<PAGE>

                                                                     EXHIBIT 4.3

                       TRANSFER AND SERVICING AGREEMENT

                                     among

                        SPIEGEL CREDIT CORPORATION III,

                                    Seller,

                        FIRST CONSUMERS NATIONAL BANK,

                                   Servicer,

                                      and

                    SPIEGEL CREDIT CARD MASTER NOTE TRUST,

                                    Issuer,

                         Dated as of [__________] 2000




<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                          Page
<S>                                                                                       <C>
ARTICLE I
DEFINITIONS...........................................................................       1
          Section 1.1.   Definitions..................................................       1
          Section 1.2.   Other Definitional Provisions................................       1
          Section 1.3    Monthly Allocation of Finance Charge Receivables.............       2
          Section 1.4    Daily Allocation of Principal Collections....................       2
ARTICLE II
CONVEYANCE OF RECEIVABLES.............................................................       3
          Section 2.1.   Conveyance of Receivables....................................       3
          Section 2.2    Acceptance by Issuer.........................................       5
          Section 2.3.   Representations and Warranties of Seller Relating
                         to such Seller...............................................       5
          Section 2.4    Representations and Warranties of Seller Relating
                         to the Agreement and the Receivables.........................       7
          Section 2.5.   Covenants of Seller..........................................      11
          Section 2.6    Addition of Accounts.........................................      16
          Section 2.7    Removal of Accounts..........................................      19
          Section 2.8    Discount Option..............................................      21
          Section 2.9    Net Worth....................................................      21
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES...........................................      22
          Section 3.1    Acceptance of Appointment and Other Matters
                         Relating to the Servicer.....................................      22
          Section 3.2    Servicing Compensation.......................................      23
          Section 3.3    Representations, Warranties and Covenants of the
                         Servicer.....................................................      24
          Section 3.4    Reports and Records for the Owner Trustee....................      26
          Section 3.5    Annual Certificate of Servicer...............................      26
          Section 3.6    Annual Servicing Report of Independent Public
                         Accountants; Copies of Reports Available.....................      27
          Section 3.7    Tax Treatment................................................      27
          Section 3.8    Merchant Fees................................................      28
          Section 3.9    Reports to the Commission....................................      28
ARTICLE IV
OTHER MATTERS RELATING TO Seller......................................................      28
          Section 4.1    Liability of Seller..........................................      28
          Section 4.2    Merger or Consolidation of, or Assumption of the
                         Obligations of, a Seller.....................................      28
          Section 4.3    Limitations on Liability of Seller...........................      29
ARTICLE V
OTHER MATTERS RELATING TO THE SERVICER................................................      30
          Section 5.1    Liability of the Servicer....................................      30
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                         <C>
          Section 5.2.   Merger or Consolidation of, or Assumption of the
                         Obligations of, the Servicer.................................      30
          Section 5.3.   Limitation on Liability of the Servicer and Others...........      30
          Section 5.4.   Servicer Indemnification of the Issuer, the Owner
                         Trustee and the Indenture Trustee............................      31
          Section 5.5.   Servicer Not to Resign.......................................      32
          Section 5.6.   Access to Certain Documentation and Information
                         Regarding the Receivables....................................      32
          Section 5.7.   Delegation of Duties.........................................      32
          Section 5.8.   Examination of Records.......................................      32
ARTICLE VI
INSOLVENCY EVENTS.....................................................................      33
          Section 6.1.   Rights upon the Occurrence of an Insolvency
          Event.......................................................................      33
ARTICLE VII
SERVICER DEFAULTS.....................................................................      33
          Section 7.1.   Servicer Defaults............................................      33
          Section 7.2.   Indenture Trustee To Act; Appointment of
                         Successor....................................................      35
          Section 7.3.   Notification to Noteholders..................................      37
          Section 7.4    Waiver of Past Defaults......................................      37
ARTICLE VIII
TERMINATION...........................................................................      37
          Section 8.1.   Termination of Agreement.....................................      37
ARTICLE IX
MISCELLANEOUS PROVISIONS..............................................................      38
          Section 9.1.   Amendment; Waiver of Past Defaults...........................      38
          Section 9.2.   Protection of Right, Title and Interest to Issuer............      40
          Section 9.3.   GOVERNING LAW................................................      41
          Section 9.4.   Notices; Payments............................................      41
          Section 9.5.   Severability of Provisions...................................      41
          Section 9.6.   Further Assurances...........................................      41
          Section 9.7.   No Waiver; Cumulative Remedies...............................      42
          Section 9.8.   Counterparts.................................................      42
          Section 9.9.   Third-Party Beneficiaries....................................      42
          Section 9.10.  Actions by Noteholders.......................................      42
          Section 9.11.  Rule 144A Information........................................      42
          Section 9.12.  Merger and Integration.......................................      43


EXHIBITS
--------

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
</TABLE>

                                      ii
<PAGE>

<TABLE>
<S>                                                                                       <C>
EXHIBIT D-3 Provisions to be Included in Annual Opinion of Counsel....................    D-3-1
EXHIBIT E-1 Form of Annual Servicer's Certificate.....................................    E-1-1
EXHIBIT E-2 Form of Annual Independent Public Accountants' Servicing
Report................................................................................    E-2-1
EXHIBIT F-1 Form of Opinion of Counsel with Respect to Amendments.....................    F-1-1
EXHIBIT F-2 Form of Opinion of Counsel with Respect to Accounts.......................    F-2-1
EXHIBIT F-3 Provisions to be Included in Annual Opinion of Counsel....................    F-3-1

SCHEDULES
---------

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

                                      iii
<PAGE>

     TRANSFER AND SERVICING AGREEMENT, dated as of [_____], 2000 (this

"Agreement") among SPIEGEL CREDIT CORPORATION III, a Delaware corporation, as
----------
Seller, FIRST CONSUMERS NATIONAL BANK, a national banking association, as
Servicer, and SPIEGEL CREDIT CARD MASTER NOTE TRUST, a trust organized under the
laws of the State of Illinois, 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 to the extent provided herein, in the Indenture and in any
Indenture Supplement:

                                   ARTICLE I

                                  DEFINITIONS

     Section 1.1.  Definitions. Capitalized terms used herein and not otherwise
                   -----------
defined herein are defined in Annex A to the Master Indenture, dated as of the
                              -------
date hereof, between Spiegel Credit Card Master Note Trust and BNY Midwest Trust
Company.

     Section 1.2.   Other Definitional Provisions. All terms defined directly or
                    ------------------------------
by reference in this Agreement shall have the defined meanings when used in any
certificate or other document delivered pursuant hereto unless otherwise defined
therein. For purposes of this Agreement and all such certificates and other
documents, unless the context otherwise requires: (a) accounting terms not
otherwise defined in this Agreement, and accounting terms partly defined in this
Agreement to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles; (b) terms defined in
Article 9 of the UCC as in effect in the State of Illinois and not otherwise
adefined in this Agreement are used as defined in that Article; (c) any
reference to each Rating Agency shall only apply to any specific rating agency
if such rating agency is then rating any outstanding Series; (d) references to
any amount as on deposit or outstanding on any particular date means such amount
at the close of business on such day; (e) the words "hereof," "herein" and
"hereunder" and words of similar import refer to this Agreement (or the
certificate or other document in which they are used) as a whole and not to any
particular provision of this Agreement (or such certificate or document); (f)
references to any Section, Schedule or Exhibit are references to Sections,
Schedules and Exhibits in or to this Agreement (or the certificate or other
document in which the reference is made), and references to any paragraph,
Section, clause or other subdivision within any Section or definition refer to
such paragraph, subsection, clause or other subdivision of such Section or
definition; (g) the term "including" means "including without limitation"; (h)
references to any law or regulation refer to that law or regulation as amended
from time to time and include any successor law or regulation; (i) references to
any Person include that Person's successors and assigns; and (j) headings are
for purposes of reference only and shall not otherwise affect the meaning or
interpretation of any provision hereof.

                                       1
<PAGE>

     Section 1.3.   Monthly Allocation of Finance Charge Receivables. The
                    ------------------------------------------------
amount of Finance Charge Receivables (excluding, in each case where such term is
used in this Section 1.3, Discount Option Receivables) in all Accounts shall be
             -----------
determined as follows:

     (i)    At the close of business on each Cycle Billing Date for any Cycle of
which any Accounts are included in the Receivables Trust, the amount of Finance
Charge Receivables of all Accounts in such Cycle shall be equal to (A) the
amount of Finance Charges charged to all Accounts in such Cycle on such date
plus (B) the Carry-Over Finance Charge Amount for such Cycle.

     (ii)   For each Business Day in each Monthly Period, the amount of
Collections allocated to Finance Charge Receivables for all Accounts in such
Cycle shall be an amount equal to the quotient of the amount of Finance Charges
actually assessed on all Accounts, in accordance with the Charge Account
Guidelines, on the Cycle Billing Date for such Cycle in the immediately
preceding Monthly Period divided by the number of Business Days in such Monthly
Period; provided, however, that the amount of Collections allocated to Finance
        --------  -------
Charge Receivables for all Accounts in a Cycle on the first Business Day of each
Monthly Period shall equal the product of two times such quotient and provided,
                                                                      --------
further, that the amount of Collections allocated to Finance Charge Receivables
-------
for all Accounts in a Cycle on the last Business Day of each Monthly Period
shall equal zero.

     (iii)  If, at the close of business on the last Business Day of any
Monthly Period, the amount of Collections allocated to Finance Charge
Receivables for all Accounts in such Cycle during such Monthly Period is less
than the amount of Finance Charge Receivables for all Accounts in such Cycle on
the Cycle Billing Date for such Cycle next preceding such Monthly Period, then
such deficit shall be the "Carry-Over Finance Charge Amount" for such Cycle and
                           --------------------------------
shall be added to the amount of Finance Charges assessed on such Billing Cycle
Date pursuant to clause (i)(B) above. The Carry-Over Finance Charge Amount with
respect to any Accounts shall be zero as of the Cycle Billing Date next
preceding (A) the Closing Date, in the case of Accounts which are not Additional
Accounts and (B) the applicable Addition Date, in the case of Additional
Accounts.

     Notwithstanding the foregoing, the Servicer may adopt a different method of
determining the amount of Finance Charge Receivables which in the good faith
judgment of the Servicer is designed to more accurately reflect the portions of
Receivables and Collections constituting Finance Charge Receivables.

     Section 1.4.   Daily Allocation of Principal Collections.
                    -----------------------------------------

     (a)    For purposes of allocating Collections on a daily basis during any
Monthly Period, the Servicer may estimate the portion of Collections on the
entire portfolio of FCNB Preferred Charge accounts that is allocable to the
Accounts. Such

                                       2
<PAGE>

estimate shall be made using a fraction the numerator of which is the Principal
Receivables plus the Discount Option Receivables as of the last day of the
preceding Monthly Period and the denominator of which is the aggregate principal
receivables in such entire portfolio as of such last day.

     (b)  On the Determination Date following each Monthly Period during which
such estimation method is used, the Servicer shall make an appropriate true-up
adjustment to the balance on deposit in the Principal Collections Subaccount and
in the Finance Charge Subaccount and to the amount of Principal Receivables
included in the Trust Assets and the amount of Discount Option Receivables
allocable to the Note Interest in respect of the preceding Monthly Period, in
each case to reflect the difference, if any, between the amount that should have
been recorded as collections in respect of Principal Receivables and Discount
Option Receivables if actual Collections allocable to the Accounts had been
known and the amount allocated thereto pursuant to Section 1.4(a).
                                                   --------------

     (c)  Notwithstanding the foregoing, the Servicer may adopt a different
method of estimating the amount of Collections allocable to the Accounts which
in the good faith judgment of the Servicer is designed to more accurately
reflect the actual amounts being collected in respect thereof. The Servicer
shall provide to each Rating Agency and to the Owner Trustee written notice each
time the Servicer adopts a different method of estimating such amounts.


                                  ARTICLE II

                           CONVEYANCE OF RECEIVABLES

     Section 2.1.   Conveyance of Receivables. By execution of this Agreement,
                    -------------------------
Seller does hereby transfer, assign, set over and otherwise convey to the
Issuer, without recourse except as provided herein, all its right, title and
interest in, to and under (a) the Collateral Certificate, and (b) effective on
the SMT Termination Date, the Receivables existing at the opening of business on
the SMT Termination Date, and thereafter created from time to time until the
termination of the Issuer, and Recoveries allocable to the Issuer as provided
herein, in each case together with all monies due or to become due and all
amounts received or receivable with respect thereto and all proceeds thereof.
Such property, together with all monies and other property credited to the
Collection Account, the Series Accounts and the Excess Funding Account
(including any subaccounts of any such account), the rights of the Issuer under
this Agreement and the Trust Agreement and the right to receive Recoveries shall
constitute the assets of the Issuer (the "Trust Assets"). The foregoing does not
                                          ------------
constitute and is not intended to result in the creation or assumption by the
Issuer, the Owner Trustee, the Indenture Trustee or any Noteholder of any
obligation of FCNB or other Account Owner or Seller, 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 or clearance systems. Effective on the SMT

                                       3
<PAGE>

Termination Date, Seller does hereby further transfer, assign, set over and
otherwise convey to the Issuer all of its right, title and interest in and under
the Receivables Purchase Agreement.

     On or prior to the first Closing Date, Seller shall deliver to the Owner
Trustee a registered certificate representing the Collateral Certificate. On or
prior to the SMT Termination Date, Seller agrees to record and file, at its own
expense, financing statements (and continuation statements when applicable) with
respect to the Receivables conveyed by such Seller existing on the SMT
Termination Date and thereafter 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 Issuer, 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 Closing Date, 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.

     Seller further agrees, at its own expense, on or prior to (x) the SMT
Termination Date, (y) the applicable Addition Date, in the case of Additional
Accounts (other than Additional Accounts added pursuant to Section 2.6(e))
specified in the Receivables Purchase Agreement on or after the SMT Termination
Date, and (z) the applicable Removal Date, in the case of Removed Accounts, (a)
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 Issuer pursuant to this Agreement (or conveyed to
Seller or its designee in accordance with Section 2.7, in the case of Removed
                                          -----------
Accounts) by including (or deleting in the case of Removed Accounts) in such
computer files the that identifies each such Account and (b) 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 SMT
Termination Date, the applicable Addition Date in the case of Additional
Accounts, and the applicable Removal Date in the case of Removed Accounts, its
account number and, the aggregate amount outstanding in such Account and 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.

     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 Seller shall be deemed to have granted
to the Issuer a first priority perfected security interest in all of Seller's
right, title and interest, whether owned on the SMT Termination Date or
thereafter acquired, in, to and under the

                                       4
<PAGE>

Receivables and the other Trust Assets conveyed by Seller, and all money,
accounts, general intangibles, chattel paper, instruments, documents, goods,
investment property, deposit accounts, certificates of deposit, letters of
credit, and advices of credit consisting of, arising from or related to the
Trust Assets, to secure its obligations hereunder.

     Section 2.2.   Acceptance by Issuer.
                    --------------------

     (a)  The Issuer hereby acknowledges its acceptance of all right, title and
interest to the property, now existing and hereafter created, conveyed to the
Issuer pursuant to Section 2.1. The Owner Trustee shall maintain a copy of
                   -----------
Schedule 1, as delivered from time to time, at its Corporate Trust Office.
----------

     (b)  The Owner Trustee and the Issuer each 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 or the Issuer, 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 or the Issuer'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, Servicer or Seller for the limited
purpose of enabling any such creditor to identify Receivables or Accounts
subject to this Agreement or the Receivables Purchase Agreement. The Owner
Trustee and the Issuer each agrees to take such measures as shall be reasonably
requested by Seller to protect and maintain the security and confidentiality of
such information and, in connection therewith, shall allow Seller or its duly
authorized representatives to inspect the Owner Trustee's security and
confidentiality arrangements as they specifically relate to the administration
of the Issuer from time to time during normal business hours upon prior written
notice. The Owner Trustee and the Issuer shall provide Seller with notice five
(5) Business Days prior to disclosure of any information of the type described
in this Section 2.2(b).
        --------------

      Section 2.3.  Representations and Warranties of Seller Relating to Seller.
                    -----------------------------------------------------------
Seller hereby represents and warrants as of the Closing Date that:

     (a)  Organization and Good Standing. Seller is a corporation duly organized
          ------------------------------
and validly existing in good standing under the laws of the State of Delaware,
and has full corporate power, authority and legal right to own its properties
and conduct its business as such properties are presently owned and such
business is presently conducted, and to execute, deliver and perform its
obligations under this Agreement and the Receivables Purchase Agreement and to
execute and deliver to the Owner Trustee pursuant hereto the Notes.

