by such Transferor and the order to the Owner Trustee to have the
Notes authenticated and delivered and the consummation by such Transferor of the
transactions provided for in this Agreement, the Receivables Purchase Agreement
and each Participation Interest Supplement have been duly authorized by such
Transferor by all necessary corporate action on the part of such Transferor.

          (d)     No Conflict.  The execution and delivery by such Transferor of
                  -----------
this Agreement, the Receivables Purchase Agreement and each Participation
Interest Supplement, and the performance of the transactions contemplated by
this Agreement, the Receivables Purchase Agreement and each Participation
Interest Supplement and the fulfillment of the terms hereof and thereof
applicable to such Transferor, will not conflict with or violate any
Requirements of Law applicable to such Transferor or conflict with, result in
any breach of any of the material terms and provisions of, or constitute (with
or without notice or lapse of time or both) a material default under, any
indenture, contract, agreement, mortgage, deed of trust or other instrument to
which such Transferor is a party or by which it or its properties are bound.

          (e)     No Proceedings.  There are no proceedings or investigations,
                  --------------
pending or, to the best knowledge of such Transferor, threatened against such
Transferor before any Governmental Authority (i) asserting the invalidity of
this Agreement, the Receivables Purchase Agreement or any Participation Interest
Supplement, (ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement, the Receivables Purchase Agreement or any
Participation Interest Supplement, (iii) seeking any determination or ruling
that, in the reasonable judgment of such Transferor, would materially and
adversely affect the performance by such Transferor of its obligations under
this Agreement, the Receivables Purchase Agreement or any Participation Interest
Supplement, (iv) seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of this Agreement, the
Receivables Purchase Agreement or any Participation Interest Supplement or (v)
seeking

                                      16
<PAGE>

to affect adversely the income or franchise tax attributes of the Trust
under the United States Federal or any State income or franchise tax systems.

          (f)     All Consents. All authorizations, consents, orders or
                  ------------
approvals of or registrations or declarations with any Governmental Authority
required to be obtained, effected or given by such Transferor in connection with
the execution and delivery by such Transferor of this Agreement, the Receivables
Purchase Agreement and each Participation Interest Supplement and the
performance of the transactions contemplated by this Agreement, the Receivables
Purchase Agreement and each Participation Interest Supplement by such Transferor
have been duly obtained, effected or given and are in full force and effect.

          Section 2.04.  Representations and Warranties of each Transferor
                         -------------------------------------------------
Relating to the Agreement and Any Participation Interest Supplement and the
---------------------------------------------------------------------------
Receivables.
-----------

          (a)     Representations and Warranties. Each Transferor hereby
                  ------------------------------
severally represents and warrants to the Trust as of the Initial Issuance Date,
each Closing Date and, with respect to Additional Accounts, as of the related
Addition Date (but only if, in either case, it was a Transferor on such date and
only with respect to Accounts it has transferred) that:

               (i)   this Agreement, the Receivables Purchase Agreement, each
     Participation Interest Supplement and, in the case of Additional Accounts,
     the related Assignment, each constitutes a legal, valid and binding
     obligation of such Transferor enforceable against such Transferor in
     accordance with its terms, except as such enforceability may be limited by
     applicable bankruptcy, insolvency, reorganization, moratorium or other
     similar laws affecting creditors' rights generally from time to time in
     effect or general principles of equity;

               (ii)  as of the Initial Cut-Off Date and as of the related
     Additional Cut-Off Date with respect to Additional Accounts, the portion of

     Schedule 1 to this Agreement under such Transferor's name, as supplemented
     ----------
     to such date, is, or will be on the Required Delivery Date in the case of
     Additional Accounts, an accurate and complete listing in all material
     respects of all the Accounts the Receivables in which were transferred by
     such Transferor as of the Initial Cut-Off Date or such Additional Cut-Off
     Date, as the case may be, and the information contained therein with
     respect to the identity of such Accounts and the Receivables existing
     thereunder is, or will be on the Required Delivery Date in the case of
     Additional Accounts, true and correct in all material respects as of the
     Initial Cut-Off Date or such Additional Cut-Off Date, as the case may be;

               (iii) each Receivable conveyed to the Trust by such Transferor
     has been conveyed to the Trust free and clear of any Lien and each
     underlying receivable is free and clear of all Liens;

               (iv)  all authorizations, consents, orders or approvals of or
     registrations or declarations with any Governmental Authority required to
     be obtained, effected or given by such Transferor in connection with the
     conveyance by such Transferor of Receivables to the Trust have been duly
     obtained, effected or given and are in full force and effect;

               (v)   either this Agreement or, in the case of Additional
     Accounts, the related Assignment constitutes a valid sale, transfer and
     assignment to the Trust of all right, title and interest of such Transferor
     in the Receivables conveyed to the Trust by such Transferor and the
     proceeds thereof and Recoveries and Interchange identified as relating to
     the Receivables conveyed to the Trust by such Transferor which have become
     Defaulted Receivables or, if this


                                      17
<PAGE>

     Agreement or, in the case of Additional Accounts, the related Assignment
     does not constitute a sale of such property, it constitutes a grant of a
     first priority perfected "security interest" (as defined in the UCC) in
     such property to the Trust, which, in the case of existing Receivables and
     the proceeds thereof and said Recoveries and Interchange, is enforceable
     upon execution and delivery of this Agreement, or, with respect to then
     existing Receivables in Additional Accounts, as of the applicable Addition
     Date, and which will be enforceable with respect to such Receivables
     hereafter and thereafter created and the proceeds thereof upon such
     creation. Upon the filing of the financing statements and, in the case of
     Receivables hereafter created and the proceeds thereof, upon the creation
     thereof, the Trust shall have a first priority perfected security or
     ownership interest in such property and proceeds;

               (vi)    on the Initial Cut-Off Date, each Initial Account
     specified in Schedule 1 with respect to such Transferor is an Eligible
                  ----------
     Account and, on the applicable Additional Cut-Off Date, each related
     Additional Account specified in Schedule 1 with respect to such Transferor
                                     ----------
     is an Eligible Account;

               (vii)   on the Initial Cut-Off Date, each Receivable then
     existing and conveyed to the Trust by such Transferor is an Eligible
     Receivable and, on the applicable Additional Cut-Off Date, each Receivable
     contained in the related Additional Accounts and conveyed to the Trust by
     such Transferor is an Eligible Receivable;

               (viii)  as of the date of the creation of any new Receivable in
     an Account specified in the Receivables Purchase Agreement, such Receivable
     is an Eligible Receivable; and

               (ix)    no selection procedures believed by such Transferor to be
     materially adverse to the interests of the Noteholders have been used in
     selecting such Accounts.

          (b)     Notice of Breach. The representations and warranties set forth
                  ----------------
in Section 2.03, this Section 2.04 and subsection 2.09(f) shall survive the
transfers and assignments of the Receivables to the Trust, the pledge of the
Receivables to the Indenture Trustee pursuant to the Indenture, and the issuance
of the Notes. Upon discovery by any Transferor, the Servicer or the Owner
Trustee of a breach of any of the representations and warranties set forth in
Section 2.03, this Section 2.04 or subsection 2.09(f), the party discovering
such breach shall give notice to the other parties and to the Indenture Trustee
within three Business Days following such discovery, provided that the failure
to give notice within three Business Days does not preclude subsequent notice.

          Section 2.05.  Reassignment of Ineligible Receivables.
                         --------------------------------------

          (a)     Reassignment of Receivables. In the event (i) any
                  ---------------------------
representation or warranty contained in subsection 2.04(a)(ii), (iii), (iv),
(vi), (vii) or (viii) is not true and correct in any material respect as of the
date specified therein with respect to any Receivable or the related Account and
such breach has a material adverse effect on any Receivable included in the
Noteholders' Collateral (which determination shall be made without regard to
whether funds are then available pursuant to any Series Enhancement) unless
cured within 60 days (or such longer period, not in excess of 120 days, as may
be agreed to by the Indenture Trustee and the Servicer) after the earlier to
occur of the discovery thereof by each Transferor which conveyed such
Receivables to the Trust or receipt by such Transferor of written notice thereof
given by the Owner Trustee, Indenture Trustee or the Servicer, or (ii) it is so
provided in subsection 2.07(a) with respect to any Receivables conveyed to the
Trust by such Transferor, then such Transferor shall accept reassignment of all
Receivables included in the Noteholders' Collateral in the related Account
("Ineligible Receivables") on the terms and conditions set forth in
  ----------------------
paragraph (b) below.

                                      18
<PAGE>

          (b)    Price of Reassignment. The Servicer shall deduct the portion of
                 ---------------------
such Ineligible Receivables reassigned to each Transferor which are Principal
Receivables from the aggregate amount of the Principal Receivables used to
calculate the Transferor Amount. In the event that, following the exclusion of
such Principal Receivables from the calculation of the Transferor Amount, the
Transferor Amount would be less than the Required Transferor Amount, not later
than 1:00 P.M., New York City time, on the first Distribution Date following the
Due Period in which such reassignment obligation arises, the applicable
Transferor shall make a deposit into the Special Funding Account in immediately
available funds in an amount equal to the amount by which the Transferor Amount
would be below the Required Transferor Amount (up to the amount of such
Principal Receivables).

          Upon reassignment of any Ineligible Receivable, the Trust shall
automatically and without further action be deemed to transfer, assign, set over
and otherwise convey to the applicable Transferor or its designee, without
recourse, representation or warranty, all the right, title and interest of the
Trust in and to such Ineligible Receivable, all monies due or to become due and
all proceeds thereof and such reassigned Ineligible Receivable shall be treated
by the Trust as collected in full as of the date on which it was transferred.
The obligation of each Transferor to accept reassignment of any Ineligible
Receivables conveyed to the Trust by such Transferor, and to make the deposits,
if any, required to be made to the Special Funding Account as provided in this
Section, shall constitute the sole remedy respecting the event giving rise to
such obligation available to Noteholders (or the Owner Trustee on behalf of the
Noteholders) or any Series Enhancer.  Notwithstanding any other provision of
this subsection 2.05(b), a reassignment of an Ineligible Receivable in excess of
the amount that would cause the Transferor Amount to be less than the Required
Transferor Amount shall not occur if the applicable Transferor fails to make any
deposit required by this subsection 2.05(b) with respect to such Ineligible
Receivable.  The Owner Trustee shall execute such documents and instruments of
transfer or assignment and take such other actions as shall reasonably be
requested and provided by the applicable Transferor to effect the conveyance of
such Ineligible Receivables pursuant to this subsection 2.05(b), but only upon
receipt of an Officer's Certificate from such Transferor that states that all
conditions set forth in this Section 2.05 have been satisfied.

          Section 2.06.  Reassignment of Noteholders' Collateral.  In the event
                         ---------------------------------------
any representation or warranty of a Transferor set forth in subsection 2.03(a)
or (c) or subsection 2.04(a)(i) or (v) is not true and correct in any material
respect and such breach has a material adverse effect on the Noteholders'
Collateral in Receivables conveyed to the Trust by such Transferor or the
availability of the proceeds thereof to the Trust (which determination shall be
made without regard to whether funds are then available pursuant to any Series
Enhancement), then either the Owner Trustee, the Indenture Trustee or the
Holders of Notes evidencing not less than 50% of the aggregate unpaid principal
amount of all outstanding Notes, by notice then given to such Transferor and the
Servicer (and to the Owner Trustee and Indenture Trustee if given by the
Noteholders), may direct such Transferor to accept a reassignment of the
Noteholders' Collateral conveyed to the Trust by such Transferor if such breach
and any material adverse effect caused by such breach is not cured within 60
days of such notice (or within such longer period, not in excess of 120 days, as
may be specified in such notice), and upon those conditions such Transferor
shall be obligated to accept such reassignment on the terms set forth below;
provided, however, that such Receivables will not be reassigned to such
Transferor if, on any day prior to the end of such 60-day or longer period (i)
the relevant representation and warranty shall be true and correct in all
material respects as if made on such day and (ii) such Transferor shall have
delivered to the Owner Trustee a certificate of an authorized officer describing
the nature of such breach and the manner in which the relevant representation
and warranty has become true and correct.

          The applicable Transferor shall deposit in the Collection Account in
immediately available funds not later than 1:00 P.M., New York City time, on the
first Distribution Date following the Due Period in which such reassignment
obligation arises, in payment for such reassignment, an amount


                                      19
<PAGE>

equal to the sum of the amounts specified therefor with respect to each
outstanding Series in the related Indenture Supplement. Notwithstanding anything
to the contrary in this Agreement, such amounts shall be distributed to the
Noteholders on such Distribution Date in accordance with the terms of each
Indenture Supplement. If the Owner Trustee, the Indenture Trustee or the
Noteholders give notice directing the applicable Transferor to accept a
reassignment of the Noteholders' Collateral as provided above, the obligation of
such Transferor to accept such reassignment pursuant to this Section 2.06 and to
make the deposit required to be made to the Collection Account as provided in
this paragraph shall constitute the sole remedy respecting an event of the type
specified in the first sentence of this Section 2.06 available to the
Noteholders (or the Owner Trustee or Indenture Trustee on behalf of the
Noteholders) or any Series Enhancer.

