<PAGE>
                                                                    Exhibit 10.4

                              SETTLEMENT AGREEMENT

          THIS SETTLEMENT AGREEMENT (this "AGREEMENT") dated as of December 3,
2004 is made by and among Spiegel, Inc. ("SPIEGEL"), Newport News, Inc., Eddie
Bauer, Inc., Spiegel Catalog, Inc. and Spiegel Catalog Services, LLC
(collectively, the "SPIEGEL DEBTORS"), Spiegel Credit Corporation III ("SCC
III"), Spiegel Acceptance Corporation ("SAC"), First Consumers National Bank
("FCNB"), Michael Crusemann, Horst Hansen, Martin Zaepfel, Michael Otto, Spiegel
Holdings Inc., and Otto (GmbH & Co KG) (all of the foregoing shall be referred
to, collectively, as the "SPIEGEL PARTIES"), The Bank of New York, as Trustee
(the "TRUSTEE") under the Master Indenture, dated December 1, 2000 (the "MASTER
INDENTURE") between the Spiegel Credit Card Master Note Trust (the "NOTE Trust")
and the Trustee, and the Series 2000-A Supplement (the "SERIES 2000-A
SUPPLEMENT") and Series 2001-A Supplement (the "SERIES 2001-A SUPPLEMENT") to
the Master Indenture, and MBIA Insurance Corporation ("MBIA").

                             PRELIMINARY STATEMENTS

          WHEREAS, FCNB issued certain private-label credit cards from time to
time prior to the Petition Date (as defined herein). The holders of those credit
cards (the "CARDHOLDERS") could use those credit cards to purchase products and
services from retail affiliates of Spiegel, including Eddie Bauer, Inc., Spiegel
Catalog, Inc. and Newport News, Inc. (collectively, the "SPIEGEL RETAIL
AFFILIATES");

          WHEREAS, when the Cardholders made purchases from the Spiegel Retail
Affiliates, those purchases generated receivables held initially by FCNB (the
"RECEIVABLES");

<PAGE>

          WHEREAS, in addition to being the issuer of the credit cards, FCNB was
until some point in June 2003 responsible for, among other things, servicing the
Receivables from the Cardholders;

          WHEREAS, pursuant to a series of agreements (collectively, the
"TRANSACTION DOCUMENTS"), the Receivables were conveyed to the Note Trust on a
"revolving pool basis" and used as collateral to secure notes issued to
investors in the following manner:

               (a)  FCNB sold and transferred the Receivables to SCC III, a
                    bankruptcy remote entity, and/or SAC;

               (b)  Receivables sold and transferred to SAC were sold and
                    transferred to SCC III;

               (c)  SCC III in turn sold and transferred the Receivables to the
                    Note Trust;

               (d)  Using an interest in the Receivables as security, the Note
                    Trust issued and sold interest-bearing notes (the "NOTES")
                    to investors (the "NOTEHOLDERS");

               (e)  The collections from the Receivables were distributed based
                    on the priority of payments provisions set forth in the
                    Transaction Documents;

               (f)  As consideration for the interest in the Receivables used to
                    secure the Notes, the Note Trust transferred to SCC III,
                    directly or indirectly, proceeds of the Note issuance and,
                    subject to certain exceptions, the "SELLER INTEREST" (as
                    defined in the Master Indenture);

               (g)  The Trustee used collections of principal receivables and
                    finance charge receivables from Cardholders to pay principal
                    and interest on the Notes to the Noteholders;

               (h)  Cash collateral was held in segregated trust accounts (the
                    "SPREAD ACCOUNTS," as that term is defined in the 2000-A and
                    2001-A Insurance and Reimbursement Agreements ("INSURANCE
                    AND REIMBURSEMENT AGREEMENTS")) to secure certain amounts
                    payable to MBIA and the interest rate swap counter-party;
                    and

               (i)  Cash collateral (the "VFN CASH COLLATERAL") was held in an
                    escrow account for the benefit of the VFN Noteholders (as
                    defined below).