                                       5
<PAGE>

     (b)  Due Qualification. Seller is not required to qualify to do business as
          -----------------
a foreign corporation in any state or to obtain any licenses or approvals in any
jurisdiction in order to conduct its business.

     (c)  Due Authorization. The execution and delivery of this Agreement and
          -----------------
the Receivables Purchase Agreement and the consummation of the transactions
provided for herein and therein have been duly authorized by Seller by all
necessary corporate action on the part of Seller.

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

     (e)  No Violation. The execution and delivery of this Agreement and the
          ------------
Receivables Purchase Agreement, the performance of the transactions contemplated
hereby and thereby and the fulfillment of the terms hereof and thereof will not
conflict with or violate any Requirements of Law applicable to Seller.

     (f)  No Proceedings. There are no proceedings or investigations pending or,
          --------------
to the best knowledge of Seller, threatened against Seller, before any court,
regulatory body, administrative agency, or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Agreement, the Receivables
Purchase Agreement or the Notes, (ii) seeking to prevent the issuance of the
Notes or the consummation of any of the transactions contemplated by this
Agreement, the Receivables Purchase Agreement or the Notes, (iii) seeking any
determination or ruling that, in the reasonable judgment of Seller, would
materially and adversely affect the performance by Seller of its obligations
under this Agreement or the Receivables Purchase Agreement, (iv) seeking any
determination or ruling that would materially and adversely affect the validity
or enforceability of this Agreement, the Receivables Purchase Agreement or the
Notes or (v) seeking to impose income taxes on the Issuer (other than as a
wholly-owned subsidiary of Seller).

     (g)  Eligibility of Accounts. As of the Initial SMT Cut-Off Date, each
          -----------------------
Account was an Eligible Account.

     (h)  All Consents Required. All appraisals, authorizations, consents,
          ---------------------
orders or other actions of any Person or of any governmental body or official
required in connection with the execution and delivery of this Agreement, and
the Notes, the performance of the transactions contemplated by this Agreement,
and the fulfillment of or terms hereof, have been obtained.

                                       6
<PAGE>

     (i)  Bulk Sales. The execution, delivery and performance of this Agreement
          ----------
do not require compliance with any "bulk sales" law by Seller.

     (j)  Solvency. The transactions under this Agreement do not and will not
          --------
render Seller insolvent.

     (k)  Selection Procedures. No selection procedures believed by Seller to be
          --------------------
materially adverse to the interests of the Issuer or the Noteholders were
utilized by FCNB in selecting the Accounts.

The representations and warranties set forth in this Section 2.3 shall survive
                                                     -----------
the transfer of the Trust Assets to the Issuer, and termination of the rights
and obligations of the Servicer pursuant to Section 7.1. Upon discovery by
                                            -----------
Seller, the Servicer or the Owner Trustee of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the others and any Enhancement Provider. For the
purposes of the representations and warranties contained in this Section 2.3 and
                                                                 -----------
made by Seller on the Initial Closing Date, "Notes" shall mean the Notes issued
                                             -----
on the Initial Closing Date. Seller hereby represents and warrants, with respect
to any Series, as of the Closing Date with respect to such Series, unless
otherwise stated in the related Indenture Supplement, that the representations
and warranties of Seller set forth in this Section 2.3 will be true and correct
                                           -----------
as of such date (for the purposes of such representations and warranties,
"Notes" shall mean the Notes issued on such Closing Date).
 -----

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

     (a)  Binding Obligation; Valid Transfer and Security Interest. Seller
          --------------------------------------------------------
hereby represents and warrants to the Issuer that, as of the Initial Closing
Date and, with respect to any Series issued on or after the SMT Termination
Date, unless otherwise stated in the related Indenture Supplement, as of the SMT
Termination Date or the Closing Date for such Series, as the case may be:

          (i)  This Agreement constitutes a legal, valid and binding obligation
     of Seller, enforceable against Seller in accordance with its terms, except
     as such enforceability may be limited by Debtor Relief Laws and except as
     such enforceability may be limited by general principles of equity (whether
     considered in a suit at law or in equity).

          (ii) This Agreement constitutes either (A) a valid transfer to the
     Issuer of all right, title and interest of Seller in, to and under the
     Trust Assets, and such property will be held by the Issuer free and clear
     of any Lien of any Person claiming through or under Seller or its
     Affiliates, except for (w) the interests of the SMT Trustee, the Indenture
     Trustee and the Noteholders, (x) Liens permitted under Section 2.5(b), (y)
                                                            --------------
     the interest of Seller as holder of

                                       7
<PAGE>

     the Seller Certificate and (z) Seller's right to receive interest accruing
     on, and investment earnings in respect of, the Collection Account or any
     Series Account as provided in the Transaction Documents or (B) a grant of a
     security interest in such property to the Issuer, which is enforceable with
     respect to (i) upon execution and delivery of this Agreement, the
     Collateral Certificate, all monies due or to become due with respect
     thereto and other proceeds thereof, (ii) upon the SMT Termination Date, the
     existing Receivables in the Accounts, all monies due or to become due with
     respect thereto, the Collections, Recoveries and other proceeds thereof,
     and Insurance Proceeds relating thereto and (iii) thereafter, at the time
     new Receivables arise, with respect to such Receivables, all monies due or
     to become due with respect thereto, and the Collections, Recoveries and
     other proceeds thereof and Insurance Proceeds relating thereto. If this
     Agreement constitutes the grant of a security interest to the Issuer in
     such property, upon the filing of the financing statement described in
     Section 2.1 and in the case of the Receivables hereafter arising in the
     -----------
     Accounts and proceeds thereof and Insurance Proceeds relating to such
     Receivables, as the same arise, the Issuer shall have a first priority
     perfected security interest in such property, except for Liens permitted
     under Section 2.5(b). Neither Seller nor any Person claiming through or
           --------------
     under Seller shall have any claim to or interest in the Collection Account,
     the Excess Funding Account or any Series Account, except for Seller's right
     to receive interest accruing on, and investment earnings in respect of, the
     Collection Account, the Excess Funding Account or any Series Account as
     provided in the Transaction Documents, Seller's right to receive payments
     from the Collection Account or any Series Account in accordance with the
     provisions of the Indenture, and, if this Agreement constitutes the grant
     of a security interest in such property, except for the interest of Seller
     in such property as a debtor for purposes of the UCC as in effect in the
     State of Illinois.

     (b)  Eligibility of Receivables. As of the SMT Termination Date, Seller
          --------------------------
agrees that all representations and warranties made by it with respect to any
Account or Receivable pursuant to Section 2.4 of the Transfer and Servicing
                                  -----------
Agreement shall be deemed for all purposes (including the reassignment
obligations under Section 2.4(e)) to have been made pursuant to this Agreement
                  --------------
as of the day when each was made or deemed made, as if this Agreement had been
in effect on that day. Thereafter, each day on which any new Receivable is
transferred by Seller to the Issuer, Seller shall be deemed to represent and
warrant to the Issuer that (i) each Receivable transferred on such day is an
Eligible Receivable, (ii) each Receivable transferred on such day has been
transferred to the Issuer free and clear of any Lien of any Person (other than
Liens permitted under Section 2.5(b), the interest of Seller as holder of the
                      --------------
Seller Certificate and Seller's right to receive interest accruing on, and
investment earnings in respect of, the Collection Account or any Series Account,
as provided in the Transaction Documents) and in compliance, in all material
respects, with all Requirements of Law applicable to Seller, (iii) with respect
to each

                                       8
<PAGE>

such Receivable, all consents, licenses, approvals or authorizations of or
registrations or declarations with any Governmental Authority required to be
obtained, effected or given by Seller in connection with the transfer of such
Receivable to the Issuer have been duly obtained, effected or given and are in
full force and effect and (iv) the representations and warranties set forth in
Section 2.4(a) are true and correct with respect to each Receivable transferred
--------------
on such day as if made on such day.

     (c)  Notice of Breach. The representations and warranties set forth in this
          ----------------
Section 2.4 shall survive the transfer of the respective Receivables to the
-----------
Issuer, and termination of the rights and obligations of the Servicer pursuant
to Section 7.1. Upon discovery by Seller, the Servicer or the Owner Trustee of a
   -----------
breach of any of the foregoing representations and warranties, the party
discovering such breach shall give prompt written notice to the others and any
Enhancement Provider.

     (d)  Reassignment of Ineligible Receivables.
          --------------------------------------

     (i)  Reassignment of Receivables. In the event (i) any representation or
          ---------------------------
warranty contained in Section 2.4(b) or Section 2.6(c) is not true and correct
                      --------------    --------------
in any material respect as of the date specified therein with respect to any
Receivable or the related Account unless cured within sixty (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
the Seller which conveyed such Receivables to the Issuer or receipt by such
Seller of written notice thereof given by the Owner Trustee, the Indenture
Trustee or the Servicer, or (ii) it is so provided in Section 2.5(a) or
                                                      --------------
2.6(c)(vii) with respect to any Receivables conveyed to the Issuer by such
-----------
Seller, then such Seller shall accept reassignment of all Receivables in the
related Account ("Ineligible Receivables") on the terms and conditions set forth
                  ----------------------
in paragraph (ii) below. Notwithstanding anything contained in this Section
                                                                    -------
2.4(d) to the contrary, in the event of breach of any representation and
------
warranty set forth in Section 2.4(b), with respect to (x) each Receivable
                      --------------
existing as of the Closing Date or an Addition Date, as applicable, and (y) each
new Receivable thereafter arising, having been conveyed to the Trust free and
clear of any Lien of any Person claiming through or under Seller and its
Affiliates and in compliance in all material respects, with all Requirements of
Law applicable to Seller, immediately upon the earlier to occur of the discovery
of such breach by Seller or receipt by Seller of written notice of such breach
given by the Owner Trustee or the Servicer, Seller shall repurchase and the
Owner Trustee shall convey, without recourse, representation or warranty, all of
the Owner Trustee's right, title and interest in each Ineligible Receivable.

     (ii) Price of Reassignment. The Servicer shall deduct the portion of such
          ---------------------
Ineligible Receivables reassigned to the Seller which are Principal Receivables
from the aggregate amount of the Principal Receivables used to calculate the
Seller Amount.

     Upon reassignment of any Ineligible Receivable, the Issuer shall
automatically and without further action be deemed to transfer, assign, set over
and

                                       9
<PAGE>

otherwise convey to the applicable Seller or its designee, without recourse,
representation or warranty, all the right, title and interest of the Issuer in
and to such Ineligible Receivable, all Recoveries related thereto, all monies
and amounts due or to become due and all proceeds thereof and such reassigned
Ineligible Receivable shall be treated by the Issuer as collected in full as of
the date on which it was transferred. The obligation of Seller to accept
reassignment of any Ineligible Receivables conveyed to the Issuer by Seller, and
to make the deposits, if any, required to be made to the Excess Funding Account
as provided in this Section, shall constitute the sole remedy respecting the
event giving rise to such obligation available to the Issuer, the Noteholders
(or the Owner Trustee on behalf of the Noteholders) or any Series Enhancer. The
Issuer 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 Seller to effect the conveyance of such Ineligible Receivables
pursuant to this Section 2.4(d), but only upon receipt of an Officer's
                 --------------
Certificate from such Seller that states that all conditions set forth in this
Section 2.5 have been satisfied.
-----------

     (e)  Reassignment of Issuer Portfolio. In the event any representation or
          --------------------------------
warranty of a Seller set forth in Section 2.4(a) is not true and correct in any
                                  --------------
material respect and such breach has a material adverse effect on the
Receivables conveyed to the Issuer by such Seller or the availability of the
proceeds thereof to the Issuer (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 holding
not less than 50% of the aggregate principal amount of all Outstanding Notes, by
notice then given to such Seller and the Servicer (and to the Owner Trustee and
Indenture Trustee if given by the Noteholders), may direct such Seller to accept
a reassignment of the Receivables conveyed to the Issuer by such Seller if such
breach and any material adverse effect caused by such breach is not cured within
sixty (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
Seller shall be obligated to accept such reassignment on the terms set forth
below; provided, however, that such Receivables will not be reassigned to such
       --------  -------
Seller 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 Seller 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 Seller shall deposit in the Collection Account in
immediately available funds not later than 1:00 p.m., New York City time, on the
first Payment Date following the Monthly Period in which such reassignment
obligation arises, in payment for such reassignment, an amount 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 Payment
Date in accordance with the terms of each Indenture Supplement. If the Owner
Trustee, the Indenture Trustee or the

                                      10
<PAGE>

Noteholders give notice directing the applicable Seller to accept a reassignment
of the Receivables as provided above, the obligation of such Seller to accept
such reassignment pursuant to this Section 2.4(e) 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 2.4(e) available to the Noteholders (or the
                           --------------
Owner Trustee or Indenture Trustee on behalf of the Noteholders) or any Series
Enhancer. Upon reassignment of the Receivables on such Payment Date, the Issuer
shall automatically and without further action be deemed to sell, transfer,
assign, set-over and otherwise convey to the applicable Seller, without
recourse, representation or warranty, all the right, title and interest of the
Issuer in and to the Receivables, all Interchange and Recoveries allocable to
the Issuer, and all monies and amounts due or to become due with respect thereto
and all proceeds thereof. The Issuer shall execute such documents and
instruments of transfer or assignment and take such other actions as shall
reasonably be requested by the applicable Seller to effect the conveyance of
such property pursuant to this Section.

     Section 2.5.   Covenants of Seller. Seller hereby covenants that:
                    -------------------

     (a) Receivables Not to be Evidenced by Promissory Notes. Seller will take
         ---------------------------------------------------
no action to cause any Receivable to be evidenced by any instrument.

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

provided further, however, that nothing in this Section 2.5(b) shall prevent or
-------- -------  -------                       --------------
be deemed to prohibit Seller from granting a participation interest in the
Seller Certificate or the undivided interests in the Issuer evidenced thereby.

     (c)  Account Allocations.
          -------------------

          (i) If Seller is unable for any reason to transfer Receivables to the
     Issuer in accordance with the provisions of this Agreement (including by
     reason of the occurrence of an Insolvency Event) then, in any such event,
     (A) Seller agrees to instruct the Servicer to allocate and pay to the
     Issuer, after the date of such inability, payments received in respect of
     the Accounts giving


                                      11
<PAGE>

     rise to such Receivables first to the total amount of Principal Receivables
     from such Accounts transferred to the Issuer; and (B) Seller agrees to have
     such amounts applied as Collections in accordance with the Indenture. The
     parties hereto agree that Finance Charge Receivables, whenever created,
     with respect to Principal Receivables which have been transferred to the
     Issuer shall continue to be a part of the Issuer notwithstanding any
     cessation of the transfer of additional Principal Receivables to the Issuer
     and Collections with respect thereto shall continue to be allocated and
     paid in accordance with the Indenture and all amounts which would have
     constituted Principal Receivables but for Seller's inability to transfer
     Receivables to the Issuer shall be deemed to be Principal Receivables for
     the purpose of calculating (i) the applicable Allocation Percentage with
     respect to any Series and (ii) the Aggregate Allocation Percentage
     thereunder. If Seller is unable pursuant to any Requirement of Law to
     allocate Collections as described above, Seller agrees that, solely for
     purposes of payments under this Agreement, it shall in any such event
     allocate, after the occurrence of such event, payments on each Account with
     respect to the principal balance of such Account first to the oldest
     principal balance of such Account (it being understood that the foregoing
     allocation does not affect, with respect to any obligor, the priority of
     application of cardholder payments provided for in the related Charge
     Account Agreement(s)) and to have such payments applied as Collections in
     accordance with the Indenture. The parties hereto agree that Finance Charge
     Receivables, whenever created, accrued in respect of Principal Receivables
     which have been conveyed to the Issuer, or which would have been conveyed
     to the Issuer but for the above described inability to transfer such
     Receivables, shall continue to be a part of the Issuer notwithstanding any
     cessation of the transfer of additional Principal Receivables to the Issuer
     and Collections with respect thereto shall continue to be allocated and
     paid in accordance with the Indenture.

          (ii) If, pursuant to Section 2.4(d), Seller accepts a retransfer of an
                               --------------
     Ineligible Receivable as a result of a breach of the representations and
     warranties in Section 2.4(b) relating to such Receivable, then, in any such
                   --------------
     event, Seller agrees to instruct the Servicer to allocate payments received
     in respect of the Account giving rise to such Receivable first to the total
     amount of Principal Receivables of the appropriate Obligor retained in the
     Issuer and thereafter to the total amount owing by such Obligor on any
     Ineligible Receivable retransferred to Seller.

     (d)  Delivery of Collections. Seller agrees to pay to the Servicer promptly
          -----------------------
(but in no event later than two Business Days after receipt) all Collections
received by Seller in respect of the Receivables.