          Section 2.07.  Covenants of each Transferor.  Each Transferor hereby
                         ----------------------------
severally covenants that:

          (a)     Receivables Not To Be Evidenced by Promissory Notes. Except in
                  ---------------------------------------------------
connection with its enforcement or collection of an Account, such Transferor
will take no action to cause any Receivable conveyed by it to the Trust to be
evidenced by any instrument (as defined in the UCC) and if any such Receivable
(or any underlying receivable) is so evidenced it shall be deemed to be an
Ineligible Receivable in accordance with Section 2.05(a) and shall be reassigned
to such Transferor in accordance with Section 2.05(b).

          (b)     Security Interests. Except for the conveyances hereunder, such
                  ------------------
Transferor will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien on, any Receivable (or
any underlying receivable) conveyed by it to the Trust, whether now existing or
hereafter created, or any interest therein, and such Transferor shall defend the
right, title and interest of the Trust and the Indenture Trustee in, to and
under the Receivables, whether now existing or hereafter created, against all
claims of third parties claiming through or under such Transferor.

          (c)     Transferor's Interest. Except for (i) the conveyances
                  ---------------------
hereunder, in connection with any transaction permitted by Section 4.02(a)(i)
and as provided in subsection 2.09(g) of this Agreement or Section 2.12 of the
Indenture or (ii) conveyances with respect to which the Rating Agency Condition
shall have been satisfied and a Tax Opinion shall have been delivered, each
Transferor agrees not to transfer, sell, assign, exchange or otherwise convey or
pledge, hypothecate or otherwise grant a security interest in the Transferor's
Interest, the Transferor Certificate or any Supplemental Certificate and any
such attempted transfer, assignment, exchange, conveyance, pledge,
hypothecation, grant or sale shall be void; provided, however, that nothing in
this Section 2.07(c) shall prevent the owner of an interest in the Transferor's
Interest from granting to an Affiliate a participation interest or other
beneficial interest in the rights to receive cash flows related to the
Transferor's Interest, if (i) such interest does not grant such Affiliate any
rights hereunder or delegate to such Affiliate any obligations or duties
hereunder, (ii) the transferor of such interest obtains the prior written
consent of the Transferor and (iii) after giving effect to such transfer, the
interest in the Transferor's Interest owned directly by the Transferor
represents an undivided ownership interest in two percent (2.0%) or more of the
Trust Assets.

          (d)     Delivery of Collections or Recoveries.  In the event that such
                  -------------------------------------
Transferor receives Collections or Recoveries, such Transferor agrees to pay the
Servicer all such Collections and Recoveries as soon as practicable after
receipt thereof.

          (e)     Notice of Liens. Such Transferor shall notify the Owner
                  ---------------
Trustee, the Indenture Trustee and each Series Enhancer promptly after becoming
aware of any Lien on any Receivable (or on the underlying receivable) conveyed
by it to the Trust other than the conveyances hereunder and under the
Receivables Purchase Agreement and the Indenture.

                                      20
<PAGE>

          (f)    Amendment of the Certificate of Incorporation.  Such Transferor
                 ---------------------------------------------
will not amend in any material respect its Certificate of Incorporation without
providing the Rating Agency with notice no later than the fifth Business Day
prior to such amendment (unless the right to such notice is waived by the Rating
Agency) and satisfying the Rating Agency Condition.

          (g)     Other Indebtedness.  Such Transferor shall not incur any
                  ------------------
additional debt, unless (i) such debt is incurred pursuant to the Revolving
Credit Agreement or (ii) the Rating Agency is provided with notice no later than
the fifth Business Day prior to the incurrence of such additional debt (unless
the right to such notice is waived by the Rating Agency) and the Rating Agency
Condition is satisfied with respect to the incurrence of such debt.

          (h)     Interchange.  Subject to Section 8.04 of the Indenture, with
                  -----------              ------------
respect to any Distribution Date, on or prior to the immediately preceding
Transfer Date, the Transferor shall notify the Servicer of the amount of
Interchange required to be included as Collections of Finance Charge and
Administrative Receivables with respect to such Due Period, which amount for any
Series shall be specified in the related Indenture Supplement.  Not later than
1:00 p.m., New York City time, on the related Distribution Date, the Transferor
shall cause to be deposited into the Collection Account, in immediately
available funds, the amount of Interchange to be so included as Collections of
Finance Charge and Administrative Receivables with respect to such Due Period.

          Section 2.08.  Covenants of each Transferor with Respect to
                         --------------------------------------------
Receivables Purchase Agreement.  Each Transferor, in its capacity as purchaser
------------------------------
of Receivables from the Bank or another Account Owner pursuant to a Receivables
Purchase Agreement, hereby covenants that such Transferor will at all times
enforce the covenants and agreements of the Bank or such other Account Owner in
such Receivables Purchase Agreement, including covenants substantially to the
effect set forth below:

          (a)     Periodic Rate Finance Charges.  (i) Except (A) as otherwise
                  -----------------------------
required by any Requirements of Law or (B) as is deemed by the Bank or any other
Account Owner, as the case may be, to be necessary in order for it to maintain
its credit business or a program operated by such credit business on a
competitive basis based on a good faith assessment by it of the nature of the
competition with respect to the credit business or such program, it shall not at
any time take any action which would have the effect of reducing the Series
Portfolio Yield to a level that could be reasonably expected to result in an
Adverse Effect with respect to any Series based on the insufficiency of the
Series Portfolio Yield or any similar test.

          (b)     Credit Agreements and Guidelines. Subject to compliance with
                  --------------------------------
all Requirements of Law and paragraph (a) above, the Bank (or other Account
Owner if the Bank is not the Account Owner) and/or the Servicer (solely with
respect to the Credit Guidelines) as the case may be, may change the terms and
provisions of the applicable Credit Agreements or the applicable Credit
Guidelines in any respect (including the calculation of the amount or the timing
of charge-offs and the Periodic Rate Finance Charges to be assessed thereon).
Notwithstanding the above, unless required by Requirements of Law or as
permitted by paragraph (a) above, the Bank (or other Account Owner if the Bank
is not the Account Owner) and/or the Servicer, as the case may be, will not take
any action unless (i) at the time of such action, the Bank (or other Account
Owner if the Bank is not the Account Owner) and/or the Servicer, as the case may
be, reasonably believes that such action will not cause an Amortization Event,
Reinvestment Event or Event of Default to occur, and (ii) is made applicable to
the comparable segment of the revolving credit accounts owned by the Bank (or
other Account Owner if the Bank is not the Account Owner) and/or the Servicer
which have characteristics the same as, or substantially similar to, the
Accounts that are the subject of such change, except as otherwise restricted by
an endorsement, sponsorship, or other agreement between the Bank (or other
Account Owner if the Bank is not the

                                      21
<PAGE>

Account Owner) and/or the Servicer, as the case may be, and an unrelated third
party or by the terms of the Credit Agreements.

          Section 2.09.  Addition of Accounts.
                         --------------------

          (a)     (i)  Required Additional Accounts.  If, as of the close of
                       ----------------------------
     business on the last Business Day of any calendar month, the aggregate
     amount of the Principal Receivables is less than the Required Minimum
     Principal Balance (as adjusted for any Series having a Paired Series as
     described in the Indenture Supplement for such Series) on such date, the
     Transferor shall on or prior to the close of business on the last Business
     Day of the next succeeding Due Period (the "Required Designation Date"),
                                                 -------------------------
     unless the aggregate amount of the Principal Receivables exceeds the
     Required Minimum Principal Balance as of the close of business on any day
     after the last Business Day of such calendar month and prior to the
     Required Designation Date, effect the addition of Eligible Accounts to be
     included as Accounts as of the Required Designation Date or any earlier
     date in a sufficient amount (or such lesser amount as shall represent all
     Eligible Accounts constituting revolving credit accounts then available to
     the Transferor under the Receivables Purchase Agreement) such that, after
     giving effect to such addition and the addition by each other Transferor,
     the aggregate amount of the Principal Receivables is at least equal to the
     Required Minimum Principal Balance on such date.

               (ii)    Optional Participation Interests.  In lieu of, or in
                       --------------------------------
     addition to, causing the designation of Additional Accounts pursuant to
     clause (i) above, the Transferor may (but shall not be required), subject
     to the conditions specified in paragraph (c) below, convey to the Trust
     participations (including 100% participations) representing undivided
     interests in a pool of assets primarily consisting of revolving credit
     receivables and any interests in any of the foregoing, including securities
     representing or backed by such receivables and collections, together with
     all earnings, revenue, dividends, distributions, income, issues and profits
     thereon ("Participation Interests").  The addition of Participation
               -----------------------
     Interests in the Trust pursuant to this paragraph (a) or paragraph (b)
     below shall be effected by a Participation Interest Supplement, dated the
     applicable Addition Date and entered into pursuant to subsection 9.01(a).

               (iii)   Any Additional Accounts or Participation Interests
     designated to be included as Trust Assets pursuant to clauses (i) or (ii)
     above may only be so included if the applicable conditions specified in
     paragraph (c) below have been satisfied.

          (b)  Permitted Aggregate Additions.  Each Transferor may from time to
               -----------------------------
time, in its sole discretion, subject to the conditions specified in paragraph
(c) below, voluntarily cause the designation of additional Eligible Accounts to
be included as Accounts or Participation Interests to be included as Trust
Assets, in either case as of the applicable Additional Cut-Off Date.

          (c)  Conditions to Aggregate Additions.  On the Addition Date with
               ---------------------------------
respect to any Aggregate Additions, the Trust shall acquire the Receivables in
such Aggregate Addition Accounts (and such Aggregate Addition Accounts shall be
deemed to be Accounts for purposes of this Agreement) or shall acquire such
Participation Interests as of the close of business on the applicable Additional
Cut-Off Date, subject to the satisfaction of the following conditions:

               (i)  on or before the fifth Business Day immediately preceding
     the Addition Date, the applicable Transferor shall have given the Owner
     Trustee, the Indenture Trustee, the Servicer and each Rating Agency notice
     (unless such notice requirement is otherwise waived) that the Aggregate
     Addition Accounts or Participation Interests will be included and
     specifying the applicable Addition Date and Additional Cut-Off Date;

                                      22
<PAGE>

               (ii)   as of the applicable Addition Date, such Aggregate
     Addition Accounts shall be Eligible Accounts;

               (iii)  on or before the Required Delivery Date, the applicable
     Transferor shall have delivered to the Owner Trustee and Indenture Trustee
     copies of UCC-1 financing statements covering such Aggregate Addition
     Accounts, if necessary to perfect the Trust's interest in the Receivables
     arising therein and a schedule of such Aggregate Addition Accounts;

               (iv)   to the extent required by Section 8.04 of the Indenture,
     such Transferor shall have deposited in the Collection Account all
     Collections with respect to such Aggregate Addition Accounts since the
     Additional Cut-Off Date;

               (v)    as of each of the Additional Cut-Off Date and the Addition
     Date, no Insolvency Event with respect to the Bank or any other Account
     Owner, as applicable, or such Transferor shall have occurred nor shall the
     transfer to the Trust of the Receivables arising in the Aggregate Addition
     Accounts or of the Participation Interests have been made in contemplation
     of the occurrence thereof;

               (vi)   solely with respect to Aggregate Additions designated
     pursuant to subsection 2.09(b), the Rating Agency Condition shall have been
     satisfied;

               (vii)  such Transferor shall have delivered to the Owner Trustee
     and the Indenture Trustee an Officer's Certificate, dated the Addition
     Date, confirming, to the extent applicable, the items set forth in clauses
     (ii) through (vi) above;

               (viii) the addition to the Trust of the Receivables arising in
     the Aggregate Addition Accounts or of the Participation Interests will not
     result in an Adverse Effect and, in the case of Aggregate Additions, such
     Transferor shall have delivered to the Owner Trustee and the Indenture
     Trustee an Officer's Certificate, dated the Addition Date, stating that
     such Transferor reasonably believes that the addition to the Trust of the
     Receivables arising in the Aggregate Addition Accounts or of the
     Participation Interests will not have an Adverse Effect; and

               (ix)   such Transferor shall have delivered to the Owner Trustee,
     the Indenture Trustee and each Rating Agency an Opinion of Counsel, dated
     the Addition Date, in accordance with subsection 9.02(d)(ii) or (iv), as
     applicable.

          (d)  New Accounts.  Each Transferor may from time to time, at its sole
               ------------
discretion, subject to the conditions specified in paragraph (e) below,
voluntarily designate newly originated Eligible Accounts to be included as New
Accounts.  For purposes of this paragraph, Eligible Accounts shall be deemed to
include only revolving credit accounts of the same nature as those included as
Initial Accounts or which have previously been included in any Aggregate
Addition if the Assignment related to such Aggregate Addition expressly provides
that such type of revolving credit account is permitted to be designated as a
New Account.