                                        2

<PAGE>

          WHEREAS, the Note Trust issued three different series of Notes: $600
million of 2000-A Notes, on December 1, 2000 (the "2000-A NOTES" or "2000-A NOTE
SERIES"); $600 million of 2001-A Notes, on July 19, 2001 (the "2001-A NOTES" or
"2001-A NOTE SERIES"); and $426 million in Variable Funding Notes, on October
17, 2001, which principal amount was increased over time to a high of $512
million (the "VFN NOTES" or "VFN SERIES"' the holders of those notes, the "VFN
NOTEHOLDERS");

          WHEREAS, in connection with the issuance of the 2000-A Notes and the
2001-A Notes, MBIA agreed to insure payment of all interest and principal due to
the Noteholders.

          WHEREAS, as the insurer of the 2000-A Notes and the 2001-A Notes, MBIA
is party to certain of the Transaction Documents and an express third-party
beneficiary of other Transaction Documents.(1)

----------
(1)  MBIA is a party to, or third-party beneficiary of, the following
     Transaction Documents, among others:

-    Insurance and Reimbursement Agreement, among MBIA Insurance Corporation,
     Spiegel, Inc., Spiegel Acceptance Corporation, Spiegel Credit Corporation
     III, as Seller, First Consumers National Bank, as Servicer, Spiegel Credit
     Card Master Note Trust, as Issuer and The Bank of New York, as Indenture
     Trustee, dated as of December 19, 2000, as amended (incorporating certain
     prior agreements, defined in the Insurance and Reimbursement Agreement as
     the "Condition Precedent Documents").

-    Insurance and Reimbursement Agreement, among MBIA Insurance Corporation,
     Spiegel Credit Corporation III, as Seller, First Consumers National Bank,
     as Servicer, Spiegel, Inc., Spiegel Acceptance Corporation, Spiegel Credit
     Card Master Note Trust, as Issuer and The Bank of New York, as Indenture
     Trustee, dated as of July 19, 2001, as amended (incorporating the
     "Condition Precedent Documents").

-    Master Indenture, between Spiegel Credit Card Master Note Trust, as Issuer
     and The Bank of New York, as Indenture Trustee, dated as of December 1,
     2000, as supplemented to date.

-    Series 2000-A Indenture Supplement, between Spiegel Credit Card Master Note
     Trust, as Issuer and The Bank of New York, as Indenture Trustee, dated as
     of December 1, 2000, as amended.

-    Series 2001-A Indenture Supplement, between Spiegel Credit Card Master Note
     Trust, as Issuer, and The Bank of New York, as Indenture Trustee, dated as
     of July 19, 2001, as amended.

-    Transfer and Servicing Agreement, among Spiegel Credit Corporation III, as
     Seller, First Consumers National Bank, as Servicer and Spiegel Credit Card
     Master Note Trust, as Issuer, dated as of December 1, 2000, as amended.

-    MBIA Insurance Corporation Financial Guaranty Insurance Policy, dated
     December 19, 2000, Policy #33927(1) & (2).

-    MBIA Insurance Corporation Financial Guaranty Insurance Policy, dated July
     19, 2001, Policy #35738(1) & (2).

-    Indemnification Agreement, among MBIA Insurance Corporation, Spiegel Credit
     Corporation III, as Seller, Spiegel, Inc. and Bank of America Securities
     LLC, as Representative of the Underwriter, dated December 19, 2000.


                                        3

<PAGE>

          WHEREAS, the VFN Notes were paid off in January 2004;

          WHEREAS, following the payoff of the VFN Notes, (a) VFN Cash
Collateral held for the benefit of the VFN Noteholders in the aggregate amount
of $16,608,166.46 (the "VFN CASH COLLATERAL AMOUNT") was scheduled to be
released by the Trustee to the holder of the Seller Interest but, subject to a
Stipulation and Order entered in the District Court Case (as defined below) (the
"ATTACHMENT STIPULATION"), the VFN Cash Collateral Amount is being held by the
Trustee in a segregated account (the "SELLER INTEREST ACCOUNT") and (b) pursuant
to the Attachment Stipulation, the Seller Interest portion of the monthly
allocation from the finance charge receivables collections is also being held in
the Seller Interest Account and the balance of such portion of the monthly
allocation from finance charge collections being held in the Seller Interest
Account as of November 15, 2004 was $16,395,786.07.