     (e)  Regulatory Filings. Seller shall make any filings, reports, notices,
          ------------------
applications and registrations with, and seek any consents or authorizations
from, the

                                      12
<PAGE>

Securities and Exchange Commission and any state securities authority on behalf
of the Issuer as may be necessary or advisable to comply with any federal or
state securities or reporting requirements laws.

     (f) Finance Charges and Other Fees. Seller agrees that, except as otherwise
         ------------------------------
required by any Requirement of Law or as is deemed by FCNB to be advisable for
its charge account programs based on a good faith assessment by FCNB of the
various factors relating to its business, FCNB shall not reduce at any time (i)
the Finance Charges assessed in respect of any Accounts, or (y) any other fees
charged on any of the Accounts if, as a result of such reduction, FCNB's
reasonable expectation of the Portfolio Yield as of such date, after giving
effect to such reduction, would be less than the current weighted average Base
Rates for all outstanding Series. Further, Seller agrees that, unless required
by any Requirement of Law, FCNB shall not reduce the annual percentage rate
applicable to the Accounts if, as a result of such reduction, FCNB's reasonable
expectation is that the Portfolio Yield would be less than the highest Note Rate
with respect to any Series then issued and outstanding.

     (g) Charge Account Agreements and Charge Account Guidelines. Seller agrees
         -------------------------------------------------------
to comply with and perform its obligations under the Charge Account Agreements
relating to the Accounts and the Charge Account Guidelines, except insofar as
any failure so to comply or conform would not materially and adversely affect
the rights of the Issuer or the Noteholders hereunder or under the Notes or any
Indenture Supplement. Subject to the foregoing and subject to the restrictions
set forth in Section 2.5(f) and subject to compliance with any applicable Terms
             --------------
Change Condition, and so long as such changes are made applicable to comparable
segments of those charge account accounts serviced by the Servicer which have
characteristics the same as, or substantially similar to, the Accounts which are
subject hereto, FCNB shall be free to change the terms and provisions of such
Charge Account Agreements or the Charge Account Guidelines in any respect. FCNB
shall provide to each Rating Agency written notice of any such change of which
FCNB notifies Obligors.

     (h) Compliance with Law. Seller hereby agrees to comply in all material
         -------------------
respects with all Requirements of Law applicable to Seller.

     (i) Activities of Seller. Seller shall not engage in any business or
         --------------------
activity of any kind or enter into any transaction or indenture, mortgage,
instrument, agreement, contract, lease or other undertaking which is not
directly related to the transactions contemplated and authorized by this
Agreement or the Receivables Purchase Agreement or which is otherwise a
Permitted Transaction.

     (j) Indebtedness. Seller shall not create, incur, assume or suffer to exist
         ------------
any Indebtedness or other liability whatsoever, except (i) obligations incurred
or owing to the Issuer under this Agreement or the Receivables Purchase
Agreement, (ii) liabilities incident to the maintenance of its corporate
existence in good standing

                                      13
<PAGE>

and the ownership of the Receivables or (iii) obligations incident to a
Permitted Transaction.

     (k) Guarantees. Seller shall not become or remain liable, directly or
         ----------
contingently, in connection with any Indebtedness or other liability of any
other Person, whether by guarantee, endorsement (other than endorsements of
negotiable instruments for deposit or collection in the ordinary course of
business), agreement to purchase or repurchase, agreement to supply or advance
funds, or otherwise except incident to a Permitted Transaction.

     (l) Investments. Seller shall not make or suffer to exist any loans or
         -----------
advances to, or extend any credit to, or make any investments (by way of
transfer of property, contributions to capital, purchase of stock or securities
or evidences of indebtedness, acquisition of the business or assets, or
otherwise) in, any Person except (i) for purchases of Receivables pursuant to
the Receivables Purchase Agreement, (ii) for investments in Permitted
Investments in accordance with the terms of this Agreement or (iii) pursuant to
a Permitted Transaction.

     (m) Distributions. Seller shall not declare or pay, directly or indirectly,
         -------------
any dividend or make any other distribution (whether in cash or other property)
with respect to the profits, assets or capital of Seller or any Person's
interest therein, or purchase, redeem or otherwise acquire for value any of its
capital stock now or hereafter outstanding, except that so long as no Pay Out
Event has occurred and is continuing and no Pay Out Event would occur as a
result thereof or after giving effect thereto, Seller may declare and pay
dividends on its capital stock.

     (n) Agreements. Seller shall not become a party to, or permit any of its
         ----------
properties to be bound by, any indenture, mortgage, instrument, contract,
agreement, lease or other undertaking, except the Transaction Documents and
except incidental to a Permitted Transaction or amend or modify the provisions
of its Certificate of Incorporation or issue any power of attorney except to the
Owner Trustee or to the Servicer.

     (o) Receivables Purchase Agreement. Seller shall not give any consent to
         ------------------------------
FCNB or exercise any of its rights under the Receivables Purchase Agreement
unless the Rating Agency Condition is satisfied with respect thereto.

     (p) Separate Corporate Existence. Seller shall:
         ----------------------------

         (i) Maintain its own deposit account or accounts, separate from those
     of any Affiliate, with commercial banking institutions. The funds of Seller
     will not be diverted to any other Person or for other than corporate uses
     of Seller.


                                      14
<PAGE>

          (ii)    Ensure that, to the extent that it shares the same officers or
     other employees as any of its stockholders or Affiliates, the salaries of
     and the expenses related to providing benefits to such officers and other
     employees shall be fairly allocated among such entities, and each such
     entity shall bear its fair share of the salary and benefit costs associated
     with all such common officers and employees.

          (iii)   Ensure that, to the extent that it jointly contracts with any
     of its stockholders or Affiliates to do business with vendors or service
     providers or to share overhead expenses, the costs incurred in so doing
     shall be allocated fairly among such entities, and each such entity shall
     bear its fair share of such costs. To the extent that Seller contracts or
     does business with vendors or service providers where the goods and
     services provided are partially for the benefit of any other Person, the
     costs incurred in so doing shall be fairly allocated to or among such
     entities for whose benefit the goods and services are provided, and each
     such entity shall bear its fair share of such costs. All material
     transactions (other than this Agreement and the Receivables Purchase
     Agreement) between Seller and any of its Affiliates shall be only on an
     arm's length basis.

          (iv)    Maintain a principal executive and administrative office
     through which its business is conducted separate from those of its
     Affiliates. To the extent that Seller and any of its stockholders or
     Affiliates have offices in the same location, there shall be a fair and
     appropriate allocation of overhead costs among them, and each such entity
     shall bear its fair share of such expenses.

          (v)     Conduct its affairs strictly in accordance with its
     Certificate of Incorporation and observe all necessary, appropriate and
     customary corporate formalities, including, but not limited to, holding all
     regular and special stockholders' and directors' meetings appropriate to
     authorize all corporate action, keeping separate and accurate minutes of
     its meetings, passing all resolutions or consents necessary to authorize
     actions taken or to be taken, and maintaining accurate and separate books,
     records and accounts, including, but not limited to, payroll and
     intercompany transaction accounts.

     (q)  Location of Records. Seller (i) shall not move outside the State of
          -------------------
Delaware the location of its chief executive office without 45 days' prior
written notice to the Owner Trustee and (ii) will promptly take all actions
required (including but not limited to all filings and other acts necessary or
advisable under the UCC of each relevant jurisdiction) in order to continue the
first priority perfected ownership interest of the Noteholders in all
Receivables now owned or hereunder created. Seller will give the Owner Trustee
prompt notice of a change within the State of Delaware of the location of its
chief executive office.


                                      15
<PAGE>

      Section 2.6.  Addition of Accounts.
                    --------------------

      (a)  If, during any period of 30 consecutive days ending after the SMT
Termination Date either (i) the average Aggregate Net Principal Receivables is
less than the Minimum Aggregate Principal Receivables averaged for such period
or (ii) the average Seller Amount is less than the Minimum Seller Amount
averaged for such period, either Seller or the Servicer (whichever shall first
become aware of same) promptly shall give the Owner Trustee written notice
thereof, and as soon as practicable (but in no event later than 10 Business Days
thereafter) Seller shall designate additional Eligible Accounts ("Additional
                                                                  ----------
Accounts") to be included as Accounts and shall transfer the Receivables in such
--------
Additional Accounts to the Issuer, in a sufficient amount so that (x) the
average Aggregate Net Principal Receivables would at least equal the Minimum
Aggregate Principal Receivables averaged for such 30-day period and (ii) the
average Seller Amount would at least equal the Minimum Seller Amount averaged
for such 30-day period would have, if the Receivables from such Additional
Accounts had been transferred to the Issuer during such 30-day period.  Each of
the averages referred to in the preceding sentence shall be calculating by
taking the sum of the specified amount at the end of each Business Day falling
in that period and dividing by the number of Business Days falling in that
period.

      (b)  In addition to its obligation under Section 2.6(a), Seller may, but
                                               --------------
shall not be obligated to, from time to time, designate Additional Accounts to
be included as Accounts so long as after giving effect to such addition not more
than 20% of the Principal Receivables, by outstanding balance, will be 30 or
more days delinquent.

      (c)  Seller agrees that any Receivables from Additional Accounts shall be
transferred by Seller to the Issuer under Section 2.6(a), (b) or (e) upon and
                                          --------------  ---    ---
subject to the following conditions:

          (i)  On or before the fifth Business Day (the "Notice Date") prior to
                                                         -----------
      the Addition Date in respect of Additional Accounts added pursuant to
      Section 2.6(a) or (b), Seller shall give the Owner Trustee and the
      -------------     ---
      Servicer written notice that such Additional Accounts will be included and
      specifying the approximate aggregate amount of the Receivables to be
      transferred;

          (ii) Seller (A) shall transfer to the Issuer Receivables only in
      Eligible Accounts, and (B) shall satisfy the applicable condition in
      accordance with Section 2.6(f) if such designation of Additional Accounts
                      --------------
      is made pursuant to Section 2.6(b) or (e) and if the addition of such
                          --------------
      Additional Accounts


               (1)  would cause the quotient (the "Annual Quotient") of (x) the
                                                  ---------------
          sum of the Annual Net Account Additions after giving effect



                                      16
<PAGE>

          to such addition plus the related Base Amount divided by (y) the
          related Base Amount to exceed 1.20, or

                (2)  would cause the quotient (the "Quarterly Quotient") of (x)
                                                    ------------------
          the sum of the Quarterly Net Account Additions after giving effect to
          such addition plus the related Base Amount divided by (y) the related
          Base Amount to exceed 1.15;

          (iii) On or prior to the Addition Date, in respect of Additional
     Accounts added pursuant to Section 2.6(a) or (b), Seller shall have
                                -------------     ---
     delivered to the Owner Trustee a written Assignment Agreement (including an
     acceptance by the Owner Trustee on behalf of the Issuer for the benefit of
     the Noteholders) in substantially the form of Exhibit A (the "Assignment
                                                   ---------       ----------
     Agreement") and shall have indicated in its books and records, including
     ---------
     the computer files of the Receivables, that the Receivables created in
     connection with the Additional Accounts have been transferred by Seller to
     the Issuer; and shall have delivered to the Owner Trustee a computer file
     or microfiche list containing a true and complete list of all Additional
     Accounts identified by account number and by Receivable balance as of the
     Addition Date in respect of Additional Accounts added pursuant to Section
                                                                       -------
     2.6(a) or  (b), which computer file or microfiche list shall be marked as
     ------     ---
     Schedule 1 to the Assignment Agreement, delivered to the Owner Trustee as
     ----------
     confidential and proprietary, shall be as of the date of such Assignment
     Agreement and incorporated into and made a part of such Assignment
     Agreement and this Agreement;

          (iv)  Seller shall be deemed to represent and warrant that (w) as of
     the Addition Date, Schedule 1 to the Assignment Agreement and the computer
                        ----------
     file or microfiche list delivered pursuant to Section 2.6(c) is an accurate
                                                   --------------
     and complete listing in all material respects of all the Additional
     Accounts as of the Addition Date and the information contained therein with
     respect to the identity of such Additional Accounts and the Receivables
     existing thereunder is true and correct in all material respects as of the
     Addition Date, (x) each Additional Account is, as of the Addition Date, an
     Eligible Account, (y) no selection procedures reasonably believed by Seller
     to be materially adverse to the interests of the Noteholders were utilized
     in selecting the Additional Accounts from the available Eligible Accounts,
     and (z) as of the Addition Date, Seller is not insolvent and will not be
     rendered insolvent by adding any such Additional Account to any Cycle;

          (v)   Seller shall be deemed to represent and warrant that, as of the
     Addition Date, the Assignment Agreement constitutes either (x) a valid
     transfer to the Issuer of all right, title and interest of Seller in, to
     and under the Receivables then existing and thereafter arising in respect
     of the Additional Accounts, all monies due or to become due with respect
     thereto


                                      17
<PAGE>

     (including all Finance Charge Receivables), and all proceeds of such
     Receivables and Insurance Proceeds relating thereto, and such property will
     be owned by the Issuer free and clear of any Lien of any Person, except for
     (i) Liens permitted under Section 2.5(b), (ii) the interest of Seller as
                               --------------
     holder of the Seller Certificate and (iii) Seller's right to receive
     interest accruing on, and investment earnings in respect of, the Collection
     Account or any Series Account as provided in this Agreement and any
     Indenture Supplement, or (y) a grant of a security interest in such
     property to the Issuer, which is enforceable with respect to then existing
     Receivables of the Additional Accounts, all monies due or to become due
     with respect thereto, the proceeds thereof and Recoveries and Insurance
     Proceeds relating thereto upon the transfer of such Receivables to the
     Issuer, and which will be enforceable with respect to the Receivables
     thereafter transferred in respect of Additional Accounts, the proceeds
     thereof and Insurance Proceeds relating thereto upon such transfer; and (z)
     if the Assignment Agreement constitutes the grant of a security interest to
     the Issuer in such property, upon the filing of a financing statement as
     described in Section 2.1 with respect to such Additional Accounts and in
                  -----------
     the case of the Receivables of Additional Accounts thereafter transferred
     and the proceeds thereof, and Insurance Proceeds relating to such
     Receivables, upon such transfer, the Issuer shall have a first priority
     perfected security interest in such property, except for Liens permitted
     under Section 2.5(b), the interest of Seller as holder of the Seller
           --------------
     Certificate and Seller's right to receive interest accruing on, and
     investment earnings in respect of, the Collection Account or any Series
     Account, as provided in this Agreement and any Indenture Supplement;

          (vi)  Seller shall, on the Addition Date for Additional Accounts added
     pursuant to Section 2.6(a) or (b), deliver a certificate of a Vice
                 --------------    ---
     President or more senior officer confirming the items set forth in
     paragraphs (ii), (iii), (iv) and (v) above; and
                ----  -----  ----     ---

          (vii) Seller shall, on the Addition Date for Additional Accounts added
     pursuant to Section 2.6(a) or (b), deliver an Opinion of Counsel with
                 --------------    ---
     respect to the Receivables in the Additional Accounts to the Owner Trustee
     substantially in the form of Exhibit C.
                                  ---------

     (d)  Seller shall provide to each Rating Agency and to each Enhancement
Provider prior written notice each time Additional Accounts are added pursuant
to Section 2.6(a) or (b).
   --------------    ---

     (e)  In addition to the occasional designation of Additional Accounts as
required or permitted pursuant to Sections 2.6(a) and (b), Seller agrees that
                                  ---------------     ---
each new Charge Account originated in the normal course of FCNB's business and
assigned to an Included Cycle after the SMT Termination Date, and the
Receivables in which are purchased by Seller pursuant to the Receivables
Purchase Agreement, shall


                                      18
<PAGE>

automatically be included as an Account (and the Receivables arising thereunder
automatically transferred to the Issuer) effective on the tenth Business Day
following the end of the Monthly Period in which such account is assigned to
such billing cycle; provided, however, that such automatic inclusion and
                    --------  -------
transfer shall not occur with respect to any such account if: (i) such account
does not qualify as an Eligible Account, (ii) the inclusion in the Issuer of the
Receivables in such Account, if such Accounts had been designated by Seller
pursuant to Section 2.6(b), would have caused the limitations set forth in
            --------------
Section 2.6(c)(ii) to be exceeded (unless Seller shall have satisfied any
------------------
applicable condition to such addition), or (iii) Seller otherwise designates
such account as an account which is not to be included as an Account pursuant to
this Section 2.6(e). On or before the fifth Business Day of each month next
     -----------
succeeding a calendar month in which Accounts were included pursuant to the
preceding sentence, Seller shall (i) indicate in its books and records,
including the computer files of the receivables, that the Receivables created in
connection with such included Accounts have been transferred to the Issuer, and
(ii) shall deliver to the Owner Trustee a computer file or microfiche list
containing a true and complete list of all such included Accounts identified by
account number and by the Receivables balance as of the end of such calendar
month, which computer file or microfiche list shall be delivered to the Owner
Trustee as confidential and proprietary and incorporated into and made a part of
this Agreement. Seller, at its option, may, by providing written notice to the
Owner Trustee and the Servicer, terminate or suspend the inclusion of Additional
Accounts added pursuant to Section 2.6(e) at any time.