          (e)  Conditions to Addition of New Accounts. On the Addition Date with
               --------------------------------------
respect to any New Accounts, the Trust shall acquire the Receivables in such New
Accounts (and such New Accounts shall be deemed to be Accounts for purposes of
this Agreement) as of the close of business on the applicable Additional Cut-Off
Date, subject to the satisfaction of the following conditions:

               (i) the New Accounts shall all be Eligible Accounts;
                                      23
<PAGE>

               (ii)   on or before the Required Delivery Date, the applicable
     Transferor shall have delivered to the Owner Trustee and Indenture Trustee
     copies of UCC-1 financing statements covering such New Accounts, if
     necessary to perfect the Trust's interest in the Receivables arising
     therein and a schedule of such New Accounts;

               (iii)  to the extent required by Section 8.04 of the Indenture,
     the applicable Transferor shall have deposited in the Collection Account
     all Collections with respect to such New Accounts since the Additional Cut-
     Off Date;

               (iv)   as of each of the Additional Cut-Off Date and the Addition
     Date, no Insolvency Event with respect to the Bank or any other Account
     Owner, as applicable, or such Transferor shall have occurred nor shall the
     transfer to the Trust of the Receivables arising in the New Accounts have
     been made in contemplation of the occurrence thereof;

               (v)    such Transferor shall have delivered to the Owner Trustee
     and the Indenture Trustee an Officer's Certificate, dated the Addition
     Date, confirming, to the extent applicable, the items set forth in clauses
     (ii) through (vi) above;

               (vi)   the addition of the Receivables arising in the New
     Accounts to the Trust will not result in an Adverse Effect and such
     Transferor shall have delivered to the Owner Trustee and the Indenture
     Trustee an Officer's Certificate, dated the Addition Date, stating that
     such Transferor reasonably believes that the addition to the Trust of the
     Receivables arising in the New Accounts will not have an Adverse Effect;
     and

               (vii)  with respect to each Distribution Date following a Due
     Period ending in March, June, September, and December, such Transferor
     shall deliver to the Owner Trustee, the Indenture Trustee and each Rating
     Agency, an Opinion of Counsel substantially in the form of Exhibit D-2 with
                                                                -----------
     respect to the New Accounts, if any, included as Accounts during the three
     consecutive Due Periods ending prior to such Distribution Date.  The
     opinion delivery requirement set forth in the immediately preceding
     sentence may be modified provided that the Rating Agency Condition is
     satisfied.

          (f)  Representations and Warranties.  Each Transferor conveying
               ------------------------------
Additional Accounts or Participation Interests hereby represents and warrants to
the Trust as of the related Addition Date as to the matters set forth in clauses
(v) and (viii) of subsection 2.09(c) above and that, in the case of Additional
Accounts, the list delivered pursuant to subsection 2.09(h) is, as of the
applicable Additional Cut-Off Date, true and complete in all material respects.

          (g)  Additional Transferors.  The Transferor may designate Affiliates
               ----------------------
of the Transferor to be included as Transferors ("Additional Transferors") under
                                                  ----------------------
this Agreement in an amendment hereto pursuant to subsection 9.01(a) and, in
connection with such designation, the Transferor shall (i) surrender the
Transferor Certificate to the Owner Trustee in exchange for a newly issued
Transferor Certificate modified to reflect such Additional Transferor's interest
in the Transferor's Interest or (ii) if the Transferor Certificate is
uncertificated, direct the Indenture Trustee to make the appropriate entries in
its books and records to reflect such Additional Transferor's interest in the
Transferor's Interest; provided, however, that prior to any such designation and
exchange the conditions set forth in clauses (iii) and (v) of subsection 3.06 of
the Trust Agreement shall have been satisfied with respect thereto.

          (h)  Delivery of Documents.  In the case of the designation of
               ---------------------
Additional Accounts, the Transferor designating such Accounts shall deliver to
the Indenture Trustee and the Owner Trustee (i) the computer file or microfiche
list required to be delivered pursuant to Section 2.01 with respect to such

                                      24
<PAGE>

Additional Accounts on the date such file or list is required to be delivered
pursuant to Section 2.01 (the "Document Delivery Date") and (ii) a duly
                               ----------------------
executed, written Assignment (including an acceptance by the Owner Trustee for
the benefit of the Noteholders), substantially in the form of Exhibit A (the
                                                              ---------
"Assignment"), on the Document Delivery Date.
-----------

          Section 2.10.  Removal of Accounts and Participation Interests.  (a)
                         -----------------------------------------------
On any day of any Due Period each Transferor shall have the right to require the
reassignment to it or its designee of all the Trust's right, title and interest
in, to and under the Receivables then existing and thereafter created, all
monies due or to become due and all amounts received thereafter with respect
thereto and all proceeds thereof in or with respect to the Accounts specified in
the Receivables Purchase Agreement (the "Removed Accounts") or Participation
                                         ----------------
Interests conveyed to the Trust by such Transferor (the "Removed Participation
                                                         ---------------------
Interests") (unless otherwise set forth in the applicable Participation Interest
---------
Supplement or Indenture Supplement) and designated for removal by the
Transferor, upon satisfaction of the conditions in clauses (i) through (v)
below; provided, however, that the conditions listed in clauses (iv) and (v)
below need not be satisfied if the Removed Accounts (x) are Small Balance
Accounts or (y) relate to a terminated Affinity Agreement and the related
merchant or co-branding participant or designee has elected to purchase the
Receivables in such Removed Accounts:

               (i)    on or before the fifth Business Day immediately preceding
     the Removal Date, such Transferor shall have given written notice to the
     Owner Trustee, the Indenture Trustee, the Servicer, the Rating Agency and
     each Series Enhancer (unless such notice requirement is otherwise waived)
     of such removal and specifying the date for removal of the Removed Accounts
     and removed Participation Interests (the "Removal Date");
                                               ------------

               (ii)   on or prior to the date that is five Business Days on or
     before the Removal Date, such Transferor shall amend Schedule 1 by
                                                          ----------
     delivering to the Owner Trustee a computer file or microfiche list
     containing a true and complete list of the Removed Accounts specifying for
     each such Account, as of the date notice of the Removal Date is given, its
     account number, the aggregate amount outstanding in such Account and the
     aggregate amount of Principal Receivables outstanding in such Account;

               (iii)  such Transferor shall have represented and warranted as of
     the Removal Date that the list of Removed Accounts delivered pursuant to
     paragraph (ii) above, as of the Removal Date, is true and complete in all
     material respects;

               (iv)   the Rating Agency Condition shall have been satisfied with
     respect to the removal of the Removed Accounts and removed Participation
     Interests; and

               (v)    such Transferor shall have delivered to the Owner Trustee
     and the Indenture Trustee an Officer's Certificate, dated the Removal Date,
     to the effect that such Transferor reasonably believes that (A) such
     removal will not have an Adverse Effect and (B) no selection procedures
     believed by such Transferor to be materially adverse to the interests of
     the Noteholders have been used in selecting the Removed Accounts.

          Upon satisfaction of the above conditions, the Owner Trustee shall
execute and deliver to such Transferor a written reassignment in substantially
the form of Exhibit B (the "Reassignment") and shall, without further action, be
            ---------       ------------
deemed to transfer, assign, set over and otherwise convey to such Transferor or
its designee, effective as of the Removal Date, without recourse, representation
or warranty, all the right, title and interest of the Trust in and to the
Receivables arising in the Removed Accounts and Removed Participation Interests,
all monies due and to become due and all amounts received with respect thereto
and all proceeds thereof and any Insurance Proceeds relating thereto.  The Owner
Trustee may

                                      25
<PAGE>

conclusively rely on the Officer's Certificate delivered pursuant to this
Section 2.10 and shall have no duty to make inquiries with regard to the matters
set forth therein and shall incur no liability in so relying.

          In addition to the foregoing, on the date when any Receivable in an
Account becomes a Defaulted Receivable, the Trust shall automatically and
without further action or consideration be deemed to transfer, set over and
otherwise convey to the Transferor with respect to such Account, without
recourse, representation or warranty, all right, title and interest of the Trust
in and to the Defaulted Receivables in such Account, all monies due or to become
due with respect thereto, all proceeds thereof and any Insurance Proceeds
relating thereto; provided, that Recoveries of such Account shall be applied as
provided herein.

          (b) Anything to the contrary herein notwithstanding, the Transferor
shall be entitled to purchase all Receivables in Accounts designated for
purchase or re-purchase by a merchant or co-branding participant pursuant to the
termination of an Affinity Agreement to which such merchant or co-branding
participant is a party.  Any repurchase of Receivables pursuant to this
subsection 2.10(b) shall be effected in the manner, and at a price determined in
accordance with Section 2.05(b) as if the Receivables being repurchased were
Ineligible Receivables.  Amounts deposited in the Collection Account in
connection therewith shall be deemed to be Collections of Principal Receivables
and shall be applied in accordance with Article VIII of the Indenture and the
terms of each Indenture Supplement.

          Section 2.11.  Account Allocations.  In the event that any Transferor
                         -------------------
is unable for any reason to transfer Receivables to the Trust in accordance with
the provisions of this Agreement, including by reason of the application of the
provisions of Section 6.01 or any order of any Governmental Authority (a
"Transfer Restriction Event"), then, (a) such Transferor and the Servicer agree
---------------------------
(except as prohibited by any such order) to allocate and pay to the Trust, after
the date of such inability, all Collections, including Collections of
Receivables transferred to the Trust prior to the occurrence of such event, and
all amounts which would have constituted Collections but for such Transferor's
inability to transfer Receivables (up to an aggregate amount equal to the amount
of Receivables transferred to the Trust by such Transferor in the Trust on such
date), (b) such Transferor and the Servicer agree that such amounts will be
applied as Collections in accordance with Article VIII of the Indenture and the
terms of each Indenture Supplement and (c) for so long as the allocation and
application of all Collections and all amounts that would have constituted
Collections are made in accordance with clauses (a) and (b) above, Principal
Receivables and all amounts which would have constituted Principal Receivables
but for such Transferor's inability to transfer Receivables to the Trust which
are charged off as uncollectible in accordance with this Agreement shall
continue to be allocated in accordance with Article VIII of the Indenture and
the terms of each Indenture Supplement.  For the purpose of the immediately
preceding sentence, such Transferor and the Servicer shall treat the first
received Collections with respect to the Accounts as allocable to the Trust
until the Trust shall have been allocated and paid Collections in an amount
equal to the aggregate amount of Principal Receivables in the Trust as of the
date of the occurrence of such event.  If such Transferor and the Servicer are
unable pursuant to any Requirements of Law to allocate Collections as described
above, such Transferor and the Servicer agree that, after the occurrence of such
event, payments on each Account with respect to the principal balance of such
Account shall be allocated first to the oldest principal balance of such Account
and shall have such payments applied as Collections in accordance with Article
VIII of the Indenture and the terms of each Indenture Supplement.  The parties
hereto agree that Finance Charge and Administrative Receivables, whenever
created, accrued in respect of Principal Receivables which have been conveyed to
the Trust shall continue to be a part of the Trust notwithstanding any cessation
of the transfer of additional Principal Receivables to the Trust and Collections
with respect thereto shall continue to be allocated and paid in accordance with
Article VIII of the Indenture and the terms of each Indenture Supplement.

          Section 2.12.  Discount Option.
                         ---------------

                                      26
<PAGE>

          (a) The Transferor shall have the option to designate at any time and
from time to time a percentage or percentages, which may be a fixed percentage
or a variable percentage based on a formula (the "Discount Percentage"), of all
or any specified portion of Principal Receivables existing on and after the
Discount Option Date to be treated as Finance Charge and Administrative
Receivables ("Discount Option Receivables").  The Transferor shall also have the
option of increasing, reducing or withdrawing the Discount Percentage, at any
time and from time to time, on and after such Discount Option Date; provided
that the Discount Percentage shall be reduced or withdrawn on the date which the
Transferor shall deliver to the Indenture Trustee an Officer's Certificate to
the effect that, in the reasonable belief of the Transferor, the continued
discounting of Principal Receivables would have an adverse regulatory
implication with respect to the Transferor.  The Transferor shall provide to the
Servicer, the Indenture Trustee and the Rating Agency 30 days' prior written
notice of the Discount Option Date and such designation shall become effective
on the Discount Option Date and such other date, respectively only if, (i) the
Transferor delivers an Officer's Certificate to the effect that such designation
or such increase in the reasonable belief of the Transferor, would not cause an
Adverse Effect and (ii) the Rating Agency Condition shall have been satisfied
with respect to such designation.

          (b) After the Discount Option Date, Discount Option Receivable
Collections shall be treated as Collections of Finance Charge and Administrative
Receivables.


                              [END OF ARTICLE II]

                                      27
<PAGE>

                                  ARTICLE III

                         ADMINISTRATION AND SERVICING
                                OF RECEIVABLES

          Section 3.01.  Acceptance of Appointment and Other Matters Relating to
                         -------------------------------------------------------
the Servicer.
------------

          (a)     Household Finance Corporation agrees to act as the Servicer
under this Agreement and the Noteholders by their acceptance of Notes consent to
Household Finance Corporation acting as Servicer.