          WHEREAS, Spiegel, SCC III, SAC, and FCNB represent on behalf of
themselves and all of their subsidiaries and affiliates that SAC is the "holder
of the Seller Interest";

          WHEREAS, FCNB represents on behalf of itself and all of its
subsidiaries that it has no interest in the Seller Interest;

          WHEREAS, on March 17, 2003 (the "PETITION DATE") and certain dates
thereafter, each of the Spiegel Debtors and certain of their subsidiaries and
affiliates (collectively with the Spiegel Debtors, the "DEBTORS") filed
voluntary petitions for relief (the "BANKRUPTCY CASE") under chapter 11 of title
11, United States Code (the "BANKRUPTCY CODE") in the Bankruptcy Court for the
Southern District of New York (the "BANKRUPTCY COURT"). The Debtors' chapter 11
cases are being jointly administered in the Bankruptcy Court;

----------
-    Indemnification Agreement, among MBIA Insurance Corporation, Spiegel Credit
     Corporation III, as Seller, Spiegel, Inc., and J.P. Morgan Securities Inc.,
     as Representative of the Underwriters, dated July 19, 2001.


                                        4

<PAGE>

          WHEREAS, in accordance with sections 1107(a) and 1108 of the
Bankruptcy Code, the Debtors continue to operate their businesses and manage
their properties as debtors in possession;

          WHEREAS, the Trustee has received, but not disbursed, collections from
Receivables received in February 2003 in the amount of $18,178,834.98 (the
"FEBRUARY 2003 COLLECTIONS");

          WHEREAS, MBIA, on behalf of the Series 2000-A and Series 2001-A
Noteholders, and SCC III and SAC each asserted (respectively, in writing and
orally) a right to the full amount of the February 2003 Collections;

          WHEREAS, MBIA has incurred certain fees and expenses in connection
with the performance of its obligations under the Transaction Documents and
prosecution of its claims related thereto in an aggregate amount as of November
15, 2004 of $48,861,585.67 (the "MBIA EXPENSES"), which amount consists of: (a)
legal fees in the amount of $5,486,317.39 (b) external and internal audit fees
in the amount of $580,880.92; (c) Cardholder Management Services, LLC ("CMS")
back-up servicer fees in the amount of $1,491,690.55; (d) Gordian Group fees in
the amount of $3,168,243.42; (e) CMS successor servicer fees in the amount of
$30,131,428.39, and (f) accrued unpaid Monthly Insurance Premium, as defined in
the Series 2000-A Supplement and the Series 2001-A Supplement, in the amount of
$8,003,025.00;

          WHEREAS, on September 16, 2003, MBIA commenced an action styled MBIA
Insurance Corporation v. First Consumers National Bank and Spiegel Credit
Corporation III, 03-CIV-7246 (RCC) (RLE) (the "DISTRICT COURT CASE"), in the
United States District Court for the Southern District in New York (the
"DISTRICT COURT"). In its Complaint and Jury Demand


                                        5

<PAGE>

against FCNB and SCC III, MBIA sought damages, imposition of a constructive
trust, and certain declaratory relief;

          WHEREAS, on November 17, 2003, MBIA filed an Amended Complaint and
Jury Demand in the District Court pursuant to which MBIA, inter alia, added SAC
as a defendant in the District Court Case;

          WHEREAS, on December 19, 2003, MBIA on behalf of the Noteholders of
the 2000-A Note Series and the 2001-A Note Series commenced an action styled
MBIA Insurance Corp. v. Spiegel Holdings, Inc., Michael Otto, Michael Crusemann;
Horst Hansen; Martin Zaepfel; and Otto (GmbH & Co KG), 03 Civ. 10097 (GEL) (the
"SECURITIES LITIGATION"). In its Complaint and Jury Demand, MBIA alleged several
breaches of the Securities Act of 1933 and the Securities Exchange Act of 1934;

          WHEREAS, judgment dismissing the Securities Litigation was entered on
September 2, 2004;

          WHEREAS, MBIA filed a Notice of Appeal of the judgment on September
29, 2004, and that appeal is still pending;

          WHEREAS, on October 1, 2003, MBIA filed proof of claim number 3035
against Spiegel Catalog, Inc., proof of claim number 3036 against Newport News,
Inc., proof of claim number 3037 against Eddie Bauer, Inc., proof of claim
number 3038 against Spiegel and proof of claim number 3039 against Spiegel
Catalog Services, LLC in the Bankruptcy Court. On July 1, 2004 MBIA filed proof
of claim number 4162 against Spiegel, amending proof of claim number 3038
(claims 3035, 3036, 3037, 3038, 3039 and 4162, collectively, the "PRE-PETITION
CLAIMS"). MBIA has also notified the Spiegel Debtors of an outstanding
administrative claim of