     (f)  (i) The Rating Agency Condition shall be applicable and must be
satisfied whenever the Quarterly Quotient exceeds the amount set forth in

Section 2.6(c)(ii)(B)(2) or whenever the Annual Quotient exceeds 1.30.
------------------------

          (ii) If the Annual Quotient exceeds 1.20 but is less than or equal to
     1.30 Seller may at its option satisfy either the Rating Agency Condition or
     the Additional Accounts Enhancement Increase Condition. If no outstanding
     Series specifies an Additional Accounts Enhancement Increase Condition,
     then this clause (ii) shall not be applicable to the addition of Additional
               -----------
     Accounts.

     Section 2.7.  Removal of Accounts.
                   -------------------

     (a)  Subject to the conditions set forth below, after the SMT Termination
Date, Seller may designate from time to time Accounts no longer to be designated
for inclusion in the Issuer (the "Removed Accounts"); provided, however, that
                                  ----------------    --------  -------
Seller shall not make more than one such designation in any Monthly Period. On
or before the fifth Business Day (the "Removal Notice Date") prior to the date
                                       -------------------
on which Removed Accounts shall be designated (the "Removal Date"), Seller shall
                                                    ------------
give the Owner Trustee, the Servicer and each Enhancement Provider written
notice that the Receivables from such Removed Accounts are to be retransferred
to Seller.


                                      19
<PAGE>

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

          (i)    Seller shall satisfy the Rating Agency Condition with respect
     thereto by such Removal Date;

          (ii)   on each Removal Date, the Owner Trustee shall deliver to Seller
     a written Reassignment Agreement in substantially the form of Exhibit B
                                                                   ---------
     (the "Reassignment Agreement") prepared by Seller, and Seller shall deliver
           ----------------------
     to the Owner Trustee a computer file, microfiche or written list containing
     a true and complete schedule identifying all Removed Accounts specifying
     for each such Removed Account, as of the Removal Notice Date, its account
     number and the Receivable balance thereof. Such computer file, microfiche
     or written list shall be as of the date of such Reassignment Agreement
     incorporated into and made a part of this Agreement;

          (iii)  Seller shall represent and warrant as of each Removal Date that
     (A) the list of Removed Accounts, as of the Removal Notice Date, complies
     in all material respects with the requirements of (ii) above; (B) Accounts
     (or administratively convenient groups of Accounts, such as billing cycles)
     were chosen for removal randomly or at any rate not on a basis intended to
     select particular accounts or groups of accounts for any reason other than
     administrative convenience, and no selection procedure used by Seller which
     is adverse to the interests of the Noteholders was utilized in selecting
     the Removed Accounts; and (C) as of the Removal Notice Date and as of the
     Removal Date, Seller is not insolvent and Seller has no present intention
     of seeking protection under any Debtor Relief Laws;

          (iv)   The removal of any Receivables of any Removed Accounts on any
     Removal Date shall not, in the reasonable belief of Seller, cause a Pay Out
     Event to occur, or an event which with notice or lapse of time or both
     would constitute a Pay Out Event;

          (v)    The Seller Amount shall not be less than 105% of the Minimum
     Seller Amount (or if the Minimum Seller Amount is zero, 5% of the Minimum
     Aggregate Principal Balance) after giving effect to such removal and the
     Aggregate Net Principal Receivables shall not be less than the Minimum
     Aggregate Principal Balance;

          (vi)   Seller shall have delivered to the Owner Trustee and to each
     Enhancement Provider a certificate of an officer of Seller confirming the
     items set forth in (i) through (v) above. The Owner Trustee may
     conclusively rely on such certificate, shall have no duty to make inquiries
     with regard to the matters set forth therein and shall incur no liability
     in so relying; and


                                      20
<PAGE>

          (vii)  such other conditions and restrictions as may at any time be
     specified in an Officer's Certificate of the Seller delivered to the Owner
     Trustee shall have been satisfied, it being understood that (i) no such
     additional conditions or restrictions may conflict with or override any of
     the conditions and restrictions specified above, and (ii) upon delivery of
     such an Officer's Certificate to the Owner Trustee, the additional
     conditions and restrictions specified therein shall be deemed to be
     incorporated by reference into and become a part of this Agreement.

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

      Section 2.8.  Discount Option. (a) Seller 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
 -------------------
created after the Discount Option Date to be treated as Finance Charge
Receivables ("Discount Option Receivables"). Seller shall also have the option
              ---------------------------
of reducing or withdrawing the Discount Percentage, at any time and from time to
time, on and after such Discount Option Date. Seller shall provide to the
Servicer, the Owner Trustee and any Rating Agency 30 days' prior written notice
of the Discount Option Date, and such designation shall become effective on the
Discount Option Date (i) unless such designation in the reasonable belief of
Seller would cause a Pay Out Event with respect to any series to occur, or an
event which, with notice or lapse of time or both, would constitute a Pay Out
Event with respect to any Series or (ii) unless the Rating Agency Condition
shall not have been satisfied with respect to such designation.

     (b) After the Discount Option Date, Seller shall treat Discount Option
Receivable Collections as Collections of Finance Charge Receivables.

     [Section 2.9.  Net Worth.  The Seller agrees to retain in force and to
                    ---------
enforce in accordance with its terms that certain Demand Note (the "Demand
                                                                    ------
Note") dated as of September 20, 1994, made by Spiegel and payable to the order
----
of the Seller; provided, however, that at such time as the Demand Note shall
become due in accordance with its terms, the Seller may enter into a new demand
note or alternative arrangement (in lieu of receiving or retaining cash payable
under the Demand Note) if it obtains an Opinion of Counsel that such new demand
note or alternate arrangement will not cause the Trust to be classified for
federal income tax purposes as an association taxable as a corporation.]

                                   ARTICLE III

                  ADMINISTRATION AND SERVICING OF RECEIVABLES


                                      21
<PAGE>

     Prior to the SMT Termination Date, the Receivables shall be serviced as
provided in the Transfer and Servicing Agreement, and this Article III will have
                                                           -----------
no effect. On and after the SMT Termination Date:

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

     (a)  FCNB agrees to act as the Servicer under this Agreement. The
Noteholders by their acceptance of the Notes consent to FCNB's acting as
Servicer.

     (b)  Subject to the provisions of this Agreement, the Servicer shall
service and administer the Receivables and shall collect payments due under the
[Collateral Certificate and] the Receivables in accordance with its customary
and usual servicing procedures for servicing charge account receivables
comparable to the Receivables and in accordance with the Charge Account
Guidelines and shall have full power and authority, acting alone or through any
party properly designated by it hereunder, to do any and all things in
connection with such servicing and administration which it may deem necessary or
desirable; provided, however, if the Servicer changes its policies with respect
           --------  -------
to the treatment of delinquencies or the recognition of charge-offs, the
Servicer shall provide to each Rating Agency written notice of such change in
policy. Without limiting the generality of the foregoing and subject to Section
                                                                        -------
7.1, the Servicer is hereby authorized and empowered (i) unless such power and
---
authority is revoked by the Owner Trustee on account of the occurrence of a
Servicer Default pursuant to Section 7.1, to make withdrawals from the
                             -----------
Collection Account as set forth in this Agreement, (ii) unless such power and
authority is revoked by the Owner Trustee on account of the occurrence of a
Servicer Default pursuant to Section 7.1, to instruct the Owner Trustee to make
                             -----------
withdrawals and payments from the Series Accounts in accordance with such
instructions as set forth in this Agreement, (iii) unless such power and
authority is revoked by the Owner Trustee on account of the occurrence of a
Servicer Default pursuant to Section 7.1, to instruct the Owner Trustee in
                             -----------
writing as provided herein, and (iv) unless such power and authority is revoked
by the Owner Trustee on account of the occurrence of a Servicer Default pursuant
to Section 7.1, to execute and deliver, on behalf of the Issuer for the benefit
   -----------
of the Noteholders, any and all instruments of satisfaction or cancellation, or
of partial or full release or discharge, and all other comparable instruments,
with respect to the Receivables and, after the delinquency of any Receivable and
to the extent permitted under and in compliance with applicable law and
regulations, to commence enforcement proceedings with respect to such
Receivables. The Owner Trustee agrees that it shall promptly follow the
instructions of the Servicer, including those to withdraw funds from the
Collection and any other Series Account. The Owner Trustee shall furnish the
Servicer with any powers of attorney and other documents necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties hereunder.

                                      22
<PAGE>

     (c)  (i)  In the event that Seller is unable for any reason to transfer
Receivables to the Issuer in accordance with the provisions of this Agreement
(including by reason of the occurrence of an Insolvency Event) the Servicer
agrees to allocate and pay to the Issuer, after such date, all Collections in
respect of the Accounts giving rise to such Receivables first to the total
amount of Principal Receivables from such Accounts transferred to the Issuer.

          (ii) In the event that pursuant to Section 2.4(d), Seller accepts a
                                             --------------
     retransfer of an Ineligible Receivable as a result of a breach of the
     representations and warranties in Section 2.4(b) relating to such
                                       --------------
     Receivable, the Servicer agrees to allocate payments received in respect of
     the Account giving rise to such Receivable first to the total amount of
     Principal Receivables of the appropriate Obligor retained in the Issuer and
     thereafter to the total amount owing by such Obligor on any Ineligible
     Receivables retransferred to Seller.

     (d)  The Servicer shall not be obligated to use separate servicing
procedures, offices, employees or accounts for servicing the Receivables from
the procedures, offices, employees and accounts used by the Servicer in
connection with servicing other charge account receivables.

     (e)  The Servicer shall maintain fidelity bond coverage insuring against
losses through wrongdoing of its officers and employees who are involved in the
servicing of credit card receivables.

     Section 3.2.  Servicing Compensation. As compensation for its servicing
                   ----------------------
activities hereunder and reimbursement for its expenses as set forth in the
immediately following paragraph, the Servicer shall be entitled to receive a
monthly servicing fee in respect of any Monthly Period (or portion thereof)
prior to the termination of the Issuer pursuant to the Indenture (with respect
to each Monthly Period, the "Monthly Servicing Fee"). The share of the Monthly
                             ---------------------
Servicing Fee allocable to each Series of Notes with respect to any Monthly
Period (or portion thereof) shall be payable on the related Distribution Date
and, with respect to each Series (unless provided in the related Indenture
Supplement), shall be equal to one-twelfth of the product of (A) the applicable
Series Servicing Fee Rate and (B) the outstanding principal amount of such
Series as of the first day of the related Monthly Period, or portion thereof
(the "Investor Monthly Servicing Fee"). The share of the Monthly Servicing Fee
      ------------------------------
allocable to the Holder of the Collateral Certificate with respect to any
Monthly Period (or portion thereof) shall be equal to one-twelfth of the product
of (A) Seller Amount and (B) the weighted average of the Series Servicing Fee
Rates with respect to each Series of Notes then outstanding (the "Monthly Seller
                                                                  --------------
Servicing Fee"). The Monthly Servicing Fee shall equal the sum of (x) the
-------------
aggregate amount of Investor Monthly Servicing Fees with respect to each Series
then outstanding and (y) the Monthly Seller Servicing Fee. The Investor Monthly
Servicing Fee with respect to any Series is payable in arrears on the related

                                      23
<PAGE>

Distribution Date (unless otherwise provided in the related Indenture
Supplement) and the Monthly Seller Servicing Fee is payable in arrears no later
than the last Distribution Date with respect to any Series occurring in a
Monthly Period.

     The Servicer's expenses include the reasonable fees and disbursements of
independent accountants and all other expenses incurred by the Servicer in
connection with its activities hereunder; provided that the Servicer shall not
                                          --------
be liable for any liabilities, costs or expenses of the Issuer, the Noteholders
or the Note Owners arising under any tax law, including any federal, state or
local income or franchise taxes or any other tax imposed on or measured by
income (or any interest or penalties with respect thereto or arising from a
failure to comply therewith). The Servicer shall be required to pay such
expenses for its own account and shall not be entitled to any payment therefor
other than the Monthly Servicing Fee.

     Section 3.3.  Representations; Warranties and Covenants of the Servicer.
                   ---------------------------------------------------------
FCNB, as initial Servicer, hereby makes, and any successor Servicer by its
appointment hereunder shall make, the following representations and warranties
and covenants on which the Owner Trustee has relied in accepting the Receivables
in trust and in authenticating Notes:

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

     (b)  Due Qualification. The Servicer is qualified as a foreign banking
          -----------------
association or other entity in any state where it is required to be so qualified
to service the Receivables as required by this Agreement and has obtained all
necessary licenses and approvals as required under federal and state law, in
each case, where the failure to be so qualified, licensed or approved, could
reasonably be expected materially and adversely to affect the ability of the
Servicer to comply with the terms of this Agreement.

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

     (d)  Binding Obligation. This Agreement constitutes legal, valid and
          ------------------
binding obligations of the Servicer, enforceable in accordance with its terms,
except as enforceability may be limited by Debtor Relief Laws and except as such
enforceability may be limited by general principles of equity (whether
considered in a proceeding at law or in equity).

                                      24
<PAGE>

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

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

     (g)  Rescission and Cancellation. Other than pursuant to and in accordance
          ---------------------------
with the Charge Account Guidelines, the Servicer shall not rescind or cancel any
Receivable unless such rescission or cancellation shall have been ordered or
directed by a Governmental Authority.

     (h)  Other Actions. Other than pursuant to and in accordance with the
          -------------
Charge Account Guidelines and as otherwise specifically permitted by this
Agreement, the Servicer shall not (i) take or fail to take any action if such
action or failure to act would impair the rights of the Issuer in any
Receivable, or (ii) revise or defer any payment due in respect of any
Receivable.

     (i)  Compliance with Requirements of Law. The Servicer shall duly satisfy
          -----------------------------------
all obligations on its part to be fulfilled under or in connection with the
Receivables or Accounts, will maintain in effect all qualifications required
under Requirements of Law in order to properly service the Receivables and the
Accounts and will comply in all material respects with all Requirements of Law
in connection with servicing the Receivables and the Accounts the failure to
comply with which would have a material adverse effect on the Noteholders.

     Section 3.4.  Reports and Records for the Owner Trustee; Bank Account
                   -------------------------------------------------------
Statements.
----------

     (a)  Daily Reports. On each Business Day, the Servicer shall prepare and
          -------------
make available at the office of the Servicer for inspection by the Owner Trustee
a record (the "Daily Report") setting forth (i) the aggregate amount of
               ------------
Collections processed by the Servicer on the preceding Business Day, (ii) the
Aggregate Net

                                      25
<PAGE>

Principal Receivables as of the close of business on the preceding Business Day,
(iii) the amount of Finance Charge Collections for the preceding Business Day,
(iv) the amount on deposit in the Excess Funding Account on the preceding
Business Day and (v) a calculation of the Seller Amount and the Minimum Seller
Amount and the Minimum Aggregate Principal Balance on the preceding Business Day
and a determination of whether the Seller Amount on the preceding Business Day
was greater than the Minimum Seller Amount on such Business Day and whether the
Aggregate Principal Balance on the preceding Business Day was greater than the
Minimum Aggregate Principal Balance on the preceding Business Day and such other
information as may be specified in an Indenture Supplement.

     (b)  Monthly Servicer's Certificate. Unless otherwise stated in the related
          ------------------------------
Indenture Supplement with respect to any Series, on each Determination Date, the
Servicer shall forward to the Owner Trustee, the Paying Agent, any Rating Agency
and any Enhancement Provider a certificate of a Servicing Officer substantially
in the form of Exhibit D setting forth (i) the aggregate amounts for the
               ---------
preceding Monthly Period with respect to each of the items specified in clauses
(i) and (iii) of Section 3.4(a), together with the amount and nature of any
                 --------------
true-up adjustment required by Section 1.4(b), (ii) the Default Amount for the
                               --------------
preceding Monthly Period, (iii) investor Net Recoveries for the preceding
Monthly Period, (iv) a calculation of the Portfolio Yield and Base Rate for each
Series then outstanding, (v) the aggregate amount of Receivables and the balance
on deposit in the Collection Account (or any subaccount thereof) or any Series
Account applicable to any Series then outstanding with respect to Collections
processed as of the end of the last day of the preceding Monthly Period, (vi)
the aggregate amount of Credit Adjustments from the preceding Monthly Period,
(vii) the aggregate amount, if any, of withdrawals, drawings or payments under
any Enhancement with respect to each Series required to be made with respect to
the previous Monthly Period, and (viii) the sum of all amounts payable to the
Noteholders on the succeeding Distribution Date in respect of Note Interest and
Note Principal.