          (b)     As agent for each Transferor and the Trust, the Servicer shall
service and administer the Receivables (including the underlying receivables),
shall collect and deposit into the Collection Account payments due under the
Receivables (including the underlying receivables) and shall charge-off as
uncollectible Receivables, all in accordance with its customary and usual
servicing procedures for servicing revolving credit receivables comparable to
the Receivables and in accordance with the Credit Guidelines. As agent for each
Transferor and the Trust, the Servicer shall have full power and authority,
acting alone or through any party properly designated by it hereunder, to do any
and all things in connection with such servicing and administration which it may
deem necessary or desirable; provided, however, that subject to the rights of
the Owner Trustee, the Indenture Trustee and the Noteholders hereunder, HRF
shall have the absolute right to direct the Servicer with respect to any power
conferred on the Servicer hereunder in accordance with any such direction.
Without limiting the generality of the foregoing and subject to Section 7.01,
the Servicer or its designee is hereby authorized and empowered, unless such
power is revoked by the Indenture Trustee on account of the occurrence of a
Servicer Default pursuant to Section 7.01, (i) to instruct the Owner Trustee or
the Indenture Trustee to make withdrawals and payments from the Collection
Account, the Special Funding Account and any Series Account, as set forth in
this Agreement, the Indenture or any Indenture Supplement, (ii) to take any
action required or permitted under any Series Enhancement, as set forth in this
Agreement, the Indenture or any Indenture Supplement, (iii) to execute and
deliver, on behalf of the Trust, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Receivables and, after the
delinquency of any Receivable and to the extent permitted under and in
compliance with applicable Requirements of Law, to commence collection
proceedings with respect to such Receivables and (iv) to make any filings,
reports, notices, applications and registrations with, and to seek any consents
or authorizations from, the Commission and any state securities authority on
behalf of the Trust as may be necessary or advisable to comply with any Federal
or state securities or reporting requirements or other laws or regulations. The
Owner Trustee and the Indenture Trustee shall furnish the Servicer with any
documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties hereunder.

          (c)     The Servicer shall not, and no Successor Servicer shall, be
obligated to use separate servicing procedures, offices, employees or accounts
for servicing the Receivables from the procedures, offices, employees and
accounts used by the Servicer or such Successor Servicer, as the case may be, in
connection with servicing other revolving credit receivables.

          (d)     The Servicer shall comply with and perform its servicing
obligations with respect to the Accounts and Receivables in accordance with the
Credit Agreements relating to the Accounts and the Credit Guidelines and all
applicable rules and regulations of MasterCard and VISA, except insofar as any
failure to so comply or perform would not materially and adversely affect the
Trust or the Noteholders.

                                      28
<PAGE>

          (e)     The Servicer shall pay out of its own funds, without
reimbursement, all expenses incurred in connection with the Trust and the
servicing activities hereunder including expenses related to enforcement of the
Receivables, fees and disbursements of the Owner Trustee and the Indenture
Trustee (including the reasonable fees and expenses of its outside counsel) and
independent accountants and all other fees and expenses, including the costs of
filing UCC continuation statements, the costs and expenses relating to obtaining
and maintaining the listing of any Notes on any stock exchange and any stamp,
documentary, excise, property (whether on real, personal or intangible property)
or any similar tax levied on the Trust or the Trust's assets that are not
expressly stated in this Agreement to be payable by the Trust or the Transferor
(other than federal, state, local and foreign income and franchise taxes, if
any, or any interest or penalties with respect thereto, assessed on the Trust).

          Section 3.02.  Servicing Compensation.  As full compensation for its
                         ----------------------
servicing activities hereunder and as reimbursement for any expense incurred by
it in connection therewith, the Servicer shall be entitled to receive a
servicing fee (the "Servicing Fee") prior to the termination of the Trust
                    -------------
pursuant to Section 8.01 of the Trust Agreement.  The share of the Servicing Fee
allocable to the Noteholders' Collateral of a particular Series with respect to
any Due Period (the "Monthly Servicing Fee") will each be determined in
                     ---------------------
accordance with the relevant Indenture Supplement.  The portion of the Servicing
Fee with respect to any Due Period not so allocated to the Noteholders'
Collateral of any particular Series shall be paid by the Holders of the
Transferor Certificates on the related Distribution Date and in no event shall
the Trust, the Owner Trustee, the Indenture Trustee, the Noteholders of any
Series or any Series Enhancer be liable for the share of the Servicing Fee with
respect to any Due Period to be paid by the Holders of the Transferor
Certificates.

          Section 3.03.  Representations, Warranties and Covenants of the
                         ------------------------------------------------
Servicer. Household Finance Corporation, as initial Servicer, hereby makes, and
--------
any Successor Servicer by its appointment hereunder shall make, with respect to
itself, on each Closing Date (and on the date of any such appointment), the
following representations, warranties and covenants on which the Owner Trustee
and the Indenture Trustee shall be deemed to have relied in accepting the
Receivables in trust and in entering into the Indenture:

                  (a) Organization and Good Standing.  The Servicer is a
                      ------------------------------
     corporation validly existing under the laws of the jurisdiction of its
     organization or incorporation and has, in all material respects, full power
     and authority to own its properties and conduct its credit servicing
     business as presently owned or conducted, and to execute, deliver and
     perform its obligations under this Agreement.

                  (b) Due Qualification.  The Servicer is duly qualified to do
                      -----------------
     business and is in good standing as a foreign corporation or other foreign
     entity (or is exempt from such requirements) and has obtained all necessary
     licenses and approvals in each jurisdiction in which the servicing of the
     Receivables (including the underlying receivables) as required by this
     Agreement requires such qualification except where the failure to so
     qualify or obtain licenses or approvals would not have a material adverse
     effect on its ability to perform its obligations as Servicer under this
     Agreement.

                  (c) Due Authorization. The execution, delivery, and
                      -----------------
     performance of this Agreement and the other agreements and instruments
     executed or to be executed by the Servicer as contemplated hereby, have
     been duly authorized by the Servicer by all necessary action on the part of
     the Servicer.

                  (d) Binding Obligation.  This Agreement constitutes a legal,
                      ------------------
     valid and binding obligation of the Servicer, enforceable in accordance
     with its terms, except as such

                                      29
<PAGE>

     enforceability may be limited by applicable bankruptcy, insolvency,
     reorganization, moratorium or other similar laws affecting creditors'
     rights generally from time to time in effect or by general principles of
     equity.

               (e) No Conflict. The execution and delivery of this Agreement
                   -----------
     by the Servicer, and the performance of the transactions contemplated by
     this Agreement and the fulfillment of the terms hereof and thereof
     applicable to the Servicer, will not conflict with, violate or result in
     any breach of any of the material terms and provisions of, or constitute
     (with or without notice or lapse of time or both) a material default under,
     any indenture, contract, agreement, mortgage, deed of trust or other
     instrument to which the Servicer is a party or by which it or its
     properties are bound.

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

               (g) No Proceedings.  There are no proceedings or investigations
                   --------------
     pending or, to the best knowledge of the Servicer, threatened against the
     Servicer before any Governmental Authority seeking to prevent the
     consummation of any of the transactions contemplated by this Agreement or
     seeking any determination or ruling that, in the reasonable judgment of the
     Servicer, would materially and adversely affect the performance by the
     Servicer of its obligations under this Agreement.

               (h) Compliance with Requirements of Law.  The Servicer shall duly
                   -----------------------------------
     satisfy all obligations on its part to be fulfilled under or in connection
     with each Receivable (and the underlying receivable) and the related
     Account, if any, will maintain in effect all qualifications required under
     Requirements of Law in order to service properly each Receivable and the
     related Account, if any, and will comply in all material respects with all
     other Requirements of Law in connection with servicing each Receivable and
     the related Account the failure to comply with which would have an Adverse
     Effect.

               (i) No Rescission or Cancellation.  The Servicer shall not permit
                   -----------------------------
     any rescission or cancellation of any Receivable (or the underlying
     receivable) except in accordance with the Credit Guidelines or as ordered
     by a court of competent jurisdiction or other Governmental Authority.

               (j) Protection of Rights. The Servicer shall take no action
                   --------------------
     which, nor omit to take any action the omission of which, would impair the
     rights of the Owner Trustee, the Indenture Trustee or the Noteholders in
     any Receivable (or the underlying receivable) or the related Account, if
     any, nor shall it reschedule, revise or defer payments due on any
     Receivable except in accordance with the Credit Guidelines.

               (k) Receivables Not To Be Evidenced by Promissory Notes.  Except
                   ---------------------------------------------------
     in connection with its enforcement or collection of an Account, the
     Servicer will take no action to cause any Receivable to be evidenced by any
     instrument (as defined in the UCC) and if any Receivable is so evidenced it
     shall be reassigned or assigned to the Servicer as provided in this
     Section.

               (l) All Consents.  All authorizations, consents, orders or
                   ------------
     approvals of or registrations or declarations with any Governmental
     Authority required to be obtained, effected or

                                      30
<PAGE>

     given by the Servicer in connection with the execution and delivery of this
     Agreement by the Servicer and the performance of the transactions
     contemplated by this Agreement by the Servicer, have been duly obtained,
     effected or given and are in full force and effect.

          In the event (x) any of the representations, warranties or covenants
of the Servicer contained in subsection 3.03 (h), (i) or (j) with respect to any
Receivable or the related Account is breached, and such breach has a material
adverse effect on the Noteholders' Collateral in such Receivable (which
determination shall be made without regard to whether funds are then available
to any Noteholders pursuant to any Series Enhancement) and is not cured within
60 days (or such longer period, not in excess of 120 days, as may be agreed to
by the Indenture Trustee and the Transferor) of the earlier to occur of the
discovery of such event by the Servicer, or receipt by the Servicer of notice of
such event given by the Indenture Trustee or the Transferor, or (y) as provided
in subsection 3.03(k) with respect to any Receivable, all Receivables in the
Account or Accounts to which such event relates shall be assigned and
transferred to the Servicer on the terms and conditions set forth below.

          The Servicer shall effect such assignment by making a deposit into the
Collection Account in immediately available funds on the Distribution Date
following the Due Period in which such assignment obligation arises in an amount
equal to the amount of such Receivables.

          Upon each such reassignment or assignment to the Servicer, the Trust
shall automatically and without further action be deemed to sell, transfer,
assign, set over and otherwise convey to the Servicer, without recourse,
representation or warranty, all right, title and interest of the Trust in and to
such Receivables, all monies due or to become due and all amounts received with
respect thereto and all proceeds thereof.  The Owner Trustee shall execute such
documents and instruments of transfer or assignment and take such other actions
as shall be reasonably requested by the Servicer to effect the conveyance of any
such Receivables pursuant to this Section but only upon receipt of an Officer's
Certificate of the Servicer that states that all conditions set forth in this
section have been satisfied.  The obligation of the Servicer to accept
reassignment or assignment of such Receivables, and to make the deposits, if
any, required to be made to the Collection Account as provided in the preceding
paragraph, shall constitute the sole remedy respecting the event giving rise to
such obligation available to Noteholders (or the Indenture Trustee on behalf of
Noteholders) or any Series Enhancer, except as provided in Section 5.04.

          Section 3.04.  Reports and Records for the Owner Trustee.
                         -----------------------------------------

          (a)     Daily Records. On each Business Day, the Servicer shall make
                  -------------
or cause to be made available at the office of the Servicer for inspection by
the Owner Trustee upon request a record setting forth (i) the Collections in
respect of Principal Receivables and in respect of Finance Charge and
Administrative Receivables processed by the Servicer on the second preceding
Business Day in respect of each Account and (ii) the amount of Receivables as of
the close of business on the second preceding Business Day in each Account. The
Servicer shall, at all times, maintain its computer files with respect to the
Accounts in such a manner so that the Accounts may be specifically identified
and shall make available to the Owner Trustee at the office of the Servicer on
any Business Day any computer programs necessary to make such identification.
The Owner Trustee shall enter into such reasonable confidentiality agreements as
the Servicer shall deem necessary to protect its interests and as are reasonably
acceptable in form and substance to the Owner Trustee.

          (b)     Monthly Servicer's Certificate.  Not later than the second
                  ------------------------------
Business Day preceding each Distribution Date, the Servicer shall, with respect
to each outstanding Series, deliver to the Owner Trustee, the Indenture Trustee
and each Rating Agency a certificate of an Authorized Officer in substantially
the form set forth in the related Indenture Supplement.

                                      31
<PAGE>

          Section 3.05.  Annual Certificate of Servicer.  The Servicer shall
                         ------------------------------
deliver to the Owner Trustee, the Indenture Trustee and each Rating Agency on or
before March 31 of each calendar year, beginning with March 31, 2001, an
Officer's Certificate substantially in the form of Exhibit C.
                                                   ---------

          Section 3.06.  Annual Servicing Report of Independent Public
                         ---------------------------------------------
Accountants; Copies of Reports Available.
----------------------------------------

          (a)     On or before March 31 of each calendar year, beginning with
March 31, 2001, the Servicer shall cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer or the Transferor) to furnish a report (addressed to the Owner Trustee)
to the Owner Trustee, the Indenture Trustee, the Servicer and each Rating Agency
to the effect that they have applied certain procedures agreed upon with the
Servicer and examined certain documents and records relating to the servicing of
Accounts under this Agreement, the Indenture and each Indenture Supplement and
that, on the basis of such agreed-upon procedures, nothing has come to the
attention of such accountants that caused them to believe that the servicing
(including the allocation of Collections) has not been conducted in compliance
with the terms and conditions as set forth in Article III and Section 5.08 of
this Agreement and the applicable provisions of the Indenture and each Indenture
Supplement, except for such exceptions as they believe to be immaterial and such
other exceptions as shall be set forth in such statement. Such report shall set
forth the agreed-upon procedures performed.