                                        6

<PAGE>

approximately $9.6 million (the "POST-PETITION CLAIM"). MBIA's Pre-Petition
Claims and Post-Petition Claim are hereinafter collectively referred to as the
"MBIA CLAIMS";

          WHEREAS, on October 1, 2003, the Trustee filed proof of claim number
3024 against Spiegel, proof of claim number 3025 against Spiegel Catalog, Inc.,
proof of claim number 3026 against Eddie Bauer, Inc., proof of claim number 3027
against Spiegel Catalog Services, LLC and proof of claim number 3034 against
Newport News, Inc. (claims 3024, 3025, 3026, 3027 and 3034, collectively, the
"TRUSTEE CLAIMS");

          WHEREAS, in order to save the time and expense of litigation, the
parties to the District Court Case seek to settle their dispute;

          WHEREAS, in order to save the time and expense of litigation, the
parties to the Securities Litigation seek to settle their dispute;

          WHEREAS, in order to save the time and expense of litigation, the
parties to the Bankruptcy Case seek to settle the MBIA Claims and the Trustee
Claims; and

          WHEREAS, the parties seek a global settlement of all potential claims
in connection with the Transaction Documents.

          NOW, THEREFORE, in consideration of the premises, mutual benefits and
the agreements contained herein, the parties hereby agree as follows:

          1. As set forth herein, all of the parties hereto intend this
Agreement to constitute a settlement of all claims, and the form and source of
any payments in connection with this Agreement are for the convenience of the
parties and do not reflect any agreement among the parties with respect to which
claims are being settled and in what amount.


                                        7

<PAGE>

                         DISTRIBUTIONS TO MBIA AND SAC

          2. On the Effective Date (as defined herein), the Trustee shall
disburse: (a) $14.8 million from the February 2003 Collections to the Note Trust
for distribution to the Series 2000-A and 2001-A Noteholders by wire transfer
pursuant to the wire instructions set forth in Exhibit A annexed hereto (the
remainder of the February 2003 Collections plus any accrued interest thereon,
the "REMAINING FEBRUARY 2003 COLLECTIONS"); and (b) $16.6 million to SAC from
the Seller Interest Account by wire transfer pursuant to the wire instructions
set forth in Exhibit B annexed hereto. The "EFFECTIVE DATE" shall be two
Business Days after the Bankruptcy Court Order approving this Agreement as to
the Spiegel Debtors and authorizing the Spiegel Debtors to take all necessary
and appropriate steps to effectuate the terms of this Agreement becomes final
and non-appealable (the "FINAL BANKRUPTCY COURT ORDER"). Prior to the Effective
Date, MBIA shall provide written notice to the Trustee of the Final Bankruptcy
Court Order.

          3. Within two Business Days after the expiration of the 94 Day Period
(as defined herein), the Trustee shall disburse the Remaining February 2003
Collections to SAC by wire transfer pursuant to the wire instructions set forth
in Exhibit B; provided, however, if SAC becomes subject (voluntarily or
involuntarily) to any Bankruptcy Proceeding (as defined below) during the 94 Day
Period, then the Trustee shall disburse the Remaining February 2003 Collections
to the Note Trust for distribution to the Series 2000-A and 2001-A Noteholders
by wire transfer pursuant to the wire instructions set forth in Exhibit A, and
such distribution shall occur within two Business Days after the Trustee
receives written notification from MBIA of such Bankruptcy Proceeding. If there
is no Bankruptcy Proceeding within the 94 Day Period,


                                        8

<PAGE>

MBIA shall provide written notice to the Trustee that the 94 Day Period has
expired within two Business Days after the expiration of the 94 Day Period.