     Section 3.5.  Annual Servicer's Certificate.  Unless the Servicer has been
                   -----------------------------
relieved of all of its obligations under this Agreement because the final Series
has been re-paid during the prior calendar year, the Servicer will deliver to
the Owner Trustee, any Enhancement Provider and any Rating Agency on or before
April 30 of each calendar year, beginning with April 30, 2001, an Officer's
Certificate substantially in the form of Exhibit E-1 stating that (a) a review
                                         -----------
of the activities of the Servicer during the preceding calendar year (or, with
respect to the certificate to be delivered on [___________], since the Issuer's
inception) and of its performance under this Agreement was made under the
supervision of the officer signing such certificate and (b) to the best of such
officer's knowledge, based on such review, the Servicer has fully performed all
its obligations under this Agreement throughout such period, or, if there has
been a default in the performance of any such obligation, specifying each such
default known to such officer and the nature and status thereof.

                                      26
<PAGE>

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

     Section 3.6.  Annual Independent Public Accountants' Servicing Report.
                   -------------------------------------------------------

     (a)  Unless the Servicer has been relieved of all of its obligations under
this Agreement because the final Series has been re-paid during the prior
calendar year, on or before April 30 of each calendar year, beginning with April
30, 2001, the Servicer shall cause KPMG Peat Marwick or another firm of
nationally recognized independent public accountants (who may also render other
services to the Servicer or Seller) to furnish a report covering the preceding
annual period to the effect that such accountants have applied certain agreed-
upon procedures to certain documents and records relating to the servicing of
Accounts under this Agreement, compared the information contained in the
Servicer's certificates delivered during the period covered by such report
(which shall be the period from January 1, to and including December 31 of such
calendar year or, with respect to the certificate to be delivered on
[___________], since the Issuer's inception) with such documents and records in
each case as specified in Exhibit E-2 and that no matters came to the attention
                          -----------
of such accountants that caused them to believe that such servicing was not
conducted in compliance with Section 3.2, the Indenture and Section 5.8 of this
                             -----------                    -----------
Agreement, except for such exceptions as such accountants shall believe to be
immaterial and such other exceptions as shall be set forth in such statement. In
addition, each report shall set forth the agreed-upon procedures performed. A
copy of such report may be obtained by any Noteholder by a request in writing to
the Owner Trustee addressed to the Corporate Trust Office. In addition, the
Servicer shall cause such accountants to furnish a copy of such report to each
Rating Agency and to each Enhancement Provider.

     (b)  On or before April 30 of each calendar year, beginning with April 30,
2001, the Servicer shall cause KPMG Peat Marwick or another firm of nationally
recognized independent public accountants (who may also render other services to
the Servicer or Seller) to furnish a report to the Owner Trustee to the effect
that they have compared the mathematical calculations of each amount set forth
in the monthly certificates forwarded by the Servicer pursuant to Section 3.4(b)
                                                                  --------------
during the period covered by such report (which shall be the period from January
1, to and including December 31 of such calendar year or, with respect to the
certificate to be delivered on [___________], since the Issuer's inception) with
the Servicer's computer reports which were the source of such amounts and that
on the basis of such 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. A
copy of such report may be obtained by any Noteholder by a request in writing to
the Owner Trustee addressed to the Corporate Trust Office. In addition, the
Servicer shall cause such accountants to furnish a copy of such report to each
Rating Agency and to each Enhancement Provider.

                                      27
<PAGE>

     Section 3.7.  Tax Treatment. Seller has structured this Agreement and the
                   -------------
Notes to facilitate a secured, credit-enhanced financing on favorable terms with
the intention that the Notes will constitute indebtedness of Seller for federal
income and state and local tax purposes; and Seller and each Noteholder by
acceptance of its Note agrees to recognize and report the Notes as indebtedness
of Seller for purposes of federal, state and local income or franchise taxes and
any other tax imposed on or measured by income, and to report all receipts and
payments relating thereto in a manner that is consistent with such
characterization.

     Section 3.8.  Merchant Fees.  Within 5 days after the end of each Monthly
                   -------------
Period, FCNB shall deposit in the Collection Account an amount equal to the
Merchant Fees received (or deemed received) by it during such Monthly Period;
provided, however, that no such deposit shall be made if the same shall be
prohibited by law or regulation, or if FCNB's regulator(s) shall have requested
that such deposits not be made. All amounts so deposited shall constitute
Finance Charge Collections in respect of such Monthly Period.

      Section 3.9.  Reports to the Commission. The Servicer shall, on behalf of
                    -------------------------
the Issuer, cause to be filed with the Commission any periodic reports required
to be filed under the provisions of the Securities Exchange Act of 1934, and the
rules and regulations of the Commission thereunder. Seller shall, at its own
expense, cooperate in any reasonable request of the Servicer in connection with
such filings. The Issuer agrees to cooperate with the Servicer in connection
with such filings.

                                  ARTICLE IV

                       OTHER MATTERS RELATING TO SELLER

     Section 4.1.  Liability of Seller. Seller shall be liable in accordance
                   -------------------
herewith to the extent, and only to the extent, of the obligations specifically
undertaken by Seller hereunder.

     Section 4.2.  Merger or Consolidation of, or Assumption of the Obligations
                   ------------------------------------------------------------
of, Seller etc.
---------------

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

          (i)  the Person formed by such consolidation or into which Seller is
     merged or the Person which acquires by conveyance or transfer the
     properties and assets of Seller substantially as an entirety shall be, if
     Seller is not the surviving entity, organized and existing under the laws
     of the United States of America or any State or the District of Columbia
     and shall expressly assume, by an agreement supplemental hereto, executed
     and

                                      28
<PAGE>

     delivered to the Owner Trustee, in form satisfactory to the Owner Trustee,
     the performance of every covenant and obligation of Seller, as applicable
     hereunder, and shall benefit from all the rights granted to Seller, as
     applicable hereunder. To the extent that any right, covenant or obligation
     of Seller, as applicable hereunder, is inapplicable to the successor
     entity, such successor entity shall be subject to such covenant or
     obligation, or benefit from such right, as would apply, to the extent
     practicable, to such successor entity. In furtherance hereof, in applying
     this Section 4.2 to a successor entity, Section 6.1 hereof shall be applied
          -----------                        -----------
     by reference to events of involuntary liquidation, receivership or
     conservatorship applicable to such successor entity as such be set forth in
     the officer's certificate described in Section 4.2(a)(ii);
                                            ------------------

          (ii)   Seller shall have delivered to the Owner Trustee and each
     Enhancement Provider an Officer's Certificate of Seller and an Opinion of
     Counsel, each stating that such consolidation, merger, conveyance or
     transfer and such supplemental agreement comply with this Section 4.2 and
                                                               -----------
     that all conditions precedent herein provided for relating to such
     transaction have been complied with and, in the case of the Opinion of
     Counsel, that such supplemental agreement is legal, valid and binding with
     respect to Seller; and

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

     (b)  The obligations of Seller hereunder shall not be assignable nor shall
any Person succeed to the obligations of Seller hereunder except for mergers,
consolidations, assumptions or transfers in accordance with the provisions of
the foregoing paragraph.

     Section 4.3.  Limitation on Liability of Seller. Neither Seller nor any of
                   ---------------------------------
the directors or officers or employees or agents of Seller shall be under any
liability to the Issuer, the Owner Trustee, the Noteholders or any other Person
for any action taken or for refraining from the taking of any action pursuant to
this Agreement whether arising from express or implied duties under this
Agreement; provided, however, that this provision shall not protect Seller 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 its willful misconduct hereunder; and provided, further,
                                                             --------  -------
that Seller shall be liable for any actual damages resulting directly from
Seller's material failure to perform any of its obligations under this
Agreement, but only if and to the extent that another remedy is not provided for
and available hereunder. Seller and any director or officer or employee or agent
of Seller may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder.

                                      29
<PAGE>

                                   ARTICLE V

                    OTHER MATTERS RELATING TO THE SERVICER

     Section 5.1.  Liability of the Servicer. The Servicer shall be liable in
                   -------------------------
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer in such capacity herein.

     Section 5.2.  Merger or Consolidation of, or Assumption of the Obligations
                   ------------------------------------------------------------
of, the Servicer. The Servicer shall not consolidate with or merge into any
----------------
other Person or convey or transfer its properties and assets substantially as an
entirety to any Person, unless:

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

          (b)  the Servicer has delivered to the Owner Trustee and each
     Enhancement Provider an Officer's Certificate and an Opinion of Counsel
     each stating that such consolidation, merger, conveyance or transfer and
     such supplemental agreement comply with this Section 5.2 and that all
                                                  -----------
     conditions precedent herein provided for relating to such transaction have
     been complied with and, in the case of the Opinion of Counsel, that such
     supplemental agreement is legal, valid and binding with respect to the
     Servicer; and

          (c)  the Servicer shall have delivered notice of such consolidation,
     merger, conveyance or transfer to each of the Rating Agencies.

     Section 5.3.  Limitation on Liability of the Servicer and Others. Except
                   --------------------------------------------------
as provided in Section 5.4 with respect to the Issuer and the Owner Trustee,
               -----------
neither the Servicer nor any of the directors or officers or employees or agents
of the Servicer shall be under any liability to the Issuer, the Owner Trustee,
the Indenture Trustee, the Noteholders or any other Person for any action taken
or for refraining from the taking of any action pursuant to this Agreement
whether arising from express or

                                      30
<PAGE>

implied duties under 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 its willful misconduct
hereunder; and provided, further, that the Servicer shall be liable for any
               --------  -------
actual damages resulting directly from the Servicer's material failure to
perform any of its obligations under this Agreement, but only if and to the
extent that another remedy is not provided for and available hereunder. The
Servicer and any director or officer or employee or agent of the Servicer may
rely in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. The Servicer
shall not be under any obligation to appear in, prosecute or defend any legal
action which does not arise out of its activities in servicing the Receivables
in accordance with this Agreement which in its reasonable opinion may involve it
in any expense or liability.

     Section 5.4.  Indemnification of the Issuer and the Owner Trustee. The
                   ---------------------------------------------------
Servicer shall indemnify and hold harmless the Issuer, the Owner Trustee and the
Indenture Trustee from and against any loss, liability, expense, damage or
injury suffered or sustained by reason of any acts, omissions or alleged acts or
omissions arising out of activities of the Issuer or the Owner Trustee pursuant
to this Agreement, including those arising from acts or omissions of the
Servicer pursuant to this Agreement, including, but not limited to any judgment,
award, settlement, reasonable attorneys' fees and other costs or expenses
incurred in connection with the defense of any actual or threatened action,
proceeding or claim; provided, however, that the Servicer shall not indemnify
                     --------  -------
the Issuer or the Owner Trustee if such acts, omissions or alleged acts
constitute fraud, negligence or breach of fiduciary duty by the Owner Trustee;
provided further, that the Servicer shall not indemnify the Issuer, the Owner
-------- -------
Trustee, any Noteholders or any Note Owners for any liabilities, costs or
expenses of the Issuer with respect to any action taken by the Owner Trustee at
the request of such Noteholders; provided further, that the Servicer shall not
                                 -------- -------
indemnify the Issuer, or any Noteholders as to any losses, claims or damages
incurred by any of them in their capacities as investors, including losses
incurred as a result of defaulted Receivables or Receivables which are written
off as uncollectible; and provided further, that the Servicer shall not
                          -------- -------
indemnify the Issuer, or any Noteholders for any liabilities, costs or expenses
of the Issuer, or such Noteholders arising under any tax law, including any
federal, state or local income or franchise taxes or any other tax imposed on or
measured by income (or any interest or penalties with respect thereto or arising
from a failure to comply therewith) required to be paid by the Issuer, or such
Noteholders in connection herewith to any taxing authority. The provisions of
this indemnity shall run directly to and be enforceable by an injured party
subject to the limitations hereof.

     Any indemnification pursuant to this Section shall not be payable from the
assets of the Issuer.

                                      31
<PAGE>

     The obligations of the Servicer under this Section 5.4 shall survive the
                                                -----------
termination of the Issuer and the resignation or removal of the Owner Trustee.

     Section 5.5.   The Servicer Not to Resign. The Servicer shall not resign
                    --------------------------
from the obligations and duties hereby imposed on it except upon determination
that (i) the performance of its duties hereunder is or becomes impermissible
under applicable law and (ii) there is no reasonable action which the Servicer
could take to make the performance of its duties hereunder permissible under
applicable law. Any such determination permitting the resignation of the
Servicer shall be evidenced as to clause (i) above by an Opinion of Counsel to
such effect delivered to the Owner Trustee. No such 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
                                                                        -------
7.2. If the Indenture Trustee is unable within 120 days of the date of such
---
determination to appoint a Successor Servicer, the Indenture Trustee shall serve
as Successor Servicer hereunder subject to the provisions of Section 7.2.
                                                             -----------

     Section 5.6.   Access to Certain Documentation and Information Regarding
                    ---------------------------------------------------------
the Receivables. The Servicer shall provide to the Indenture Trustee access to
---------------
the documentation regarding the Accounts and the Receivables in such cases where
the Indenture Trustee is required in connection with the enforcement of the
rights of the Noteholders, or by applicable statutes or regulations to review
such documentation, such access being afforded without charge but only (i) upon
reasonable request, (ii) during normal business hours, (iii) subject to the
Servicer's normal security and confidentiality procedures and (iv) at offices
designated by the Servicer. Nothing in this Section 5.6 shall derogate from the
                                            -----------
obligation of Seller, the Indenture Trustee or the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors and
the failure of the Servicer to provide access as provided in this Section 5.6 as
                                                                  -----------
a result of such obligation shall not constitute a breach of this Section 5.6.
                                                                  -----------

     Section 5.7.   Delegation of Duties. It is understood and agreed by the
                    --------------------
parties hereto that the Servicer may delegate all or a portion of its duties
hereunder to Spiegel. In addition, in the ordinary course of business, the
Servicer may at any time delegate any duties hereunder to any other Person who
agrees to conduct such duties in accordance with the Charge Account Guidelines.
Any such delegations shall not relieve the Servicer of its liability and
responsibility with respect to such duties, and shall not constitute a
resignation within the meaning of Section 5.5.
                                  -----------

     Section 5.8.   Examination of Records. The Servicer shall clearly and
                    ----------------------
unambiguously identify each Account (including any Additional Account designated
pursuant to Section 2.7) in its computer or other records to reflect that the
            -----------
Receivables arising in such Account have been transferred by Seller to the
Issuer pursuant to this Agreement. The Servicer shall, prior to the sale or
transfer to a third

                                      32
<PAGE>

party of any receivable held in its custody, examine its computer and other
records to determine that such receivable is not a Receivable.

                                  ARTICLE VI

                               INSOLVENCY EVENTS

     Section 6.1.   Rights upon the Occurrence of an Insolvency Event. If the
                    -------------------------------------------------
Seller 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, marshaling of assets and liabilities or
similar proceedings of or relating to Seller of or relating to all or
substantially all of Seller'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,
marshaling 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
Seller any such action shall have remained undischarged or unstayed for a period
of sixty (60) days or upon entry of any order or decree providing for such
relief; or such Seller 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 sixty (60) days of such filing) to
the filing of, a petition to take advantage of any Debtor Relief Law, 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"), such Seller shall on the day any such Insolvency Event
 ----------------
occurs immediately cease to transfer Principal Receivables to the Issuer and
shall promptly give notice to the Indenture Trustee and the Owner Trustee
thereof. Notwithstanding any cessation of the transfer to the Issuer of
additional Principal Receivables, Principal Receivables transferred to the
Issuer prior to the occurrence of such Insolvency Event, Collections in respect
of such Principal Receivables and Finance Charges (whenever created) accrued in
respect of such Principal Receivables shall continue to be a part of the Issuer
Assets and shall be allocated and distributed to Noteholders in accordance with
the terms of the Indenture and each Indenture Supplement.