          (b)     On or before March 31 of each calendar year, beginning with
March 31, 2001, the Servicer shall cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer or Transferor) to furnish a report to the Owner Trustee, the Indenture
Trustee, the Servicer and each Rating Agency to the effect that they have
applied certain procedures agreed upon with the Servicer to compare the
mathematical calculations of certain amounts set forth in the Servicer's
certificates delivered pursuant to subsection 3.04(b) during the period covered
by such report with the Servicer's computer reports that were the source of such
amounts and that on the basis of such agreed-upon procedures and comparison,
such accountants are of the opinion that such amounts are in agreement, except
for such exceptions as they believe to be immaterial and such other exceptions
as shall be set forth in such statement. Such report shall set forth the agreed-
upon procedures performed.

          (c)     A copy of each certificate and report provided pursuant to
subsection 3.04(b), or Section 3.05 or 3.06 may be obtained by any Noteholder or
Note Owner by a request in writing to the Owner Trustee addressed to the
Corporate Trust Office.

          Section 3.07.  Tax Treatment.  Unless otherwise specified in the
                         -------------
Indenture or an Indenture Supplement with respect to a particular Series, the
Transferor has entered into this Agreement, and the Notes will be issued, with
the intention that, for federal, state and local income and franchise tax
purposes, (i) the Notes of each Series which are characterized as indebtedness
at the time of their issuance will qualify as indebtedness secured by the
Receivables and (ii) the Trust shall not be treated as an association or
publicly traded partnership taxable as a corporation.  The Transferor, by
entering into this Agreement, and each Noteholder, by the acceptance of any such
Note (and each Note Owner, by its acceptance of an interest in the applicable
Note), agree to treat such Notes for federal, state and local income and
franchise tax purposes as indebtedness of the Transferor.  Each Holder of such
Note agrees that it will cause any Note Owner acquiring an interest in a Note
through it to comply with this Agreement as to treatment as indebtedness under
applicable tax law, as described in this Section 3.07.  The parties hereto agree
that they shall not cause or permit the making, as applicable, of any election
under Treasury Regulation Section 301.7701-3 whereby the Trust or any portion
thereof would be treated as a corporation for federal income tax purposes and,
except as required by Section 6.13 of the Indenture, shall not file tax returns
or obtain any federal employer identification number for the Trust but shall
treat

                                      32
<PAGE>

the Trust as a security device for such purposes. The provisions of this
Agreement shall be construed in furtherance of the foregoing intended tax
treatment.

          Section 3.08.  Notices to Household Finance Corporation.  In the event
                         ----------------------------------------
that Household Finance Corporation is no longer acting as Servicer, any
Successor Servicer shall deliver or make available to Household Finance
Corporation each certificate and report required to be provided thereafter
pursuant to subsection 3.04(b) and Sections 3.05 and 3.06.

          Section 3.09.  Adjustments.
                         -----------

          (a)     If the Servicer adjusts downward the amount of any Receivable
because of a rebate, refund, unauthorized charge or billing error to an Obligor,
because such Receivable was created in respect of merchandise which was refused
or returned by an Obligor, or if the Servicer otherwise adjusts downward the
amount of any Receivable without receiving Collections therefor or charging off
such amount as uncollectible, then, in any such case, the amount of Principal
Receivables used to calculate the Transferor Amount, the Transferor's Interest,
and (unless otherwise specified) any other amount required herein or in the
Indenture or any Indenture Supplement to be calculated by reference to the
amount of Principal Receivables, will be reduced by the amount of the
adjustment.  Similarly, the amount of Principal Receivables used to calculate
the Transferor Amount and (unless otherwise specified) any other amount required
herein or in any Indenture Supplement to be calculated by reference to the
amount of Principal Receivables will be reduced by the principal amount of any
Receivable which was discovered as having been created through a fraudulent or
counterfeit charge or with respect to which the covenant contained in subsection
2.07(b) was breached.  Any adjustment required pursuant to either of the two
preceding sentences shall be made on or prior to the end of the Due Period in
which such adjustment obligation arises.  In the event that, following the
exclusion of such Principal Receivables from the calculation of the Transferor
Amount, the Transferor Amount would be less than the Required Transferor Amount,
not later than 1:00 P.M., New York City time, on the Distribution Date following
the Due Period in which such adjustment obligation arises, the Transferor shall
make a deposit into the Special Funding Account in immediately available funds
in an amount equal to the amount by which the Transferor Amount would be less
than the Required Transferor Amount, due to adjustments with respect to
Receivables conveyed by such Transferor (up to the amount of such Principal
Receivables).

          (b)     If (i) the Servicer makes a deposit into the Collection
Account in respect of a Collection of a Receivable and such Collection was
received by the Servicer in the form of a check which is not honored for any
reason or (ii) the Servicer makes a mistake with respect to the amount of any
Collection and deposits an amount that is less than or more than the actual
amount of such Collection, the Servicer shall appropriately adjust the amount
subsequently deposited into the Collection Account to reflect such dishonored
check or mistake. Any Receivable in respect of which a dishonored check is
received shall be deemed not to have been paid. Notwithstanding the first two
sentences of this paragraph, adjustments made pursuant to this Section shall not
require any change in any report previously delivered pursuant to subsection
3.04(a).

          Section 3.10.  Reports to the Commission.  The Servicer shall, on
                         -------------------------
behalf of the Trust, cause to be filed with the Commission any periodic reports
required to be filed under the provisions of the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder.
The Transferor shall, at the expense of the Servicer, cooperate in any
reasonable request of the Servicer in connection with such filings.

                             [END OF ARTICLE III]

                                      33
<PAGE>

                                  ARTICLE IV

                   OTHER MATTERS RELATING TO EACH TRANSFEROR

          Section 4.01.  Liability of each Transferor.  Each Transferor shall be
                         ----------------------------
severally, and not jointly, liable for all obligations, covenants,
representations and warranties of such Transferor arising under or related to
this Agreement, the Indenture or any Indenture Supplement.  Except as provided
in the preceding sentence, each Transferor shall be liable only to the extent of
the obligations specifically undertaken by it in its capacity as a Transferor.

          Section 4.02.  Merger or Consolidation of, or Assumption of the
                         ------------------------------------------------
Obligations of, a Transferor.
----------------------------

          (a)     No Transferor shall dissolve, liquidate, consolidate with or
merge into any other corporation or convey, transfer or sell its properties and
assets substantially as an entirety to any Person unless:

                  (i)    (x) the corporation formed by such consolidation or
     into which such Transferor is merged or the Person which acquires by
     conveyance, transfer or sale the properties and assets of the Transferor
     substantially as an entirety shall be, if such Transferor is not the
     surviving entity, is organized and existing under the laws of the United
     States of America or any State or the District of Columbia, and shall be a
     savings association, a national banking association, a bank or other entity
     which is not eligible to be a debtor in a case under Title 11 of the United
     States Code (the "Bankruptcy Code") or is a special purpose corporation
     whose powers and activities are limited to substantially the same degree as
     provided in the certificate of incorporation of HRF and, if such Transferor
     is not the surviving entity, shall expressly assume, by an agreement
     supplemental hereto, executed and delivered to the Owner Trustee and the
     Indenture Trustee, in form reasonably satisfactory to the Owner Trustee and
     the Indenture Trustee, the performance of every covenant and obligation of
     such Transferor hereunder; and (y) such Transferor or the surviving entity,
     as the case may be, has delivered to the Owner Trustee and the Indenture
     Trustee (with a copy to each Rating Agency) an Officer's Certificate and an
     Opinion of Counsel each stating that such consolidation, merger,
     conveyance, transfer or sale and such supplemental agreement comply with
     this Section, that such supplemental agreement is a valid and binding
     obligation of such surviving entity enforceable against such surviving
     entity in accordance with its terms, except as such enforceability may be
     limited by applicable bankruptcy, insolvency, reorganization, moratorium or
     other similar laws affecting creditors' rights generally from time to time
     in effect or general principles of equity, and that all conditions
     precedent herein provided for relating to such transaction have been
     complied with; and

               (ii)      the Rating Agency Condition shall have been satisfied
     with respect to such consolidation, merger, conveyance or transfer.

          (b)  Except as permitted by subsection 2.07(c), the obligations,
rights or any part thereof of each Transferor hereunder shall not be assignable
nor shall any Person succeed to such obligations or rights of any Transferor
hereunder except (i) for conveyances, mergers, consolidations, assumptions,
sales or transfers in accordance with the provisions of the foregoing paragraph
and (ii) for conveyances, mergers, consolidations, assumptions, sales or
transfers to other entities (1) which such Transferor and the Servicer determine
will not result in an Adverse Effect, (2) which meet the requirements of clause
(ii) of the preceding paragraph and (3) for which such purchaser, transferee,

                                      34
<PAGE>

pledgee or entity shall expressly assume, in an agreement supplemental hereto,
executed and delivered to the Owner Trustee and the Indenture Trustee in writing
in form satisfactory to the Owner Trustee and the Indenture Trustee, the
performance of every covenant and obligation of such Transferor thereby
conveyed.

          Section 4.03.  Limitations on Liability of Each Transferor.  Subject
                         -------------------------------------------
to Section 4.01, no Transferor nor any of the directors, officers, employees,
incorporators or agents of any Transferor acting in such capacities shall be
under any liability to the Trust, the Owner Trustee, the Indenture Trustee, the
Noteholders, any Series Enhancer, any other Transferor or any other Person for
any action taken or for refraining from the taking of any action in good faith
in such capacities pursuant to this Agreement, it being expressly understood
that such liability is expressly waived and released as a condition of, and
consideration for, the execution of this Agreement, the Indenture and any
Indenture Supplement and the issuance of the Notes; provided, however, that this
provision shall not protect any Transferor or any such person against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder.  Each Transferor and any
director, officer, employee or agent of such Transferor may rely in good faith
on any document of any kind prima facie properly executed and submitted by any
Person (other than such Transferor) respecting any matters arising hereunder.

          Section 4.04.  Assumption of the Transferor Obligations.
                         ----------------------------------------
Notwithstanding the provisions of Section 4.02, each Transferor may assign,
convey and transfer its revolving credit accounts and the receivables arising
thereunder, which may include all, but not less than all, of the Accounts and
such Transferor's remaining interest in the Receivables arising thereunder and
the Transferor's Interest (collectively, the "Assigned Assets"), together with
                                              ---------------
all servicing functions and other obligations under this Agreement or relating
to the transactions contemplated hereby (collectively, the "Assumed
                                                            -------
Obligations"), to another entity (the "Assuming Entity"), which may be an entity
                                       ---------------
that is not affiliated with such Transferor, and such Transferor may assign,
convey and transfer the Assigned Assets and the Assumed Obligations to the
Assuming Entity, without the consent or approval of the Holders of the Notes,
upon satisfaction of the following conditions:

          (a)     the Assuming Entity, such Transferor and the Trustee shall
     have entered into an assumption agreement (the "Assumption Agreement")
                                                     --------------------
     providing for the Assuming Entity to assume the Assumed Obligations,
     including the obligation under this Agreement to transfer the Receivables
     arising under the Accounts to the Trust, and such Transferor shall have
     delivered to the Trustee an Officer's Certificate and an Opinion of Counsel
     each stating that such transfer and assumption comply with this Section,
     that such Assumption Agreement is a valid and binding obligation of such
     Assuming Entity enforceable against such Assuming Entity in accordance with
     its terms, except as such enforceability may be limited by applicable
     bankruptcy, insolvency, reorganization, moratorium, receivership,
     conservatorship or other similar laws affecting creditors' rights generally
     or creditors of national banking associations, from time to time, in effect
     and except as such enforceability may be limited by general principles of
     equity (whether considered in a suit at law or in equity), and that all
     conditions precedent herein provided for relating to such transaction have
     been complied with;

          (b)     such Transferor or the Assuming Entity shall have delivered to
     the Trustee copies of UCC-1 financing statements covering such Accounts to
     perfect the Trust's interest in the Receivables arising herein;

          (c)     if the Assuming Entity shall be eligible to be a debtor in a
     case under the Bankruptcy Code, such Transferor shall have delivered to the
     Rating Agency

                                      35
<PAGE>

     (with a copy to the Servicer and the Trustee) notice of such transfer and
     assumption, and that each Rating Agency that has rated an Outstanding
     Series of Notes confirm in writing that such transfer will not result in a
     reduction or withdrawal of its rating of any Class of any Outstanding
     Series of Notes or, if the Assuming Entity shall not be eligible to be a
     debtor under the Bankruptcy Code, such Transferor shall have delivered to
     the Rating Agency notice of such transfer and assumption;

          (d)     the Trustee shall have received an Opinion of Counsel to the
     effect that (i) the transfer of such Receivables by the Assuming Entity
     shall constitute either a sale of, or the granting of a security interest
     in, such Receivables by the Assuming Entity to the Trust, (ii) the
     condition specified in clause (b) shall have been satisfied, and (iii) if
     the Assuming Entity shall be subject to the FDIA, the interest of the Trust
     in such Receivables should not be subject to avoidance by the FDIC if the
     FDIC were to become the receiver or conservator of the assuming entity;

          (e)     such Transferor shall have received written notice that the
     Rating Agency Condition has been satisfied with respect to such transfer
     and assumption and shall have delivered copies of each such written notice
     to the Servicer and the Trustee;

          (f)     the Trustee shall have received an Opinion of Counsel with
     respect to clause (b) above and as to certain other matters specified in
     Exhibit D-2; and
     -----------

          (g)     the Trustee shall have received a Tax Opinion.