                        FUNDING OF MBIA SETTLEMENT TRUST

          4. On the Effective Date, (a) all amounts remaining in the Seller
Interest Account (after distribution of amounts required under section 2(b)
above) shall be paid to a trust, which shall be known as the "MBIA SETTLEMENT
TRUST" (a copy of the MBIA Settlement Trust Agreement is attached hereto as
Exhibit C), by wire transfer pursuant to the wire instructions set forth in
Exhibit D annexed hereto, (b) SCC III shall assign to the MBIA Settlement Trust
any and all rights it has or may have to the Seller Interest, the Collateral (as
that term is defined in the Master Indenture) and any other interest in the Note
Trust, and (c) SAC shall assign to the MBIA Settlement Trust any and all rights
it has or may have to the Seller Interest, the Collateral and any other interest
in the Note Trust, (including any interest in the Spread Accounts). Pursuant to
the assignments set forth in (b) and (c), the parties understand that all future
monthly cash receipts from the Note Trust and/or any proceeds from the
Collateral payable to the Seller or the holder of the Seller Interest shall be
deposited in the MBIA Settlement Trust.

                            MBIA'S BANKRUPTCY CLAIMS

          5. Upon the entry of the Final Bankruptcy Court Order the Debtors will
have been deemed to have acknowledged (i) that the Pre-Petition Claims continue
to accrue in the Bankruptcy Case and are in the amount of $48,861,585.67 as of
November 15, 2004, and constitute an allowed pre-petition claim against the
Spiegel Debtors in the Bankruptcy Case in such amount, and (ii) that the
Post-Petition Claim constitutes an allowed post-petition administrative claim in
the amount of $8.0 million. In the event that the Effective Date does not


                                        9

<PAGE>

occur or no transfer of funds occurs pursuant to paragraph 2, the Spiegel
Debtors or other parties in interest shall have the right to object to and
otherwise contest such claims.

          6. Upon completion of the transfer of funds to the Note Trust under
paragraph 2 above and the releases by MBIA as set forth in paragraph 18 becoming
effective, MBIA absolutely and unconditionally waives its right to payment from
the Spiegel Debtors on account of the MBIA Claims.

    PAYMENTS FROM THE NOTE TRUST, SPREAD ACCOUNTS AND MBIA SETTLEMENT TRUST

          7. The Spiegel Parties agree not to object to the reimbursement of
MBIA Expenses (with interest, as set forth in paragraph 11) from the Note Trust
or the Spread Accounts and MBIA agrees to seek no further reimbursement from the
Note Trust or Spread Accounts for expenses or fees it may have incurred up to
and including November 15, 2004. Any interest payable on MBIA Expenses or MBIA
Future Expenses (as defined herein) shall be paid prior to the payment of such
expenses.

          8. The Spiegel Parties agree not to object to MBIA's reimbursement
(with interest, as set forth in paragraph 11) from the Note Trust or the Spread
Accounts for the following fees and expenses that may be incurred after November
15, 2004: (a) subject to paragraph 17, fees or expenses incurred by MBIA with
respect to CMS as successor servicer through the dates on which the 2000-A Note
Series and 2001-A Note Series are paid in full, (b) any unpaid Monthly Insurance
Premium, as defined in the Series 2000-A Supplement and Series 2001-A
Supplement, (c) any legal fees up to $500,000 incurred by MBIA in connection
with the Note Trust, and (d) any payments made by MBIA under the MBIA Insurance
Corporation Financial Guaranty Insurance Policy, dated December 19, 2000 (the
"2000 POLICY") and the MBIA Insurance Corporation Financial Guaranty Insurance
Policy, dated July 19, 2001 (the


                                       10

<PAGE>

"2001 POLICY") ((a), (b), (c) & (d) collectively, "MBIA FUTURE EXPENSES"). Any
accrued and unpaid interest due on MBIA Future Expenses shall be paid prior to
the payment of such expenses.

          9. The terms of the MBIA Settlement Trust shall provide, inter alia,
that: (a) to the extent that (i) any payment of principal or interest due to the
Series 2000-A Noteholders or Series 2001-A Noteholders is not paid in full when
due under the terms of the Transaction Documents and (ii) such non-payment or
partial payment is solely as a result of insufficient funds being available to
the Trustee and the Note Trust to pay such amounts prior to any claim being made
under the 2000 Policy or the 2001 Policy (as applicable) and after giving effect
to any withdrawals from the Spread Accounts contemplated under the Transaction
Documents, the amount of such shortfall shall be paid from the MBIA Settlement
Trust to MBIA; and (b) after the Noteholders have been paid in full, to the
extent that as a result of insufficient funds MBIA has not been fully reimbursed
by the Note Trust or the Spread Accounts for MBIA Expenses and MBIA Future
Expenses (both with interest, as set forth in paragraph 11), the amount of such
shortfall shall be paid to MBIA from the MBIA Settlement Trust to the extent of
funds available therein or from funds that shall become available therefrom. Any
interest payable on MBIA Expenses or MBIA Future Expenses shall be paid prior to
the payment of such expenses.