                                  ARTICLE VII

                               SERVICER DEFAULTS

     Section 7.1.   Servicer Defaults. If any one of the following events (a
                    -----------------
"Servicer Default") shall occur and be continuing after the SMT Termination
-----------------
Date:

            (a)     any failure by the Servicer to make any payment, transfer or
     deposit or to give instructions or notice to the Indenture Trustee pursuant
     to the Indenture or to make any required drawing, withdrawal, or payment
     under any Enhancement on or before the date occurring five Business Days
     after the

                                      33
<PAGE>

     date such payment, transfer, deposit, withdrawal or drawing, or such
     instruction or notice is required to be made or given, as the case may be,
     under the terms of this Agreement; or

          (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 a material adverse effect on the
     Noteholders, which continues unremedied for a period of 60 days after the
     date on which written notice of such failure requiring the same to be
     remedied shall have been given to the Servicer by the Owner Trustee, or to
     the Servicer and the Owner Trustee by the Noteholders holding not less than
     50% of the Outstanding principal amount of any Series adversely affected
     thereby and continues to materially adversely affect such Noteholders for
     such period; or the Servicer's delegation of its duties under this
     Agreement except as permitted by Section 5.7; or
                                      -----------

          (c) any representation, warranty or certification made by the Servicer
     in this Agreement or in any certificate delivered pursuant to this
     Agreement shall prove to have been incorrect when made, which has a
     material adverse effect on the Noteholders and which continues to be
     incorrect in any material respect for a period of 60 days after the date on
     which written notice of such failure requiring the same to be remedied
     shall have been given to the Servicer by the Owner Trustee, or to the
     Servicer and the Owner Trustee by the Noteholders holding not less than 50%
     of the outstanding principal amount of any Series adversely affected
     thereby and continues to materially adversely affect such Noteholders for
     such period, or if such failure cannot be cured within such 60-day period
     owing to causes beyond the control of the Servicer, if the Servicer shall
     fail to proceed promptly to cure the same and prosecute the curing of such
     failure with diligence and continuity; or

          (d) the Servicer shall (a) become insolvent, (b) fail to pay its debts
     generally as they become due, (c) voluntarily seek, consent to, or
     acquiesce in the benefit or benefits of any Debtor Relief Law, or (d)
     become a party to (or be made the subject of) any proceeding provided for
     by any Debtor Relief Law, other than as a creditor or claimant, and, in the
     event such proceeding is involuntary, the petition instituting same is not
     dismissed within 60 days after its filing; then, so long as such Servicer
     Default shall not have been remedied, either the Indenture Trustee, or the
     Noteholders holding more than 50% of the aggregate outstanding principal
     amount of the Notes, by notice then given in writing to the Servicer (and
     to the Owner Trustee if given by the Noteholders) (a "Termination Notice"),
                                                           ------------------
     may terminate all of the rights and obligations of the Servicer as Servicer
     under this Agreement and in and to the Receivables and the proceeds
     thereof. After receipt by the Servicer of such Termination Notice, and on
     the date that a Successor Servicer shall have

                                      34
<PAGE>

     been appointed by the Owner Trustee pursuant to Section 7.2, all authority
                                                     -----------
     and power of the Servicer under this Agreement shall pass to and be vested
     in a Successor Servicer; and 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 transfer of servicing rights. The Servicer agrees to cooperate with
     the Owner 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 any Collection Account or Series
     Account, or which shall thereafter be received with respect to the
     Receivables, and in assisting the Successor Servicer and in enforcing all
     rights to Insurance Proceeds. The Servicer shall promptly 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 7.1
                                                                 -----------
     shall require the Servicer to disclose to the Successor Servicer
     information of any kind which the Servicer reasonably deems to be
     confidential, the Successor Servicer shall be required to enter into such
     customary licensing and confidentiality agreements as the Servicer shall
     deem necessary to protect its interest. The Servicer shall, on the date of
     any servicing transfer, transfer all of its rights and obligations, if any,
     in respect of any Enhancement to the Successor Servicer.

     Section 7.2.   Owner Trustee to Act; Appointment of Successor. (a) On and
                    ----------------------------------------------
after the receipt by the Servicer of a Termination Notice pursuant to Section
                                                                      -------
7.1, the Servicer shall continue to perform all servicing functions under this
---
Agreement until the date specified in the Termination Notice or otherwise
specified by the Owner Trustee in writing or, if no such date is specified in
such Termination Notice or otherwise specified by the Owner Trustee, until a
date mutually agreed upon by the Servicer and the Owner Trustee. The Owner
Trustee shall as promptly as possible after the giving of a Termination Notice
appoint (with the consent of the Noteholders holding greater than 50% of the
Outstanding principal amount of each Series) a successor servicer (the
"Successor Servicer"), and such Successor Servicer shall accept its appointment
-------------------
by a written assumption in a form acceptable to the Owner Trustee. The Owner
Trustee may obtain bids from any potential successor servicer. If the Owner
Trustee is unable to obtain any bids from any potential successor

                                      35
<PAGE>

servicer and the Servicer delivers an Officer's Certificate to the effect that
it cannot in good faith cure the Servicer Default which gave rise to a transfer
of servicing, then the Owner Trustee shall offer Seller the right to accept
retransfer of all the Receivables and Seller may accept retransfer of all the
Receivables, provided, however, that if the long-term unsecured debt obligations
             --------  -------
of Seller are not rated at the time of such purchase at least Baa-3 by Moody's
and BBB- by Standard & Poor's, no such retransfer shall occur unless Seller
shall deliver an Opinion of Counsel reasonably acceptable to the Owner Trustee
that such retransfer would not constitute a fraudulent conveyance of Seller. The
retransfer deposit amount for such a retransfer shall be equal to the higher of
the sum of (i) the outstanding principal balance of the Notes, plus accrued
interest thereon, at the Note Rate, through the date of retransfer and (ii) the
average bid price quoted by two recognized dealers for a similar security rated
in the highest rating category by Moody's and Standard & Poor's and having a
remaining maturity substantially similar to the remaining maturity of the Notes.
In the event that a Successor Servicer has not been appointed and has not
accepted its appointment at the time when the Servicer ceases to act as
Servicer, the Owner Trustee without further action shall automatically be
appointed the Successor Servicer. Notwithstanding the above, the Owner Trustee
shall, if it is legally unable so to act, petition a court of competent
jurisdiction to appoint any established financial institution having a net worth
of not less than $100,000,000 and whose regular business includes the servicing
of installment sales charge, credit and/or credit card account receivables as
the Successor Servicer hereunder.

     (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. Any Successor Servicer, by its acceptance of
its appointment, will automatically agree to be bound by the terms and
provisions of any Enhancement to the extent that such terms apply to the
Servicer.

     (c) In connection with such appointment and assumption, the Owner Trustee
shall be entitled to such compensation, or may make such arrangements for the
compensation of the Successor Servicer out of Collections, as it and such
Successor Servicer shall agree; provided, however, that no such compensation
                                --------  -------
shall be in excess of the Monthly Servicing Fees permitted to the Servicer
pursuant to Section 3.2. The Holder of the Collateral Certificate agrees that if
            -----------
the Servicer is terminated hereunder, it will agree, at the request of the Owner
Trustee or any Successor Servicer, to deposit a portion of the Collections in
respect of Finance Charge Receivables that it is entitled to receive pursuant to
the Indenture, to pay its share of the compensation of the Successor Servicer.

     (d) All authority and power granted to the Servicer under this Agreement
shall automatically cease and terminate upon termination of the Issuer pursuant
to the

                                      36
<PAGE>

Indenture and shall pass to and be vested in Seller and, Seller is hereby
authorized and empowered to execute and deliver, on behalf of the 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 Servicer agrees to cooperate
with Seller in effecting the termination of the responsibilities and rights of
the Servicer to conduct servicing on the Receivables. The Servicer shall
transfer its electronic records relating to the Receivables to Seller in such
electronic form as Seller may reasonably request and shall transfer all other
records, correspondence and documents to Seller in the manner and at such times
as Seller shall reasonably request. To the extent that compliance with this
Section 7.2 shall require the Servicer to disclose to Seller information of any
-----------
kind which the Servicer deems to be confidential, Seller shall be required to
enter into such customary licensing and confidentiality agreements as the
Servicer shall deem necessary to protect its interests.

     Section 7.3.   Notification to Noteholders. Upon the occurrence of any
                    ---------------------------
Servicer Default, the Servicer shall give prompt written notice thereof to the
Owner Trustee and the Owner Trustee shall give notice to the Noteholders at
their respective addresses appearing in the Note Register. Upon any termination
or appointment of a Successor Servicer pursuant to this Article VII, the Owner
                                                        -----------
Trustee shall give prompt written notice thereof to Noteholders at their
respective addresses appearing in the Note Register. A copy of any notice given
pursuant to this Section 7.3 shall be delivered to each Rating Agency.
                 -----------

     Section 7.4.   Waiver of Past Defaults. The Noteholders holding not less
                    -----------------------
than 50% of the Outstanding principal amount of any Series affected thereby may,
on behalf of all Noteholders, waive any default by the Servicer or Seller in the
performance of its obligations hereunder and its consequences, except a default
in the failure to make any required deposits or payments in accordance with the
Indenture, provided, however, that no such waiver shall affect any rights of, or
           --------  -------
obligations to, any Enhancement Provider hereunder. Upon any such waiver of a
past default, such default shall cease to exist, and any default arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereon except to the extent expressly so waived.

                                 ARTICLE VIII

                                  TERMINATION

     Section 8.1.  Termination of Agreement. This Agreement and the respective
                   ------------------------
obligations and responsibilities of the Issuer, Seller and the Servicer under
this Agreement shall terminate, except with respect to the duties described in
Section 5.4, on the Trust Termination Date.
-----------

                                      37
<PAGE>

                                  ARTICLE IX

                           MISCELLANEOUS PROVISIONS

     Section 9.1.  Amendment; Waiver of Past Defaults.
                   ----------------------------------

     (a) This Agreement may be amended from time to time by the Servicer, Seller
and the Issuer, by a written instrument signed by each of them, without the
consent of the Indenture Trustee or any of the Noteholders; provided that (i)
                                                            --------
Seller shall have delivered to the Indenture Trustee and the Owner Trustee an
Officer's Certificate, dated the date of any such Amendment, stating that Seller
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. Additionally, notwithstanding the preceding sentence, this Agreement
will be amended by the Servicer and the Issuer at the direction of Seller
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 Issuer (1) to qualify as,
and to permit an election to be made to cause the Issuer to be treated as, a
"financial asset securitization investment trust" as described in the provisions
of Section 860L of the Code, and (2) to avoid the imposition of state or local
income or franchise taxes imposed on the Issuer's property or its income;
provided, however, that (A) Seller delivers to the Indenture Trustee and the
--------  -------
Owner Trustee an Officer's Certificate to the effect that the proposed
amendments meet the requirements set forth in this Section, (B) the Rating
Agency Condition has been satisfied, and (C) such amendment does not affect the
rights, duties or obligations of the Indenture Trustee or the Owner Trustee
hereunder. The amendments which Seller may make without the consent of
Noteholders or Series Enhancers pursuant to the preceding sentence may include
the addition of a sale of Receivables.

     (b) This Agreement may also be amended from time to time by the Servicer,
Seller and the Issuer, with the consent of the Noteholders holding more than 50%
of the Outstanding principal amount of the Notes of each Series affected thereby
for which Seller 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 Pay Out Events or Events of Default 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 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

                                      38
<PAGE>

Noteholders of such Series or Class holding more than 50% of the Outstanding
principal amount of the Notes of such Series or Class affected thereby.

     (c) Promptly after the execution of any such amendment or consent (other
than an amendment pursuant to paragraph (a)), the Issuer 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 9.1 to approve the particular form of any proposed amendment, but it
-----------
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Noteholders shall be subject to such reasonable
requirements as the Indenture Trustee may prescribe.

     (e) Notwithstanding anything in this Section 9.1 to the contrary, no
                                          -----------
amendment may be made to this Agreement 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 9.1.
                                   -----------

     (g) The Noteholders holding more than [66-2/3]% of the outstanding
principal amount of the Notes of each Series or, with respect to any Series with
two (2) or more Classes, of each Class (or, with respect to any default that
does not relate to all Series, [66-2/3]% of the outstanding 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 Seller 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 Section 9.2(d).
                        --------------

     Section 9.2.  Protection of Right, Title and Interest to Issuer.
                   -------------------------------------------------

                                      39
<PAGE>

     (a) Seller 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 Issuer's right,
title and interest to the Issuer 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 Issuer
hereunder to all property comprising the Issuer. Seller shall deliver to the
Owner Trustee and Indenture Trustee file-stamped copies of, or filing receipts
for, any document recorded, registered or filed as provided above, as soon as
available following such recording, registration or filing. Seller 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 thirty (30) days after the Seller 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 Seller 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 Issuer's security interest
or ownership interest in the Receivables and the proceeds thereof.

     (c) Seller shall give the Owner Trustee and the Indenture Trustee prompt
notice of any relocation of its chief principal executive office or any change
in the jurisdiction under whose laws it is organized and whether, as a result of
such relocation or change, 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 Issuer's security interest in the Receivables and the proceeds
thereof. Seller shall at all times maintain its chief principal executive
offices within the United States and shall at all times be organized under the
laws of a jurisdiction located within the United States.

     (d) Seller 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 F-1; (ii) on each date specified
                                      -----------
in Section 2.7(c)(ix) with respect to Aggregate Additions to be designated as
   ------------------
Accounts, an Opinion of Counsel substantially in the form of Exhibit F-2; and
                                                             -----------
(iii) on or before April 30 of each year, beginning with April 30, 2001, an
Opinion of Counsel substantially in the form of Exhibit F-3.
                                                -----------

     Section 9.3.   GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
                    -------------
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES

                                      40
<PAGE>

HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

     Section 9.4.  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 Seller, to Spiegel Credit Corporation III, 400 West 9th Street, Suite
101B, Wilmington, Delaware 19801, Attn: Treasurer, (ii) in the case of the
Servicer, to First Consumers National Bank, P.O. Box 5280, Portland, Oregon
97208, Attn: President,  (iii) in the case of the Issuer or the Owner Trustee,
to the Corporate Trust Office, Attn: Indenture Trust Division, (iv) 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 (v) 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. 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, in the
case of any Series or Class with respect to which any 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 9.5.  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 9.6.  Further Assurances. Seller 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 9.7.  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,

                                      41
<PAGE>

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 9.8.  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 9.9.  Third-Party Beneficiaries. This Agreement will inure to the
                   -------------------------
benefit of and be binding upon the parties hereto, the Indenture Trustee, the
Noteholders, and any Series Enhancer. Except as otherwise expressly provided in
this Agreement, no other Person will have any right or obligation hereunder.

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

     (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 Noteholder 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, Seller 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 Seller, 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.

                                      42
<PAGE>

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


                                   SPIEGEL CREDIT CORPORATION III,
                                   Seller

                                   By:_________________________________
                                   Name:
                                   Title:

                                   FIRST CONSUMERS NATIONAL BANK,
                                   Servicer

                                   By:_________________________________
                                   Name:
                                   Title:

                                   SPIEGEL CREDIT CARD MASTER
                                   NOTE TRUST, Issuer

                                   By:________________________________,
                                   not in its individual capacity but solely as
                                   Owner Trustee on behalf of the Issuer


                                   By:_________________________________
                                   Name:
                                   Title:

Acknowledged and Accepted:

[__________________________________],
not in its individual capacity but
solely as Indenture Trustee


By:______________________________________
Name:
Title:

             [Signature Page to Transfer and Servicing Agreement]
<PAGE>

                                   EXHIBIT A
                                      to
                       TRANSFER AND SERVICING AGREEMENT

                       FORM OF ASSIGNMENT OF RECEIVABLES
                            IN ADDITIONAL ACCOUNTS

     (As required by Section 2.6 of the Transfer and Servicing Agreement)
                     -----------

     ASSIGNMENT No. __ OF RECEIVABLES IN ADDITIONAL ACCOUNTS dated as of
_____________, by and among SPIEGAL CREDIT CORPORATION III, a Delaware
corporation, as Seller (the "Seller"), FIRST CONSUMERS NATIONAL BANK, a national
                             ------
banking association, as Servicer (the "Servicer") and SPIEGEL CREDIT CARD MASTER
                                       --------
NOTE TRUST (the "Issuer"), pursuant to the Transfer and Servicing Agreement
                 ------
referred to below.

                                  WITNESSETH

     WHEREAS, the Seller, the Servicer and the Issuer are parties to the
Transfer and Servicing Agreement, dated as of ____________ __, 2000 (the
"Agreement");
----------

     WHEREAS, pursuant to the Agreement, the Seller wishes to designate
Additional Accounts 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 Issuer; and

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

     NOW, THEREFORE, the Seller, the Servicer and the Issuer 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" means, with respect to the Additional Accounts designated
      -------------
hereby, ____________, 200__.

     "Notice Date" means, with respect to the Additional Accounts designated
      -----------
hereby, ____________, ____, (which shall be a date on or prior to the fifth
Business Day prior to the Addition Date).