Upon any such transfer to and assumption by an Assuming Entity, the Transferors
shall surrender Transferor Certificate to the Transfer Agent and Registrar for
registration of transfer and the Owner Trustee shall issue a new Transferor
Certificate in the name of the Assuming Entity and any non-assigning Transferor.
Notwithstanding such assumption, such assigning Transferor shall continue to be
liable for all representations and warranties and covenants made by it and all
obligations performed or to be performed by it in its capacity as Transferor
prior to such transfer.

          Notwithstanding the provisions of this Section 4.04 to the contrary,
any Transferor may transfer, from time to time, Assigned Assets to any other
Transferor upon the satisfaction of subsections (a) and (b), above.  Such
Transferor shall promptly provide notice to the Rating Agency indicating the
occurrence of any such transfer.

                              [END OF ARTICLE IV]

                                      36
<PAGE>

                                   ARTICLE V

                    OTHER MATTERS RELATING TO THE SERVICER

          Section 5.01.  Liability of the Servicer.  The Servicer shall be
                         -------------------------
liable under this Article only to the extent of the obligations specifically
undertaken by the Servicer in its capacity as Servicer.

          Section 5.02.  Merger or Consolidation of, or Assumption of the
                         ------------------------------------------------
Obligations of, the Servicer.  The Servicer shall not consolidate with or merge
----------------------------
into any other corporation or convey, transfer or sell its properties and assets
substantially as an entirety to any Person, unless:

          (a)      (i)   the corporation formed by such consolidation or into
     which the Servicer is merged or the Person which acquires by conveyance,
     transfer or sale the properties and assets of the Servicer substantially as
     an entirety shall be, if the Servicer is not the surviving entity, a
     corporation organized and existing under the laws of the United States of
     America or any State or the District of Columbia, and, if the Servicer is
     not the surviving entity, such corporation shall expressly assume, by an
     agreement supplemental hereto, executed and delivered to the Owner Trustee
     and the Indenture Trustee, in form satisfactory to the Owner Trustee and
     the Indenture Trustee, the performance of every covenant and obligation of
     the Servicer hereunder;

                   (ii)  the Servicer has delivered to the Owner Trustee and the
     Indenture Trustee an Officer's Certificate and an Opinion of Counsel each
     stating that such consolidation, merger, conveyance, transfer or sale
     comply with this Section and that all conditions precedent herein provided
     for relating to such transaction have been complied with;

                   (iii) the Servicer shall have given the Rating Agencies
     notice of such consolidation, merger or transfer or assets; and

          (b)      the corporation formed by such consolidation or into which
the Servicer is merged or the Person which acquires by conveyance or transfer
the properties and assets of the Servicer substantially as an entirety shall be
an Eligible Servicer.

          Section 5.03.  Limitation on Liability of the Servicer and Others.
                         --------------------------------------------------
Except as provided in Section 5.04, neither the Servicer nor any of the
directors, officers, employees or agents of the Servicer in its capacity as
Servicer shall be under any liability to the Trust, the Owner Trustee, the
Indenture Trustee, the Noteholders, any Series Enhancer or any other Person for
any action taken or for refraining from the taking of any action in good faith
in its capacity as Servicer pursuant to this Agreement; provided, however, that
this provision shall not protect the Servicer or any such Person against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder.  The Servicer and any director,
officer, employee or agent of the Servicer may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
(other than the Servicer) respecting any matters arising hereunder.  The
Servicer shall not be under any obligation to appear in, prosecute or defend any
legal action which is not incidental to its duties as Servicer in accordance
with this Agreement and which in its reasonable judgment may involve it in any
expense or liability.  The Servicer may, in its sole discretion, undertake any
such legal action which it may deem necessary or desirable for the benefit of
the Noteholders with respect to this Agreement and the rights and duties of the
parties hereto and the interests of the Noteholders hereunder.


                                      37
<PAGE>

          Section 5.04.  Servicer Indemnification of the Trust, the Owner
                         ------------------------------------------------
Trustee and the Indenture Trustee.  The Servicer shall indemnify and hold
---------------------------------
harmless each of the Trust, the Owner Trustee, the Indenture Trustee and any
trustees predecessor thereto (including the Indenture Trustee in its capacity as
Transfer Agent and Registrar or as Paying Agent) and their respective directors,
officers, employees and agents from and against any and all loss, liability,
claim, expense, damage or injury suffered or sustained by reason of (a) any acts
or omissions of the Servicer with respect to the Trust pursuant to this
Agreement or (b) the administration by the Owner Trustee of the Trust (in the
case of clause (a) or (b), other than such as may arise from the negligence or
willful misconduct of the Owner Trustee or the Indenture Trustee, as
applicable), including any judgment, award, settlement, reasonable attorneys'
fees and other costs or expenses incurred in connection with the defense of any
action, proceeding or claim.  Indemnification pursuant to this Section shall not
be payable from the Trust Assets.  The Servicer's obligations under this Section
5.04 shall survive the termination of this Agreement or the Trust or the earlier
removal or resignation of the Owner Trustee or the Indenture Trustee, as
applicable.

          Section 5.05.  Resignation of the Servicer.  The Servicer shall not
                         ---------------------------
resign from the obligations and duties hereby imposed on it except (a) upon
determination that (i) the performance of its duties hereunder is no longer
permissible under applicable law and (ii) there is no reasonable action which
the Servicer could take to make the performance of its duties hereunder
permissible under applicable law or (b) upon the assumption, by an agreement
supplemental hereto, executed and delivered to the Owner Trustee and the
Indenture Trustee, in form satisfactory to the Owner Trustee and the Indenture
Trustee, of the obligations and duties of the Servicer hereunder by any of its
Affiliates that is a direct or indirect wholly owned subsidiary of Household
International or by any other entity the appointment of which shall have
satisfied the Rating Agency Condition and, in either case, qualifies as an
Eligible Servicer.  Any determination permitting the resignation of the Servicer
shall be evidenced as to clause (a) above by an Opinion of Counsel to such
effect delivered to the Owner Trustee and the Indenture Trustee.  No resignation
shall become effective until the Indenture Trustee or a Successor Servicer shall
have assumed the responsibilities and obligations of the Servicer in accordance
with Section 7.02 hereof.  If within 120 days of the date of the determination
that the Servicer may no longer act as Servicer under clause (a) above the
Indenture Trustee is unable to appoint a Successor Servicer, the Indenture
Trustee shall serve as Successor Servicer.  Notwithstanding the foregoing, the
Indenture Trustee shall, if it is legally unable so to act, petition a court of
competent jurisdiction to appoint any established institution qualifying as an
Eligible Servicer as the Successor Servicer hereunder.  The Indenture Trustee
shall give prompt notice to each Rating Agency and each Series Enhancer upon the
appointment of a Successor Servicer.  Notwithstanding anything in this Agreement
to the contrary, Household Finance Corporation may assign part or all of its
obligations and duties as Servicer under this Agreement to an Affiliate of
Household Finance Corporation so long as Household Finance Corporation shall
have fully guaranteed the performance of such obligations and duties under this
Agreement.

          Section 5.06.  Access to Certain Documentation and Information
                         -----------------------------------------------
Regarding the Receivables.  The Servicer shall provide to the Owner Trustee or
-------------------------
the Indenture Trustee, as applicable, access to the documentation regarding the
Accounts and the Receivables in such cases where the Owner Trustee or the
Indenture Trustee, as applicable, is required in connection with the enforcement
of the rights of Noteholders or by applicable statutes or regulations to review
such documentation, such access being afforded without charge but only (a) upon
reasonable request, (b) during normal business hours, (c) subject to the
Servicer's normal security and confidentiality procedures and (d) at reasonably
accessible offices in the continental United States designated by the Servicer.
Nothing in this Section shall derogate from the obligation of the Transferor,
the Owner Trustee, the Indenture Trustee and the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors and
the failure of the Servicer to provide access as provided in this Section as a
result of such obligation shall not constitute a breach of this Section.

                                      38
<PAGE>

          Section 5.07.  Delegation of Duties.  In the ordinary course of
                         --------------------
business, the Servicer may at any time delegate its duties hereunder with
respect to the Accounts and the Receivables to any Person that agrees to conduct
such duties in accordance with the Credit Guidelines and this Agreement.  Such
delegation shall not relieve the Servicer of its liability and responsibility
with respect to such duties, and shall not constitute a resignation within the
meaning of Section 5.05.

          Section 5.08.  Examination of Records.  Each Transferor and the
                         ----------------------
Servicer shall indicate generally in their computer files or other records that
the Receivables arising in the Accounts have been conveyed to the Owner Trustee,
on behalf of the Trust, pursuant to this Agreement for the benefit of the
Noteholders.  Each Transferor and the Servicer shall, prior to the sale or
transfer to a third party of any receivable held in its custody, examine its
computer records and other records to determine that such receivable is not, and
does not include, a Receivable.

                              [END OF ARTICLE V]

                                      39
<PAGE>

                                  ARTICLE VI

                               INSOLVENCY EVENTS

          Section 6.01.  Rights upon the Occurrence of an Insolvency Event.  If
                         -------------------------------------------------
any Transferor shall consent or fail to object to the appointment of a
bankruptcy trustee or conservator, receiver or liquidator in any bankruptcy
proceeding or other insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to any Transferor of or
relating to all or substantially all of such Transferor's property, or the
commencement of an action seeking a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the appointment of
a bankruptcy trustee or conservator, receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up, insolvency, bankruptcy, reorganization,
conservatorship, receivership or liquidation of such entity's affairs, or
notwithstanding an objection by such Transferor any such action shall have
remained undischarged or unstayed for a period of 60 days or upon entry of any
order or decree providing for such relief; or such Transferor shall admit in
writing its inability to pay its debts generally as they become due, file, or
consent or fail to object (or object without dismissal of any such filing within
60 days of such filing) to the filing of, a petition to take advantage of any
applicable bankruptcy, insolvency or reorganization, receivership or
conservatorship statute, make an assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations (any such act or occurrence with
respect to any Person being an "Insolvency Event"), each Transferor shall on the
                                ----------------
day any such Insolvency Event occurs (the "Appointment Date"), immediately cease
                                           ----------------
to transfer Principal Receivables to the Trust and shall promptly give notice to
the Indenture Trustee and the Owner Trustee thereof.  Notwithstanding any
cessation of the transfer to the Trust of additional Principal Receivables,
Principal Receivables transferred to the Trust prior to the occurrence of such
Insolvency Event, Collections in respect of such Principal Receivables and
Finance Charge and Administrative Receivables (whenever created) accrued in
respect of such Principal Receivables shall continue to be a part of the Trust
Assets and shall be allocated and distributed to Noteholders in accordance with
the terms of the Indenture and each Indenture Supplement.

                              [END OF ARTICLE VI]

                                      40
<PAGE>

                                  ARTICLE VII

                               SERVICER DEFAULTS

          Section 7.01.  Servicer Defaults.  If any one of the following events
                         -----------------
(a "Servicer Default") shall occur and be continuing:
    ----------------

                  (a) any failure by the Servicer to make any payment, transfer
     or deposit or to give instructions or to give notice to the Indenture
     Trustee to make such payment, transfer or deposit on or before the date
     occurring five Business Days after the date such payment, transfer or
     deposit or such instruction or notice is required to be made or given, as
     the case may be, under the terms of this Agreement the Indenture or any
     Indenture Supplement;

                  (b) failure on the part of the Servicer duly to observe or
     perform in any material respect any other covenants or agreements of the
     Servicer set forth in this Agreement which has an Adverse Effect and which
     continues unremedied for a period of 60 days after the date on which notice
     of such failure, requiring the same to be remedied, shall have been given
     to the Servicer by the Owner Trustee or the Indenture Trustee, or to the
     Servicer, the Owner Trustee and the Indenture Trustee by Holders of Notes
     evidencing not less than 10% of the aggregate unpaid principal amount of
     all Notes (or, with respect to any such failure that does not relate to all
     Series, 10% of the aggregate unpaid principal amount of all Series to which
     such failure relates); or the Servicer shall assign or delegate its duties
     under this Agreement, except as permitted by Sections 5.02 and 5.07;

                  (c) any representation, warranty or certification made by the
     Servicer in this Agreement or in any certificate delivered pursuant to this
     Agreement shall prove to have been incorrect when made, which has an
     Adverse Effect on the rights of the Noteholders of any Series (which
     determination shall be made without regard to whether funds are then
     available pursuant to any Series Enhancement) and which Adverse Effect
     continues for a period of 60 days after the date on which notice thereof,
     requiring the same to be remedied, shall have been given to the Servicer by
     the Owner Trustee or the Indenture Trustee, or to the Servicer, the Owner
     Trustee and the Indenture Trustee by the Holders of Notes evidencing not
     less than 10% of the aggregate unpaid principal amount of all Notes (or,
     with respect to any such representation, warranty or certification that
     does not relate to all Series, 10% of the aggregate unpaid principal amount
     of all Series to which such representation, warranty or certification
     relates); or

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

                                      41
<PAGE>

          Then, in the event of any Servicer Default, so long as the Servicer
Default shall not have been remedied, either the Indenture Trustee or the
Holders of Notes evidencing more than 50% of the aggregate unpaid principal
amount of all Notes, by notice then given to the Servicer and the Owner Trustee
(and to the Indenture Trustee if given by the Noteholders) (a "Termination
                                                               -----------
Notice"), may terminate all but not less than all the rights and obligations of
------
the Servicer as Servicer under this Agreement; provided, however, if within 60
days of receipt of a Termination Notice the Indenture Trustee does not receive
any bids from Eligible Servicers in accordance with subsection 7.02(c) to act as
a Successor Servicer and receives an Officer's Certificate of the Servicer to
the effect that the Servicer cannot in good faith cure the Servicer Default
which gave rise to the Termination Notice, the Indenture Trustee shall grant a
right of first refusal to the Transferor which would permit the Transferor at
its option to acquire the Noteholders' Collateral on the Distribution Date in
the next calendar month.