          10. MBIA's right to payments from the MBIA Settlement Trust in respect
of any payments made by MBIA pursuant to the 2000 Policy and the 2001 Policy
shall not in any way be limited by MBIA's right to payment or MBIA's receipt of
payment from its reinsurers.

          11. MBIA shall be entitled to interest on all MBIA Expenses and MBIA
Future Expenses, to the extent not reimbursed pursuant to paragraphs 8 and 9,
with the exception


                                       11

<PAGE>

of any unpaid insurance premium, at an annualized rate of interest equal to the
Prime Rate minus .40% (40 basis points) (the "INTEREST RATE"). Interest shall be
calculated by multiplying the Interest Rate against the cumulative beginning of
the month balance of MBIA Expenses and MBIA Future Expenses, and such interest
shall be calculated and accrue from the first day of the month following the
month in which such expense is, or was, incurred. The "PRIME RATE" means the
rate of interest as of the first Business Day (as defined in the Master
Indenture) of each month published from time to time in the New York, New York
edition of the Wall Street Journal, under the caption "Money Rates" as the
"prime rate."

          12. In the event that (a) MBIA submits a claim for payment of MBIA
Expenses or MBIA Future Expenses from the Note Trust or the Spread Accounts
pursuant to Section 4.4(a)(x) of either the Series 2000-A Supplement or the
Series 2001-A Supplement and such claim is not paid solely as a result of any
assertion that such amounts are not claimable under such Section 4.4(a)(x) (a
"REFUSED CLAIM"), and (b) such Refused Claim is not made in respect of any
amount claimable as a "REIMBURSEMENT AMOUNT" (as such term is defined in the
Insurance and Reimbursement Agreements), then MBIA shall be entitled to
immediate payment of the amount of any such Refused Claim from amounts then on
deposit or amounts thereafter deposited into the MBIA Settlement Trust so long
as (i) Spiegel or its successor in interest has been promptly notified of such
refusal, (ii) any such claim is made within 90 days of the later of the "Series
2000-A Final Maturity Date" under the terms of the Series 2000-A Supplement or
90 days after the "Series 2001-A Final Maturity Date" under the terms of the
Series 2001-A Supplement (such later date being the "FINAL MATURITY DATE"), and
(iii) such payment is subject to paragraph 15.


                                       12

<PAGE>

          13. In the event that MBIA receives a payment from the Note Trust or
the Spread Accounts for MBIA Expenses or MBIA Future Expenses pursuant to
Section 4.4(a)(x) of either the Series 2000-A Supplement or the Series 2001-A
Supplement and is required to return such payment to the Trustee or pay such
funds to another party pursuant to an order of any court (a "RETURNED CLAIM"),
MBIA shall be entitled to payment of the amount of any such Returned Claim from
the MBIA Settlement Trust within 15 Business Days, except as set forth in
paragraph 14. In the event that MBIA receives notice of commencement of any
action, suit or proceeding in which a party seeks to require MBIA to return to
the Trustee or pay to another party a payment made to MBIA from the Note Trust
or Spread Accounts (a "POTENTIAL RETURNED CLAIM"), MBIA shall notify Spiegel and
SAC (or any successor in interest) of such Potential Returned Claim within 30
days of receipt of such claim, in each case enclosing a copy of all relevant
documents, including all papers served and claims made in respect of such
Potential Returned Claim; provided that the failure to so notify Spiegel and SAC
(or any successor in interest) shall not prevent payment to MBIA from the MBIA
Settlement Trust as provided in this paragraph, except to the extent that
Spiegel or SAC (or any successor in interest) has been prejudiced by such
failure.