     2.   Designation of Additional Accounts. On or before the date hereof, the
          ----------------------------------
Seller will deliver to the Owner Trustee a computer file or microfiche list
containing a true and complete schedule identifying all such Additional Accounts
(the "Additional Accounts") specifying for each such Additional Account, as of
      -------------------
the

                                  Exhibit A-1
<PAGE>

Notice 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 or microfiche list shall supplement Schedule 1 to
                                                                 ----------
the Agreement.

     3.   Conveyance of Receivables. (a) The Seller does hereby transfer,
          -------------------------
assign, set over and otherwise convey, without recourse except as set forth in
the Transfer and Servicing Agreement, to the Issuer, all its right, title and
interest in, to and under the Receivables of such Additional Accounts existing
at the close of business on the Notice Date and thereafter created from time to
time until the termination of the Issuer, all Recoveries related thereto, all
monies due or to become due and all amounts received or receivable with respect
thereto and all proceeds thereof. The foregoing does not constitute and is not
intended to result in the creation or assumption by the Issuer, the Owner
Trustee, the Indenture Trustee, any Noteholders or any Series Enhancer of any
obligation of the Servicer, the Seller or any other Person in connection with
the Accounts, the Receivables or under any agreement or instrument relating
thereto, including any obligation to Obligors, merchant banks, merchants
clearance systems, or insurers.

          (b)  The Seller agrees to record and file, at its own expense,
financing statements (and continuation statements when applicable) with respect
to the Receivables in Additional Accounts existing on the Notice Date and
thereafter created meeting the requirements of applicable state law in such
manner and in such jurisdictions as are necessary to perfect, and maintain
perfection of, the sale and assignment of its interest in such Receivables to
the Issuer, and to deliver a file-stamped copy of each such financing statement
or other evidence of such filing to the Owner Trustee on or prior to the
Addition Date. 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 sale and assignment.

          (c)  In connection with such sale, the Seller further agrees, at its
own expense, on or prior to the date of this Assignment, to indicate in the
appropriate computer files that Receivables created in connection with the
Additional Accounts and designated hereby have been conveyed to the Issuer
pursuant to the Agreement and this Assignment.

          (d)  The Seller does hereby grant to the Issuer a security interest in
all of its right, title and interest, whether now owned or hereafter acquired,
in and to the Receivables in the Additional Accounts existing on the Notice Date
and thereafter created, all Recoveries related thereto, all monies due or to
become due and all amounts received or receivable with respect thereto, all
money, accounts, general intangibles, chattel paper, instruments, documents,
goods, investment property, deposit accounts, certificates of deposit, letters
of credit, and advices of credit consisting of, arising from or related to the
foregoing, and all proceeds thereof. This Assignment constitutes a security
agreement under the UCC.

                                  Exhibit A-2
<PAGE>

     4.   Acceptance by Issuer. The Issuer hereby acknowledges its acceptance of
          --------------------
all right, title and interest to the property, existing on the Notice Date and
thereafter created, conveyed to the Issuer pursuant to Section 3(a) of this
                                                       ------------
Assignment. The Issuer further acknowledges that, prior to or simultaneously
with the execution and delivery of this Assignment, the Seller delivered to the
Owner Trustee the computer file or microfiche list described in Section 2 of
                                                                ---------
this Assignment.

     5.   Representations and Warranties of the Seller. The Seller hereby
          --------------------------------------------
represents and warrants to the Issuer as of the Addition Date:

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

          (b)  Schedule 1. Schedule 1 to this Assignment and the computer file
               ----------
     or microfiche list delivered pursuant to Section 2 of this Assignment is an
                                              ---------
     accurate and complete listing in all material respects of all the
     Additional Accounts as of the Addition Date and the information contained
     therein with respect to the identity of such Additional Accounts and the
     Receivables existing thereunder is true and correct in all material
     respects as of the Addition Date;

          (c)  Eligibility of Accounts. Each Additional Account designated
               -----------------------
     hereby is an Eligible Account;

          (d)  Selection Procedures. No selection procedures believed by the
               --------------------
     Transferror to be materially adverse to the interests of the Noteholders
     were utilized in selecting the Additional Accounts designated hereby;

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

          (f)  Security Interest. This Assignment constitutes (i) a valid
               -----------------
     transfer and assignment to the Issuer of all right, title and interest of
     the Seller in and to Receivables now existing and hereafter created in the
     Additional Accounts designated hereby, and all proceeds (as defined in the
     UCC as in effect in the State of Illinois) of such Receivables and
     Insurance Proceeds relating thereto, and such Receivables and any
     Collections, Recoveries and other proceeds

                                  Exhibit A-3
<PAGE>

     thereof and Insurance Proceeds relating thereto will be held by the Issuer
     free and clear of any Lien of any Person except for (x) Liens permitted
     under Section 2.5(b) of the Transfer and Servicing Agreement, (y) the
           --------------
     interest of the Seller as holder of the Collateral Certificate and (z) the
     Seller's right to receive interest accruing on, and investment earnings in
     respect of, the Collection Subaccount and Series Account as provided in the
     Transfer and Servicing Agreement; and/or (ii) it constitutes a grant of a
     security interest (as defined in the UCC as in effect in the State of
     Illinois) in such property to the Issuer, which is enforceable with respect
     to the existing Receivables in the Additional Accounts designated hereby,
     the Collections, Recoveries and other proceeds (as defined in the UCC as in
     effect in the State of Illinois) thereof and Insurance Proceeds relating
     thereto upon the conveyance of such Receivables to the Issuer, and which
     will be enforceable with respect to the Receivables thereafter created in
     respect of the Additional Accounts designated hereby, the Collections,
     Recoveries and other proceeds (as defined in the UCC as in effect in the
     State of Illinois) thereof and Insurance Proceeds relating thereto, upon
     such creation; and (iii) if this Assignment constitutes the grant of a
     security interest to the Issuer in such property, upon the filing of a
     financing statement described in Section 3 of this Assignment with respect
                                      ---------
     to the Additional Accounts designated hereby and in the case of the
     Receivables of such Additional Accounts thereafter created and the
     Collections, Recoveries and other proceeds (as defined in the UCC as in
     effect in the State of Illinois) thereof, and Insurance Proceeds relating
     to such Receivables, upon such creation, the Issuer shall have a first
     priority perfected security interest in such property, except for Liens
     permitted under Section 2.5(b) of the Transfer and Servicing Agreement, the
                     --------------
     the interest of the Seller as holder of the Collateral Certificate and the
     Seller's right to receive interest accruing on, and investment earnings in
     respect of, the Collection Subaccount and any Series Account as provided in
     the Transfer and Servicing Agreement.

          (g)  Notice has been given to each Rating Agency and to each
     Enhancement Provider as required under Section 2.7(d) of the Transfer and
                                            --------------
     Servicing Agreement.

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

          (a)  Officer's Certificate. The Seller shall have delivered to the
               ---------------------
     Owner Trustee a certificate of a Vice President or more senior officer,
     certifying that (i) as of the date of the Addition Date, the aggregate
     amount of Principal Receivables of the Accounts plus the aggregate amount
     of Principal Receivables of the Additional Accounts designated hereby does
     not exceed

                                  Exhibit A-4
<PAGE>

     the aggregate amount of Principal Receivables of the Accounts as of the SMT
     Termination Date; (ii) all requirements set forth in Section 2.7 of the
                                                          -----------
     Transfer and Servicing Agreement for designating Additional Accounts and
     conveying the Principal Receivables of such Accounts, whether now existing
     or hereafter created, have been satisfied and (iii) each of the
     representations and warranties made by the Seller in Section 5 is true and
                                                          ---------
     correct as of the Addition Date. The Owner Trustee may conclusively rely on
     such Officer's Certificate, shall have no duty to make inquiries with
     regard to the matters set forth therein, and shall incur no liability in so
     relying.

          (b)  Opinion of Counsel. The Seller shall have delivered to the Owner
               ------------------
     Trustee an Opinion of Counsel with respect to the Additional Accounts
     designated hereby substantially in the form of Exhibit C to the Transfer
                                                    ---------
     and Servicing Agreement.

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

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

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

                                  Exhibit A-5
<PAGE>

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

                                   SPIEGEL CREDIT CORPORATION III,
                                   Seller

                                   By:_________________________________________
                                   Name:
                                   Title:

                                   SPIEGEL CREDIT CARD MASTER
                                   NOTE TRUST,
                                   Issuer

                                   By:________________________________________,
                                   as Trustee and not in its individual capacity

                                   Name:
                                   Title:

                                  Exhibit A-6
<PAGE>

                                  Schedule 1
                         to Assignment of Receivables
                            in Additional Accounts

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

                                  Exhibit A-7
<PAGE>

                                   EXHIBIT B
                                      to
                       TRANSFER AND SERVICING AGREEMENT

                      FORM OF REASSIGNMENT OF RECEIVABLES
                              IN REMOVED ACCOUNTS

     (As required by Section 2.7 of the Transfer and Servicing Agreement)
                     -----------

     REASSIGNMENT No. _______ OF RECEIVABLES dated as of _________, by and among
SPIEGAL CREDIT CORPORATION III, a Delaware corporation, as Seller (the

"Seller"), FIRST CONSUMERS NATIONAL BANK, a national banking association, as
 ------
Servicer (the "Servicer") and SPIEGEL CREDIT CARD MASTER NOTE TRUST (the
               --------
"Issuer"), pursuant to the Transfer and Servicing Agreement referred to below.
 ------

                                  WITNESSETH:

     WHEREAS the Seller, the Servicer and the Issuer are parties to the Transfer
and Servicing Agreement, dated as of ___________ __, 20__ (the "Agreement");
                                                                ---------

     WHEREAS pursuant to the Agreement, the Seller wishes to remove from the
Issuer all Receivables owned by the Issuer in certain designated Accounts (the

"Removed Accounts") and to cause the Issuer to reconvey the Receivables of such
-----------------
Removed Accounts, whether now existing or hereafter created, from the Issuer to
the Seller; and

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

     NOW, THEREFORE, the Seller and the Issuer hereby agree as follows:

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

     "Removal Date" means, with respect to the Removed Accounts designated
      ------------
hereby, ___________, ____.

     "Removal Notice Date" means, with respect to the Removed Accounts
      -------------------
______________, ____, (which shall be a date on or prior to the fifth Business
Day prior to the Removal Date).

     2.   Designation of Removed Accounts. On or before the date that is ten
          -------------------------------
(10) Business Days after the Removal Date, the Seller will deliver to the Owner
Owner Trustee a computer file or microfiche list containing a true and complete
schedule identifying all Accounts the Receivables of which are being removed
from the Issuer, specifying for each such Account, as of the Removal Notice
Date, its

                                  Exhibit B-1
<PAGE>

account number, the aggregate amount outstanding in such Account and the
aggregate amount of Principal Receivables in such Account, which computer file
or microfiche list shall supplement Schedule 1 to the Agreement.
                                    ----------

     3.   Conveyance of Receivables. (a) The Issuer does hereby transfer,
          -------------------------
assign, set over and otherwise convey to the Seller, without recourse, on and
after the Removal Date, all right, title and interest of the Issuer in, to and
under the Receivables existing at the close of business on the Removal Notice
Date and thereafter created from time to time in the Removed Accounts designated
hereby, all Recoveries related thereto, all monies due or to become due and all
amounts received or receivable with respect thereto and all proceeds thereof.

     (b)  In connection with such transfer, the Issuer agrees to execute and
deliver to the Seller on or prior to the date this Reassignment is delivered,
applicable termination statements prepared by the Seller with respect to the
Receivables existing at the close of business on the Removal Notice Date and
thereafter created from time to time in the Removed Accounts reassigned hereby
and the proceeds thereof evidencing the release by the Issuer of its interest in
the Receivables in the Removed Accounts, and meeting the requirements of
applicable state law, in such manner and such jurisdictions as are necessary to
terminate such interest.

     4.   Representations and Warranties of the Seller. The Seller hereby
          --------------------------------------------
represents and warrants to the Issuer as of the Removal Date:

     (a)  Legal Valid and Binding Obligation. This Reassignment Agreement
          ----------------------------------
constitutes a legal, valid and binding obligation of the Seller enforceable
against the Seller 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);
and

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

     5.   Condition Precedent. The amendment of the Transfer and Servicing
          -------------------
Agreement set forth in Section 7 hereof is subject to the satisfaction, on or
                       ---------
prior to the Removal Date, of the following condition precedent:

     6.   Officers' Certificate. The Seller shall have delivered to the Owner
          ---------------------
Trustee an Officers' Certificate certifying that (i) as of the Removal Date, all
requirements set forth in Section 2.5 of the Transfer and Servicing Agreement
                          -----------
for designating Removed Accounts and reconveying the Receivables of such Removed
Accounts, whether now existing or hereafter created, have been satisfied, and
(ii) each of the representations and warranties made by the Seller in Section 5
                                                                      ---------
hereof is

                                  Exhibit B-2
<PAGE>

true and correct as of the Removal Date. The Owner Trustee may conclusively rely
on such Officer's Certificate, shall have no duty to make inquiries with regard
to the matters set forth therein and shall incur no liability in so relying.

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

     8.   Counterparts. This Reassignment 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.

                                  Exhibit B-3
<PAGE>

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


                                   SPIEGEL CREDIT CORPORATION
                                   III, Seller

                                   By:________________________________________
                                   Name:
                                   Title:

                                   SPIEGEL CREDIT CARD MASTER
                                   NOTE TRUST, Issuer

                                   By:_______________________________________,
                                   not in its individual capacity but solely as
                                   Owner Trustee on behalf of the Issuer

                                  Exhibit B-4
<PAGE>

                                  Schedule 1
                           to Reassignment Agreement

                               REMOVED ACCOUNTS
                               ----------------
<PAGE>

                                   EXHIBIT C
                                      to
                       TRANSFER AND SERVICING AGREEMENT

 (Provisions to be included in Opinion of Counsel to be delivered pursuant to
         Section 2.7(c)(vii) of the Transfer and Servicing Agreement)
         -------------------


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

     (i)   The Assignment has been duly authorized, executed and delivered by
Seller and constitutes the legal, valid and binding agreement of Seller,
enforceable against Seller in accordance with its terms.

     (ii)  If the Assignment constitutes a valid transfer and assignment of the
Receivables in the Additional Accounts, Financing Statements having been filed
in the offices of the Secretaries of State of the States of Delaware, Illinois
and Oregon, the Owner Trustee has acquired (based upon certificates of Seller to
the effect that (a) Seller acquired the Receivables pursuant to the Receivables
Purchase Agreement, (b) Seller has not transferred any interest in the
Receivables other than to the Trustee or caused any lien to be imposed upon the
Receivables, and (c) Seller will acquire pursuant to the Receivables Purchase
Agreement all Receivables subsequently created in the Additional Accounts) free
and clear of any Lien or interest of any Person except for (x) Liens permitted
under Section 2.5(b) of the Transfer and Servicing Agreement, (y) the interest
      --------------
of the Holder of the Collateral Certificate, and (z) Seller's right to receive
interest accruing on, and investment earnings in respect of, the Collection
Subaccounts and the Collection Sub-subaccounts as provided in the Transfer and
Servicing Agreement (the "Transfer and Servicing Agreement")) all right, title
                          --------------------------------
and interest of Seller in the Issuer Property free and clear of any Lien or
interest of any Person, except for (x) Liens permitted under Section 2.5(b) of
                                                             --------------
the Transfer and Servicing Agreement, (y) the interest of the Holder of the
Collateral Certificate, and (z) Seller's right to receive interest accruing on,
and investment earnings in respect of, the Collection Subaccounts and the
Collection Sub-subaccounts as provided in the Transfer and Servicing Agreement.

     (iii) If the Assignment does not constitute a valid transfer and assignment
of the Receivables in the Additional Accounts, the Transfer and Servicing
Agreement as amended by the Assignment creates a valid security interest in
favor of the Owner Trustee for the benefit of the Noteholders in such
Receivables. The Financing Statements having been filed in the Offices of the
Secretaries of State of the States of Delaware, Illinois and Oregon, the Issuer,
for the benefit of the Noteholders has a first priority perfected security
interest in the Receivables now existing and hereafter created in the Additional
Accounts and all monies due or to become due

                                  Exhibit C-1
<PAGE>

with respect thereto, including the proceeds thereof. Such perfection and
priority of the Owner Trustee for the benefit of the Noteholders in such
Receivables, and the proceeds thereof, would not be affected by an increase or
decrease in the relative interests in the Receivables of the Holder of the
Collateral Certificate and of the Noteholders. Such perfection and priority
would be enforceable against Seller notwithstanding the insolvency of Seller,
except that such counsel need express no opinion as to the effect of Section 9-
306(4) of the UCC as in effect in the State of Illinois with respect to Proceeds
held by Seller upon its insolvency.