          The price for the Noteholders' Collateral shall be equal to the sum of
the amounts specified therefor with respect to each outstanding Series in the
related Indenture Supplement.  The Transferor shall notify the Indenture Trustee
prior to the Record Date for the Distribution Date of the acquisition if it is
exercising such right of first refusal.  If the Transferor exercises such right
of first refusal, the Transferor shall deposit the price into the Collection
Account not later than 1:00 P.M., New York City time, on such Distribution Date
in immediately available funds.  The price shall be allocated and distributed to
Noteholders in accordance with the terms of the Indenture and each Indenture
Supplement.

          After receipt by the Servicer of a Termination Notice, and on the date
that a Successor Servicer is appointed by the Indenture Trustee pursuant to
Section 7.02, all authority and power of the Servicer under this Agreement shall
pass to and be vested in the Successor Servicer (a "Service Transfer"); and,
                                                    ----------------
without limitation, the Indenture Trustee is hereby authorized and empowered
(upon the failure of the Servicer to cooperate) to execute and deliver, on
behalf of the Servicer, as attorney-in-fact or otherwise, all documents and
other instruments upon the failure of the Servicer to execute or deliver such
documents or instruments, and to do and accomplish all other acts or things
necessary or appropriate to effect the purposes of such Service Transfer.  The
Servicer agrees to cooperate with the Indenture Trustee and such Successor
Servicer in effecting the termination of the responsibilities and rights of the
Servicer to conduct servicing hereunder, including the transfer to such
Successor Servicer of all authority of the Servicer to service the Receivables
provided for under this Agreement, including all authority over all Collections
which shall on the date of transfer be held by the Servicer for deposit, or
which have been deposited by the Servicer, in the Collection Account, or which
shall thereafter be received with respect to the Receivables, and in assisting
the Successor Servicer. The Servicer shall within 20 Business Days transfer its
electronic records relating to the Receivables to the Successor Servicer in such
electronic form as the Successor Servicer may reasonably request and shall
promptly transfer to the Successor Servicer all other records, correspondence
and documents necessary for the continued servicing of the Receivables in the
manner and at such times as the Successor Servicer shall reasonably request.  To
the extent that compliance with this Section shall require the Servicer to
disclose to the Successor Servicer information of any kind which the Servicer
deems to be confidential, the Successor Servicer shall be required to enter into
such customary licensing and confidentiality agreements as the Servicer shall
deem reasonably necessary to protect its interests.

          Notwithstanding the foregoing, a delay in or failure of performance
referred to in paragraph (a) above for a period of 10 Business Days after the
applicable grace period or under paragraph (b) or (c) above for a period of 60
Business Days after the applicable grace period, shall not constitute a Servicer
Default if such delay or failure could not be prevented by the exercise of
reasonable diligence by the Servicer and such delay or failure was caused by an
act of God or the public enemy, acts of declared or undeclared war, public
disorder, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes, floods or similar causes.  The preceding sentence shall
not relieve the Servicer

                                      42
<PAGE>

from using all commercially reasonable efforts to perform its obligations in a
timely manner in accordance with the terms of this Agreement and the Servicer
shall provide the Indenture Trustee, Owner Trustee, each Transferor and any
Series Enhancer with an Officer's Certificate giving prompt notice of such
failure or delay by it, together with a description of its efforts so to perform
its obligations.

          Section 7.02.  Indenture Trustee To Act; Appointment of Successor.
                         --------------------------------------------------

          (a)     On and after the receipt by the Servicer of a Termination
Notice pursuant to Section 7.01, the Servicer shall continue to perform all
servicing functions under this Agreement until the date specified in the
Termination Notice or otherwise specified by the Indenture Trustee or until a
date mutually agreed upon by the Servicer and the Indenture Trustee. The
Indenture Trustee shall as promptly as possible after the giving of a
Termination Notice appoint an Eligible Servicer as a successor servicer (the
"Successor Servicer"), and such Successor Servicer shall accept its appointment
 ------------------
by a written assumption in a form acceptable to the Indenture Trustee. In the
event that a Successor Servicer has not been appointed or has not accepted its
appointment at the time when the Servicer ceases to act as Servicer, the
Indenture Trustee without further action shall automatically be appointed the
Successor Servicer. The Indenture Trustee may delegate any of its servicing
obligations to an Affiliate or agent in accordance with subsection 3.01(b) and
Section 5.07. Notwithstanding the foregoing, the Indenture Trustee shall, if it
is legally unable so to act, petition at the expense of the Servicer a court of
competent jurisdiction to appoint any established institution qualifying as an
Eligible Servicer as the Successor Servicer hereunder. The Indenture Trustee
shall give prompt notice to each Rating Agency and each Series Enhancer upon the
appointment of a Successor Servicer.

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

          (c)     In connection with any Termination Notice, the Indenture
Trustee will review any bids which it obtains from Eligible Servicers and shall
be permitted to appoint any Eligible Servicer submitting such a bid as a
Successor Servicer for servicing compensation not in excess of the aggregate
Servicing Fees for all Series plus the sum of the amounts with respect to each
Series and with respect to each Distribution Date equal to any Collections of
Finance Charge and Administrative Receivables allocable to Noteholders of such
Series which are payable to the Owner Trustee for distribution to the holders of
the Transferor Certificates in accordance with the Trust Agreement after payment
of all amounts owing to the Noteholders of such Series with respect to such
Distribution Date or required to be deposited in the applicable Series Accounts
with respect to such Distribution Date and any amounts required to be paid to
any Series Enhancer for such Series with respect to such Distribution Date
pursuant to the terms of any Enhancement Agreement; provided, however, that the
Holders of the Transferor Certificates shall be responsible for payment of the
Transferor's portion of such aggregate Servicing Fees and all other such amounts
in excess of such aggregate Servicing Fees. Each Holder of the Transferor's
Certificates agrees that, if Household Finance Corporation (or any Successor
Servicer) is terminated as Servicer hereunder, the portion of the Collections in
respect of Finance Charge and Administrative Receivables that the Transferor is
entitled to receive pursuant to this Agreement, the Indenture or any Indenture
Supplement shall be reduced by an amount sufficient to pay the Transferor's
share of the compensation of the Successor Servicer.

          (d)     All authority and power granted to the Successor Servicer
under this Agreement shall automatically cease and terminate upon termination of
the Trust pursuant to Section 8.01 of the Trust Agreement, and shall pass to and
be vested in the Transferor and, without limitation, the Transferor

                                      43
<PAGE>

is hereby authorized and empowered to execute and deliver, on behalf of the
Successor Servicer, as attorney-in-fact or otherwise, all documents and other
instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of such transfer of servicing rights. The
Successor Servicer agrees to cooperate with the Transferor in effecting the
termination of the responsibilities and rights of the Successor Servicer to
conduct servicing of the Receivables. The Successor Servicer shall transfer its
electronic records relating to the Receivables to Household Finance Corporation
or its designee in such electronic form as it may reasonably request and shall
transfer all other records, correspondence and documents to it in the manner and
at such times as it shall reasonably request. To the extent that compliance with
this Section shall require the Successor Servicer to disclose to Household
Finance Corporation information of any kind which the Successor Servicer deems
to be confidential, Household Finance Corporation shall be required to enter
into such customary licensing and confidentiality agreements as the Successor
Servicer shall deem necessary to protect its interests.

          Section 7.03.  Notification to Noteholders.  Within five Business Days
                         ---------------------------
after the Servicer becomes aware of any Servicer Default, the Servicer shall
give notice thereof to the Owner Trustee, the Indenture Trustee, each Rating
Agency and each Series Enhancer and the Indenture Trustee shall give notice to
the Noteholders.  Upon any termination or appointment of a Successor Servicer
pursuant to this Article, the Indenture Trustee shall give prompt notice thereof
to the Noteholders.

                             [END OF ARTICLE VII]

                                      44
<PAGE>

                                 ARTICLE VIII

                                  TERMINATION

          Section 8.01.  Termination of Agreement.  This Agreement and the
                         ------------------------
respective obligations and responsibilities of the Transferor and the Servicer
under this Agreement shall terminate, except with respect to the duties
described in Section 5.04, on the Trust Termination Date.

                             [END OF ARTICLE VIII]


                                      45
<PAGE>

                                  ARTICLE IX

                           MISCELLANEOUS PROVISIONS

          Section 9.01.  Amendment; Waiver of Past Defaults.
                         ----------------------------------

          (a)  This Agreement may be amended by the parties hereto from time to
time prior to, or in connection with, the issuance of the first Series of Notes
hereunder without the requirement of any consents or the satisfaction of any
conditions set forth below. This Agreement may be amended from time to time by
the Servicer, the Transferor and the Owner Trustee, by a written instrument
signed by each of them, without the consent of the Indenture Trustee or any of
the Noteholders, provided that (i) the Transferor shall have delivered to the
Indenture Trustee and the Owner Trustee an Officer's Certificate, dated the date
of any such Amendment, stating that the Transferor reasonably believes that such
amendment will not have an Adverse Effect and (ii) the Rating Agency Condition
shall have been satisfied with respect to any such amendment; provided, however,
the Servicer, the Transferor and the Owner Trustee, may enter into one or more
amendments, without the consent of the Indenture Trustee or the Holders of any
Notes or prior notice to the Rating Agencies (provided that a final amendment to
this Agreement signed by the parties hereto shall be delivered to each Rating
Agency within 10 days of its execution) in order to cure any ambiguity, to
correct or supplement any provision herein or in any amendment hereto that may
be inconsistent with any other provision herein or in any amendment hereto or to
make any other provisions with respect to matters or questions arising under
this Agreement or in any amendment hereto; provided, that such amendment shall
not have an Adverse Affect. Additionally, notwithstanding the preceding
sentence, this Agreement will be amended by the Servicer and the Owner Trustee
at the direction of the Transferor without the consent of the Indenture Trustee
or any of the Noteholders or Series Enhancers to add, modify or eliminate such
provisions as may be necessary or advisable in order to enable all or a portion
of the Trust (i) to qualify as, and to permit an election to be made to cause
the Trust to be treated as, a "financial asset securitization investment trust"
as described in the provisions of Section 860L of the Code, and (ii) to avoid
the imposition of state or local income or franchise taxes imposed on the
Trust's property or its income; provided, however, that (i) the Transferor
delivers to the Indenture Trustee and the Owner Trustee an Officer's Certificate
to the effect that the proposed amendments meet the requirements set forth in
this subsection, (ii) each Rating Agency will have notified the Transferor, the
Servicer, the Indenture Trustee and the Owner Trustee in writing that the
amendment will not result in a reduction or withdrawal of the rating of any
outstanding Series or Class as to which it is a Rating Agency and (iii) such
amendment does not affect the rights, duties or obligations of the Indenture
Trustee or the Owner Trustee hereunder. The amendments which the Transferor may
make without the consent of Noteholders or Series Enhancers pursuant to the
preceding sentence may include, without limitation, the addition of a sale of
Receivables.

          (b)  This Agreement may also be amended from time to time by the
Servicer, the Transferor and the Owner Trustee, with the consent of the Holders
of Notes evidencing not less than 66-2/3% of the aggregate unpaid principal
amount of the Notes of all affected Series for which the Transferor has not
delivered an Officer's Certificate stating that there is no Adverse Effect, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the rights
of the Noteholders; provided, however, that no such amendment shall (i) reduce
in any manner the amount of or delay the timing of any distributions (changes in
Amortization Events or Reinvestment Events that decrease the likelihood of the
occurrence thereof shall not be considered delays in the timing of distributions
for purposes of this clause) to be made to Noteholders or deposits of amounts to
be so distributed or the amount available under any Series Enhancement without
the consent of each affected Noteholder, (ii) change the definition of or the
manner of calculating the

                                      46
<PAGE>

interest of any Noteholder without the consent of each affected Noteholder,
(iii) reduce the aforesaid percentage required to consent to any such amendment
without the consent of each Noteholder or (iv) adversely affect the rating of
any Series or Class by each Rating Agency without the consent of the Holders of
Notes of such Series or Class evidencing not less than 66-2/3% of the aggregate
unpaid principal amount of the Notes of such Series or Class.