          14. Upon full payment to MBIA of all claims MBIA has made pursuant to
paragraphs 9, 12 and 13 above, the MBIA Settlement Trust shall pay to SAC any
remaining funds, including accrued interest, with the exception of $9 million
less the aggregate amount of payments made from the MBIA Settlement Trust
pursuant to paragraphs 12 and 13, which shall be maintained in the MBIA
Settlement Trust and distributed to SAC or any successor in interest to SAC upon
the earlier of (a) such time when the Trustee disburses funds from the Spread
Accounts to MBIA Settlement Trust or (b) the later of (i) two years from the
Final Maturity


                                       13

<PAGE>

Date, or (ii) entry of a final, non-appealable judgment with respect to any
Potential Returned Claim filed within two years from the Final Maturity Date and
payment to MBIA from the MBIA Settlement Trust of any Returned Claims arising in
connection with such Potential Returned Claim. Notwithstanding the foregoing, in
no event shall funds from the MBIA Settlement Trust be disbursed to SAC prior to
the Final Maturity Date.

          15. In no event shall an amount in excess of $9 million be paid from
the MBIA Settlement Trust to pay Refused Claims or Returned Claims (and interest
thereon).

          16. Contemporaneously with any payment made to MBIA from the MBIA
Settlement Trust in respect of a Refused Claim or Returned Claim (collectively,
an "UNREIMBURSED CLAIM"), MBIA shall assign to SAC, and SAC shall be subrogated
to (a) all of MBIA's rights of recovery against any person or organization in
respect of the Unreimbursed Claim for which payment is made from the MBIA
Settlement Trust as provided herein and (b) all of MBIA's rights under the
Transaction Documents in respect of which the Unreimbursed Claim arose. All such
assignments shall be free and clear of all claims, defenses, counterclaims,
rights of setoff and other encumbrances. MBIA shall not release any party in
respect of any Unreimbursed Claim assigned to SAC or take any other action that
would be materially prejudicial to the rights of SAC to such assigned
Unreimbursed Claim. MBIA shall execute and deliver all instruments and documents
necessary to secure the rights of SAC to any assigned Unreimbursed Claim, and
MBIA will cooperate with SAC or any successor in interest in any proceedings
seeking to enforce such rights.

                  CONSENT REQUIRED TO INCREASE PAYMENTS TO CMS

          17. MBIA agrees that (a) after the date of this Agreement, MBIA will
not enter into any agreement with CMS that will increase CMS's total servicing
fee or expenses


                                       14

<PAGE>

without first obtaining the consent of Spiegel or any successor in interest,
which consent shall not be unreasonably withheld; and (b) after the Effective
Date, MBIA will not enter into any agreement with CMS that will increase CMS's
total servicing fee or expenses, or otherwise enter into any amendment to the
successor servicing agreement, without first obtaining the consent of Spiegel or
any successor in interest, which consent shall not be unreasonably withheld. If
Spiegel fails to object to a proposed increase in servicing fees to CMS within
15 Business Days after notification to Spiegel, Spiegel will be deemed to have
consented to such increase. In addition, MBIA shall provide to Spiegel all
Statements to Noteholders, audit reports and reports regarding account holders,
if any, provided to MBIA by CMS or any successor servicer from time to time in
connection with its servicing of the receivables.

                              WAIVERS AND RELEASES

          18. Except as set forth herein, MBIA, for and on behalf of itself and
for and on behalf of each of its past and present shareholders, representatives,
employees, consultants, conservators, trustees, officers, principals, agents,
partners, directors, attorneys, assigns, parent companies, subsidiaries,
affiliates, successors and predecessors (all in the capacity as such) (the "MBIA
RELEASORS"), absolutely and unconditionally releases, acquits and forever
discharges the Spiegel Parties, for and on behalf of themselves and for and on
behalf of each of their past and present shareholders, representatives,
employees, consultants, conservators, trustees, officers, principals, agents,
partners, directors, attorneys, assigns, parent companies, subsidiaries,
affiliates, successors and predecessors (all in the capacity as such) (the
"RELEASED SPIEGEL PARTIES"), from any and all manner of claims (including but
not limited to statutory, common law, and/or equitable), demands, actions,
suits, causes of action, whether class, individual or otherwise in nature,
whether joint or several in nature, damages whenever incurred, liabilities,
obligations, debts, and attorneys fees and costs (collectively, "RELEASED
CLAIMS") that the MBIA