     (iv) No filings or other action, other than the filing of the financing
statement(s) referred to in such opinion (the "Financing Statements") with
                                               --------------------
respect to the Issuer's security interest in such Receivables and the proceeds
thereof, in the Offices of the Secretaries of State of the States of Delaware,
Illinois and Oregon, are necessary to perfect or continue the perfected status
of the security or other interest of the Issuer in the Receivables of the
Additional Accounts designated by the Assignment, and the proceeds thereof,
against third parties, except that appropriate continuation statements with
respect to the Financing Statements be filed at five-year intervals to continue
the perfection of such security interest.

     (v)  In the course of such counsel's representation of Seller in connection
with this matter, and without independent investigation, such counsel has not
become aware of (a) any type of right, lien or interest of any government or
agency or instrumentality thereof or any lien arising by operation of law which
might be asserted against the Receivables in the Additional Accounts designated
by the Assignment or the proceeds thereof in particular circumstances other than
a tax lien or a lien arising under ERISA, (b) any such right, lien or interest
which has been so asserted, or (c) any lien arising by operation of law or any
attachment or execution lien which has been asserted against the Receivables of
the Additional Accounts designated by the Assignment or the proceeds thereof.

     (vi) Based on certificates of Seller to the effect of the following, to the
best of the knowledge of counsel, (a) Seller acquired the Receivables pursuant
to the Receivables Purchase Agreement, (b) Seller has not transferred any
interest in the Receivables other than to the Owner Trustee or caused any lien
to be imposed upon the Receivables, and (c) Seller will acquire pursuant to the
Receivables Purchase Agreement all Receivables subsequently created in the
Additional Accounts) free and clear of any Lien or interest of any Person except
for (x) Liens permitted under Section 2.5(b) of the Transfer and Servicing
                              --------------
Agreement, (y) the interest of the Holder of the Collateral Certificate, and (z)
Seller's right to receive interest accruing on, and investment earnings in
respect of, the Collection Subaccounts and the Collection Sub-subaccounts as
provided in the Transfer and Servicing Agreement.

                                  EXHIBIT C-2
<PAGE>

                                   EXHIBIT D
                                      to
                       TRANSFER AND SERVICING AGREEMENT

                    FORM OF MONTHLY SERVICER'S CERTIFICATE

     The undersigned, a duly authorized representative of First Consumers
National Bank ("FCNB"), as Servicer pursuant to the Transfer and Servicing
                ----
Agreement dated as of [_________], 2000 (the "Transfer and Servicing Agreement")
                                              --------------------------------
among FCNB, Spiegel Credit Corporation III and Spiegel Credit Card Master Note
Trust, as Issuer, does hereby certify as follows:

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

2.   FCNB is the Servicer under the Transfer and Servicing Agreement.

3.   The undersigned is a Servicing Officer.

4.   The date of this Certificate is a Determination Date under the Transfer and
     Servicing Agreement.

5.   The aggregate amount of Collections processed
     during the preceding Monthly Period (after giving
     effect to all true-up adjustments for such period)
     was equal to  $________________________

6.   Aggregate Principal Balance as of the end
     of the last day of the preceding Monthly Period
     was equal to  $ _________________________

7.   The aggregate amount of Finance Charge Collections
     during the preceding Monthly Period (after giving
     effect to all true-up adjustments for such period)
     was equal to  $ _________________________

8.   The amount and nature of true-up adjustments
     pursuant to Section 1.4 for the preceding Monthly
                 -----------

                                  Exhibit D-1
<PAGE>

     Period were as follows $ _________________________

9.   The Default Amount for the preceding Monthly
     Period was equal to $ _________________________

10.  Investor Net Recoveries for the preceding Monthly
     Period was equal to $ _________________________

11.  The Portfolio Yield for the preceding Monthly
     Period for each of the following Series was equal to:
     Series __________________$ _________________________
     Series __________________$ _________________________

12.  The Base Rate for the preceding Accrual Period for
     each of the following Series was equal to:

     Series ___________________$ _________________________
     Series ___________________$ _________________________

13.  The aggregate amount of Receivables and the balance
     on deposit in the Collection Account (or any
     Subaccount thereof) and each other Series Account
     with respect to Collections processed as of the end
     of the preceding Monthly Period was equal to $ _________________________

14.  The aggregate amount of Credit Adjustments from
     the preceding Monthly Period was equal to $ _________________________

15.  The aggregate amount, if any, of withdrawals,
     drawings or payments under any Enhancement with
     respect to each Series made with respect to the
     preceding Monthly Period was equal to $ _________________________

16.  The aggregate amount payable to the Investor
     Noteholders on the succeeding Distribution
     Date in respect of Note Interest is equal to $ _________________________

17.  The aggregate amount payable to the
     Noteholders on the succeeding Distribution Date
     in respect of Note Principal is equal to $ _________________________

                                  Exhibit D-2
<PAGE>

                                  EXHIBIT E-1
                                      to
                       TRANSFER AND SERVICING AGREEMENT

                     FORM OF ANNUAL SERVICER'S CERTIFICATE

     The undersigned, a duly authorized representative of First Consumers
National Bank ("FCNB") as Servicer pursuant to the Transfer and Servicing
                ----
Agreement dated as of [________], 2000 (the "Transfer and Servicing Agreement")
                                             --------------------------------
among Spiegel Credit Corporation III, FCNB and Spiegel Credit Card Master Note
Trust, as Issuer, does hereby certify that:

     1.   FCNB is Servicer under the Transfer and Servicing Agreement.

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

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

     4.   A review of the activities of the Servicer during the calendar year
ended December 31, 200_ was conducted under my supervision.

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

     6.   The following is a description of each default in the performance of
the Servicer's obligations under the provisions of the Transfer and Servicing
Agreement known to me to have been made during the calendar year ended December
31, 200_, which sets forth in detail the (i) nature of each such default, (ii)
the action taken by the Servicer, if any, to remedy each such default and (iii)
the current status of each such default: [If applicable, insert "None."]

                                 Exhibit E-1-1
<PAGE>

     IN WITNESS WHEREOF, the undersigned has duly executed this Certificate this
day of____________, 200 ___.

                                              _______________________________
                                              Name:
                                              Title:

                                 Exhibit E-1-2
<PAGE>

                                  EXHIBIT E-2
                                      to
                       TRANSFER AND SERVICING AGREEMENT

                FORM OF ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS'
                               SERVICING REPORT


First Consumers National Bank
P.O. Box 5280
Portland, Oregon 97208

Spiegel Credit Corporation III
400 West 9th Street, Suite 101B
Wilmington, Delaware 19801-1504

First Consumers National Bank
111 West Monroe Street
Chicago, Illinois 60690

Gentlemen:

     We have applied certain agreed-upon procedures, as discussed below, to the
accounting records of First Consumers National Bank (the "Servicer") and Spiegel
                                                          --------
Credit Corporation III ("SCCIII") as of December 31, ____, solely to assist the
                         ------
Servicer in its responsibilities as Servicer under the Transfer and Servicing
Agreement dated as of [_____], 2000, among SCCIII, the Servicer and Spiegel
Credit Card Master Note Trust (the "Transfer and Servicing Agreement"). It is
                                    --------------------------------
understood that this report is solely for your information and is not to be
referred to or distributed for any other purpose to anyone who is not a member
of management of the Servicer, SCCIII or the Owner Trustee, or who is not
otherwise specifically defined as a recipient in the Servicing Agreement. Our
procedures and findings are as follows:

     (a)  We compared each of the amounts in the certificates delivered by the
          Servicer pursuant to Section 3.4(b) of the Transfer and Servicing
                               --------------
          Agreement, the statements or reports delivered to the Noteholders of
          each Series pursuant to the Indenture Supplements and the monthly
          payment instructions delivered to the Owner Trustee with respect to
          each Series of Notes pursuant to the Indenture for each of the months
          in the year ended December 31, _____ [the period of ___ months ended
          ______, ____] to the corresponding amounts in schedules prepared by
          the Servicer and found them to be in agreement.

                                 Exhibit E-2-1
<PAGE>

     (b)  We verified the mathematical accuracy of the schedules prepared by the
          Servicer and found no differences.

     (c)  We compared the information in the schedules prepared by the Servicer
          to data extracted from the Servicer's credit accounting system and
          found them to be in agreement.

     (d)  We read the Annual Servicer's Certificate delivered pursuant to

          Section 3.5 of the Servicing Agreement for the year ended December 31,
          -----------
          _____ [for the period of ____months ended, _______, _____] and made
          inquiries of the Servicer's management regarding the Servicer's
          compliance with the guidelines of the Transfer and Servicing
          Agreement.

     Because the above procedures do not constitute an audit made in accordance
with generally accepted auditing standards, we express no opinion on any of the
specified accounts or items referred to above. In connection with the procedures
referred to above, no matters came to our attention that caused us to believe
that the certificates and reports referred to above should be adjusted. Based on
our reading, inquiries and procedures as set forth in paragraphs (a), (b), (c)
and (d) above, nothing came to our attention that caused us to believe that the
servicing of the accounts was not conducted in compliance with the terms and
conditions set forth in the Transfer and Servicing Agreement insofar as they
relate to accounting matters. Had we performed additional procedures, matters
might have come to our attention that would have been reported to you. This
report relates only to the accounts or items specified above and does not extend
to any financial statements of First Consumers National Bank, Spiegel Credit
Corporation III or Spiegel Credit Card Master Note Trust taken as a whole.

Date:

                                 Exhibit E-2-2
<PAGE>

                                  EXHIBIT F-1

                          FORM OF OPINION OF COUNSEL
                          WITH RESPECT TO AMENDMENTS

       (Provisions to be included in Opinion of Counsel to be delivered
                        pursuant to Section 9.2(d)(i))
                                    -----------------

     The opinions set forth below may be subject to all the qualifications,
assumptions, limitations and exceptions taken or made in the Opinions Of Counsel
delivered on any applicable Closing Date.

     (i)  The amendment to the Transfer and Servicing Agreement, attached hereto
as Schedule 1 (the "Amendment" ), has been duly authorized, executed and
   ----------       ---------
delivered by Seller and constitutes the legal, valid and binding agreement of
Seller, enforceable in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws from time to time in effect affecting creditors' rights generally.
The enforceability of Seller's obligations is also subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

     (ii) The Amendment has been entered into in accordance with the terms and
provisions of Section 9.1 of the Transfer and Servicing Agreement.
              -----------

                                 Exhibit F-1-1
<PAGE>

                                  EXHIBIT F-2

                          FORM OF OPINION OF COUNSEL
                           WITH RESPECT TO ACCOUNTS

       (Provisions to be included in Opinion of Counsel to be delivered
                   pursuant to Section 9.2(d)(ii) or (iii))
                               ---------------------------

     The opinions set forth below may be subject to all the qualifications,
assumptions, limitations and exceptions taken or made in the Opinions of Counsel
delivered on any applicable Closing Date.

     1.   Except for any Receivable that is evidenced by an instrument, the
Receivables constitute accounts under Article 9 of the UCC.

     2.   The Assignment creates in favor of the Issuer a security interest in
the rights of Seller in such of the Receivables identified in Schedule 1 to the
                                                              ----------
Assignment as constitute accounts. To the extent that such security interest is
not an interest of a buyer of accounts, then the Assignment creates in favor of
the Issuer a security interest in the rights of Seller in the proceeds of the
Receivables.

     3.   To extent that transactions contemplated by the Assignment do not
constitute a sale by the Assignment Seller to the Issuer of such of the
Receivables as constitute general intangibles or the proceeds thereof, the
Assignment creates in favor of the Issuer a security interest in the rights of
Seller in such of the Receivables as constitute general intangibles and the
proceeds thereof.

     4.   [The applicable Seller Purchase Agreement and related Conveyance
Papers creates in favor of Seller a security interest in the rights of FCNB in
such of the Receivables identified in Schedule 1 to the applicable Seller
                                      ----------
Purchase Agreement and related Conveyance Papers as constitute accounts.]

     5.   [To the extent that transactions contemplated by the applicable Seller
Purchase Agreement and related Conveyance Papers do not constitute a sale by
FCNB to Seller of such of the Receivables as constitute general intangibles or
the proceeds thereof, the applicable Seller Purchase Agreement and related
Conveyance Papers creates in favor of Seller a security interest in the rights
of FCNB in such of the Receivables as constitute general intangibles and the
proceeds thereof.]

     6.   The security interests described in paragraphs 2, 3, 4 and 5 above are
perfected and of first priority.

                                 Exhibit F-2-1
<PAGE>

                                  EXHIBIT F-3

                         PROVISIONS TO BE INCLUDED IN
                           ANNUAL OPINION OF COUNSEL

     The opinions set forth below may be subject to certain qualifications,
assumptions, limitations and exceptions taken or made in the opinion of counsel
to Seller with respect to similar matters delivered on the Initial Closing Date.
Unless otherwise indicated, all capitalized terms used herein shall have the
meanings ascribed to them in the Transfer and Servicing Agreement and in the
Assignment.

     (i)  If the Transfer and Servicing Agreement constitutes a valid transfer
and assignment of the Receivables identified in Schedule 1 to the Transfer and
                                                ----------
Servicing Agreement (the "Trust Property"), the Financing Statements having been
filed in the offices of the Secretaries of State of the States of Delaware,
Illinois and Oregon, the Trustee has acquired (based upon certificates of Seller
to the effect that (a) Seller acquired the Receivables pursuant to the
Receivables Purchase Agreement, (b) Seller has not transferred any interest in
the Receivables other than to the Trustee or caused any lien to be imposed upon
the Receivables, and (c) Seller will acquire pursuant to the Receivables
Purchase Agreement all Receivables subsequently created in the Additional
Accounts free and clear of any Lien or interest of any Person except for (x)
Liens permitted under subsection 2.5(b) of the Transfer and Servicing Agreement,
                      -----------------
(y) the interest of the Holder of the Exchangeable Seller Certificate, and (z)
Seller's right to receive interest accruing on, and investment earnings in
respect of, the Collection Subaccounts and the Collection Sub-subaccounts as
provided in the Transfer and Servicing Agreement) all right, title and interest
of Seller in the Trust Property free and clear of any Lien or interest of any
Person, except for (x) Liens permitted under subsection 2.5(b) of the Transfer
                                             -----------------
and Servicing Agreement, (y) the interest of the Holder of the Exchangeable
Seller Certificate, and (z) Seller's right to receive interest accruing on, and
investment earnings in respect of, the Collection Subaccounts and the Collection
Sub-subaccounts as provided in the Transfer and Servicing Agreement.

     (ii) If the Transfer and Servicing Agreement does not constitute a valid
transfer and assignment of all right, title, and interest in the Trust Property,
the Transfer and Servicing Agreement creates a valid security interest in favor
of the Trustee for the benefit of the Investor Certificateholders in the Trust
Property.  The Financing Statements having been filed in the offices of the
Secretaries of State of the States of Delaware, Illinois and Oregon, the Trust,
for the benefit of the Investor Certificateholders has a first priority
perfected security interest in that portion of the Trust Property that consists
of the Receivables now existing and hereafter created (other than Receivables in
Additional Accounts), and all monies due or to become due with respect thereto,
including the proceeds thereof.  Such perfection and priority of the Trustee for
the benefit of the Investor Certificateholders in such Receivables, and the
proceeds thereof, would not be affected by an increase or decrease in the
relative interests in the Receivables of the Holder of the Exchangeable Seller
Certificate and of the Investor Certificateholders.  Such perfection and
priority would
<PAGE>

be enforceable against Seller notwithstanding the insolvency of Seller except
that such counsel need express no opinion as to the effect of Section 9-306(4)
of the UCC as in effect in the State of Illinois with respect to proceeds held
by Seller upon its insolvency.

     (iii)  No filings or other action, other than the filing of the financing
statement(s) referred to in such opinion (the "Financing Statements") with
respect to the Trust's interest in the Receivables and the proceeds thereof in
the Offices of the Secretaries of State of the States of Delaware, Illinois and
Oregon, are necessary to perfect or continue the perfected status of the
interest of the Trust in the Receivables and the proceeds thereof against third
parties, except that appropriate continuation statements with respect to the
Financing Statement(s) must be filed at five-year intervals.

     (iv)   In the course of such counsel's representation of Seller in
connection with this matter, and without independent investigation, such counsel
has not become aware of (a) any type of right, lien, or interest of any
government or agency or instrumentality thereof or any lien arising by operation
of law which might be asserted against the Receivables or the proceeds arising
under ERISA, (b) any such right, lien or interest which has been so asserted or
(c) any lien arising by operation of law or any attachment or execution lien
which had been asserted against the Receivables or the proceeds thereof.

                                 Exhibit F-3-2
<PAGE>

                                  SCHEDULE 1

                               List of Accounts
                               ----------------

                  [Original list delivered to Owner Trustee]

                                      1-1