          (c) Promptly after the execution of any such amendment or consent
(other than an amendment pursuant to paragraph (a)), the Owner Trustee shall
furnish notification of the substance of such amendment to the Indenture Trustee
and each Noteholder, and the Servicer shall furnish notification of the
substance of such amendment to each Rating Agency and each Series Enhancer.

          (d) It shall not be necessary for the consent of Noteholders under
this Section 9.01 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof.  The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Noteholders shall be subject to such reasonable
requirements as the Indenture Trustee may prescribe.

          (e) Notwithstanding anything in this Section 9.01 to the contrary, no
amendment may be made to this Agreement or any Participation Interest Supplement
which would adversely affect in any material respect the interests of any Series
Enhancer without the consent of such Series Enhancer.

          (f) Any Indenture Supplement executed in accordance with the
provisions of Article X of the Indenture shall not be considered an amendment of
this Agreement for the purposes of this Section 9.01.

          (g) The Holders of Notes evidencing more than 66-2/3% of the aggregate
unpaid principal amount of the Notes of each Series or, with respect to any
Series with two or more Classes, of each Class (or, with respect to any default
that does not relate to all Series, 66-2/3% of the aggregate unpaid principal
amount of the Notes of each Series to which such default relates or, with
respect to any such Series with two or more Classes, of each Class) may, on
behalf of all Noteholders, waive any default by the Transferor or the Servicer
in the performance of their obligations hereunder and its consequences, except
the failure to make any distributions required to be made to Noteholders or to
make any required deposits of any amounts to be so distributed.  Upon any such
waiver of a past default, such default shall cease to exist, and any default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement.  No such waiver shall extend to any subsequent or other default
or impair any right consequent thereon except to the extent expressly so waived.

          (h) The Owner Trustee may, but shall not be obligated to, enter into
any such amendment which affects the Owner Trustee's rights, duties or
immunities under this Agreement or otherwise.  In connection with the execution
of any amendment hereunder, the Owner Trustee shall be entitled to receive the
Opinion of Counsel described in subsection 9.02(d).

          Section 9.02.  Protection of Right, Title and Interest to Trust.
                         ------------------------------------------------

          (a) The Servicer shall cause this Agreement, all amendments and
supplements hereto and all financing statements and continuation statements and
any other necessary documents covering the Indenture Trustee's and the Owner
Trustee's right, title and interest to the Trust to be promptly recorded,
registered and filed, and at all times to be kept recorded, registered and
filed, all in such manner and in such places as may be required by law fully to
preserve and protect the right, title and interest of the Indenture Trustee,
Noteholders and the Owner Trustee hereunder to all property comprising the
Trust.  The Servicer shall deliver to the Owner Trustee and Indenture Trustee
file-stamped copies of, or filing

                                      47
<PAGE>

receipts for, any document recorded, registered or filed as provided above, as
soon as available following such recording, registration or filing. The
Transferor shall cooperate fully with the Servicer in connection with the
obligations set forth above and will execute any and all documents reasonably
required to fulfill the intent of this paragraph.

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

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

          (d) The Servicer shall deliver to the Owner Trustee and the Indenture
Trustee (i) upon the execution and delivery of each amendment of this Agreement,
an Opinion of Counsel to the effect specified in Exhibit D-1; (ii) on each date
                                                 -----------
specified in subsection 2.09(c)(ix) with respect to Aggregate Additions to be
designated as Accounts, an Opinion of Counsel substantially in the form of
Exhibit D-2, (iii) on each date specified in subsection 2.09(e)(vii), with
-----------
respect to any New Accounts included as Accounts, an Opinion of Counsel
substantially in the form of Exhibit D-2, (iv) on each Addition Date on which
                             -----------
any Participation Interests are to be included in the Trust pursuant to
subsection 2.09(a) or (b), an Opinion of Counsel covering the same substantive
legal issues addressed by Exhibits D-1 and D-2 but conformed to the extent
                          ------------     ---
appropriate to relate to Participation Interests; and (v) on or before April 30
of each year, beginning with April 30, 2001, an Opinion of Counsel substantially
in the form of Exhibit D-3.
               -----------

          Section 9.03.  Governing Law.  THIS AGREEMENT SHALL BE CONSTRUED IN
                         -------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

          Section 9.04.  Notices; Payments.
                         -----------------

          (a) All demands, notices, instructions, directions and communications
(collectively, "Notices") under this Agreement shall be in writing and shall be
                -------
deemed to have been duly given if personally delivered at, mailed by registered
mail, return receipt requested, or sent by facsimile transmission (i) in the
case of the Transferor, to Household Receivables Funding, Inc. III, [1111 Town
Center, Las Vegas, Nevada 89134, Attention: General Counsel (facsimile no. (702)
222-4096)], (ii) in the case of the Bank, to Household Bank (Nevada), National
Association at 1111 Town Center, Las Vegas, Nevada 89134 Attention: General
Counsel (facsimile no. (702) 222-4096), (iii) in the case of the Servicer, to
Household Finance Corporation, at 2700 Sanders Road, Prospect Heights, Illinois
60070, Attention: Vice President, Asset Securitization (facsimile no. (847) 205-
7457), with copies to Household

                                      48
<PAGE>

International at 2700 Sanders Road, Prospect Heights, Illinois 60070, Attention:
General Counsel's Office, Securities and Funding Unit (facsimile no. (847) 205-
7457), (iv) in the case of the Owner Trustee, to Wilmington Trust Company, at
Rodney Square North, 1100 North Market Street, Wilmington, DE 19890-0001,
Attention: Corporate Trust Administration (facsimile no. (302) 651-8882), (v) in
the case of the Rating Agency for a particular Series, the address, if any,
specified in the Indenture Supplement relating to such Series, and (vi) to any
other Person as specified in the Indenture or any Indenture Supplement; or, as
to each party, at such other address or facsimile number as shall be designated
by such party in a written notice to each other party.

          (b) Any Notice required or permitted to be given to a Holder of
Registered Notes shall be given by first-class mail, postage prepaid, at the
address of such Holder as shown in the Note Register.  No Notice shall be
required to be mailed to a Holder of Bearer Notes or Coupons but shall be given
as provided below.  Any Notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given, whether or not
the Noteholder receives such Notice.  In addition, (a) if and so long as any
Series or Class is listed on the Luxembourg Stock Exchange and such Exchange
shall so require, any Notice to Noteholders shall be published in an Authorized
Newspaper of general circulation in Luxembourg within the time period prescribed
in this Agreement and (b) in the case of any Series or Class with respect to
which any Bearer Notes are outstanding, any Notice required or permitted to be
given to Noteholders of such Series or Class shall be published in an Authorized
Newspaper within the time period prescribed in this Agreement.

          Section 9.05.  Severability of Provisions.  If any one or more of the
                         --------------------------
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such provisions shall be deemed
severable from the remaining provisions of this Agreement and shall in no way
affect the validity or enforceability of the remaining provisions or of the
Notes or the rights of the Noteholders.

          Section 9.06.  Further Assurances.  The Transferor and the Servicer
                         ------------------
agree to do and perform, from time to time, any and all acts and to execute any
and all further instruments required or reasonably requested by the Owner
Trustee and the Indenture Trustee more fully to effect the purposes of this
Agreement, including the execution of any financing statements or continuation
statements relating to the Receivables for filing under the provisions of the
UCC of any applicable jurisdiction.

          Section 9.07.  No Waiver; Cumulative Remedies.  No failure to exercise
                         ------------------------------
and no delay in exercising, on the part of the Owner Trustee, the Indenture
Trustee or the Noteholders, any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege under this Agreement preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege.  The rights, remedies, powers and privileges
provided under this Agreement are cumulative and not exhaustive of any rights,
remedies, powers and privileges provided by law.

          Section 9.08.  Counterparts.  This Agreement may be executed in two or
                         ------------
more counterparts (and by different parties on separate counterparts), each of
which shall be an original, but all of which together shall constitute one and
the same instrument.

          Section 9.09.  Third-Party Beneficiaries.  This Agreement will inure
                         -------------------------
to the benefit of and be binding upon the parties hereto, the Indenture Trustee,
the Noteholders, any Series Enhancer and their respective successors and
permitted assigns.  Except as otherwise expressly provided in this Agreement, no
other Person will have any right or obligation hereunder.

          Section 9.10.  Actions by Noteholders.
                         ----------------------

                                      49
<PAGE>

          (a) Wherever in this Agreement a provision is made that an action may
be taken or a Notice given by Noteholders, such action or Notice may be taken or
given by any Noteholder, unless such provision requires a specific percentage of
Noteholders.

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

          Section 9.11.  Rule 144A Information.  For so long as any of the Notes
                         ---------------------
of any Series or Class are "restricted securities" within the meaning of Rule
144(a)(3) under the Securities Act, each of the Transferor, the Owner Trustee,
the Indenture Trustee, the Servicer and any Series Enhancer agree to cooperate
with each other to provide to any Noteholders of such Series or Class and to any
prospective purchaser of Notes designated by such Noteholder, upon the request
of such Noteholder or prospective purchaser, any information required to be
provided to such holder or prospective purchaser to satisfy the condition set
forth in Rule 144A(d)(4) under the Securities Act.

          Section 9.12.  Merger and Integration.  Except as specifically stated
                         ----------------------
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement.  This Agreement may not be
modified, amended, waived or supplemented except as provided herein.

          Section 9.13.  Headings.  The headings herein are for purposes of
                         --------
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.

                              [END OF ARTICLE IX]

                                      50
<PAGE>

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

Dated:  ______ __, 2000       HOUSEHOLD RECEIVABLES FUNDING, INC. III,
                              Transferor,

                              By:_______________________________________
                                  Name:
                                  Title:



                              HOUSEHOLD FINANCE CORPORATION, Servicer,


                              By:_______________________________________
                                  Name:
                                  Title:


                              HOUSEHOLD CREDIT CARD MASTER NOTE TRUST I, Issuer

                              By: Wilmington Trust Company,
                                  not in its individual capacity
                                  but solely as Owner Trustee
                                  on behalf of the Trust,


                              By:_______________________________________
                                  Name:
                                  Title:


Acknowledged and Accepted:


By: Wells Fargo Bank Minnesota, N.A.,
       not in its individual capacity but
       solely as Indenture Trustee,


By:___________________________________
    Name:
    Title:

                                      51


<PAGE>

                                                                   EXHIBIT A


           FORM OF ASSIGNMENT OF RECEIVABLES IN ADDITIONAL ACCOUNTS

                        (As required by Section 2.09 of
                     the Transfer and Servicing Agreement)


          ASSIGNMENT No. _________ OF RECEIVABLES IN ADDITIONAL ACCOUNTS dated
as of ____________,/1/ by and among HOUSEHOLD RECEIVABLES FUNDING, INC. III, a
Delaware corporation, as Transferor (the "Transferor"), HOUSEHOLD FINANCE
                                          ----------
CORPORATION, a Delaware corporation, as Servicer (the "Servicer"), and HOUSEHOLD
                                                       --------
CREDIT CARD MASTER NOTE TRUST I (the "Trust"), pursuant to the Transfer and
                                      -----
Servicing Agreement referred to below.


                                  WITNESSETH:

          WHEREAS the Transferor, the Servicer and the Trust are parties to the
Transfer and Servicing Agreement dated as of ____________ __, 2000 (as amended
and supplemented, the "Agreement");
                       ---------

          WHEREAS, pursuant to the Agreement, the Transferor wishes to designate
Additional Accounts owned by the [Bank] to be included as Accounts and to convey
the Receivables of such Additional Accounts (as each such term is defined in the
Agreement), whether now existing or hereafter created, to the Trust; and

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

          NOW, THEREFORE, the Transferor, the Servicer and the Trust hereby
agree as follows:

          1.   Defined Terms.  All capitalized terms used herein shall have the
               -------------
meanings ascribed to them in the Agreement unless otherwise defined herein.

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

          "Additional Cut-Off Date" shall mean, with respect to the Additional
           -----------------------
Accounts designated hereby, __________, ____.

          2.   Designation of Additional Accounts.  On or before the Document
               ----------------------------------
Delivery Date, the Transferor will deliver to the Owner Trustee a computer file,
microfiche list or printed list containing a true and complete schedule
identifying all such Additional Accounts specifying for each such Account, as of
the Additional Cut-Off Date, its account number, the aggregate amount
outstanding in such Account and the aggregate amount of Principal Receivables
outstanding in such Account, which computer file, microfiche list or printed
list shall supplement Schedule I to the Agreement.
                      ----------

          3.   Conveyance of Receivables.  (a)  The Transferor does hereby sell,
               -------------------------
transfer, assign, set over and otherwise convey, without recourse except as set
forth in the Transfer and Servicing Agreement, to the Trust, all its right,
title and interest in, to and under the Receivables of such Additional

_____________________________

1/ To be dated as of the applicable Addition Date.


                                      A-1