                                       15

<PAGE>

Releasors ever had, now have or hereafter can, shall or may have on account of
or in any way arising out of any and all known and unknown, foreseen and
unforeseen, suspected and unsuspected injuries, damages and consequences of any
act or omission related to the Transaction Documents, the District Court Case,
the Bankruptcy Case, and the Securities Litigation. The MBIA Releasors shall not
file an action or in any other way seek to establish liability against the
Released Spiegel Parties based, in whole or in part, upon the Transaction
Documents or any matters relating to the Transaction Documents. This waiver and
release of the Released Claims includes, but is not limited to, claims relating
to: (a) all register payments collected by Spiegel Retail Affiliates; (b) all
returns credits and syndication credits posted to customer accounts; (c) any
claim by MBIA for reimbursement of any portion of the servicing fee collected by
FCNB as the servicer of the Receivables; (d) principal collections in February
2003 for which allegedly there were no new Receivables to purchase; and (e) any
other claims for payments required to be paid by the Spiegel Debtors or their
affiliates into the Note Trust. Further, promptly after the date that is 94 days
from the date on which the transfers set forth in paragraphs 2 and 4 of this
Agreement are completed (the "94 DAY PERIOD"), MBIA will seek the dismissal with
prejudice of the District Court Case and the dismissal with prejudice of the
appeal of the Securities Litigation and without costs to any party.
Notwithstanding anything herein to the contrary, the release by the MBIA
Releasors of the Released Claims against all of the Released Spiegel Parties
(except FCNB and all of its subsidiaries and past, present and future directors,
officers, employees, and/or agents, as set forth below in this paragraph 18)
shall not become effective until after the expiration of the 94 Day Period, and
shall not ever become effective if SAC becomes subject (voluntarily or
involuntarily) to any Bankruptcy Proceeding (as defined below) during such 94
Day Period, provided, however, that the release by the MBIA


                                       16

<PAGE>

Releasors of the Released Claims against FCNB and, with respect to claims
arising in connection with actions taken or omissions made as agents of FCNB,
all of its subsidiaries and past, present and future directors, officers,
employees, and/or agents (collectively, the "FCNB RELEASED CLAIMS") shall be
effective upon the Effective Date.

          19. As used herein, a "BANKRUPTCY PROCEEDING" shall mean any (a)
insolvency, bankruptcy, receivership, custodianship, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to SAC or any of its respective properties, whether under any bankruptcy,
reorganization or insolvency law or laws, federal or state, or any law, federal
state, relating to relief of debtors, readjustment of indebtedness,
reorganization, composition or extension, (b) proceeding for any liquidation,
liquidating distribution, dissolution or other winding up of SAC, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings, (c)
assignment for the benefit of creditors of SAC, or (d) other marshalling of the
assets of SAC.

          20. The Trustee hereby (a) acknowledges and agrees to the terms of
this Agreement, (b) waives any claims in connection with the Trustee Claims and
(c) agrees that the Trustee Claims shall be deemed withdrawn with prejudice in
the Bankruptcy Case. Further, except as set forth herein, upon the completion of
the payments and transfers set forth in paragraphs 2 and 4 hereof, the Trustee,
for and on behalf of itself and for and on behalf of each of its past and
present shareholders, representatives, employees, consultants, conservators,
trustees, officers, principals, agents, partners, directors, attorneys, assigns,
parent companies, subsidiaries, affiliates, successors and predecessors (all in
the capacity as such) (the "TRUSTEE RELEASORS"), hereby absolutely and
unconditionally releases, acquits and forever discharges the Released Spiegel
Parties from any and all manner of Released Claims that the Trustee Releasors


                                       17

<PAGE>

ever had, now has or hereafter can, shall or may have on account of or in any
way arising out of any and all known and unknown, foreseen and unforeseen,
suspected and unsuspected injuries, damages and consequences of any act or
omission related to the Transaction Documents, the District Court Case, the
Bankruptcy Case, and the Securities Litigation. The Trustee Releasors shall not
file an action or in any other way seek to establish liability against the
Released Spiegel Parties based, in whole or in part, upon the Transaction
Documents or any matters relating to the Transaction Documents. Notwithstanding
anything herein to the contrary, the release by the Trustee Releasors of the
Released Claims against all of the Released Spiegel Parties (except FCNB and all
of its subsidiaries and past, present and future directors, officers, employees,
and/or agents, as set forth below in this paragraph 20), shall be automatically
effective after the expiration of the 94 Day Period; provided, however, that
such release shall not be effective and shall be of no force and effect if SAC
becomes subject (voluntarily or involuntarily) to any Bankruptcy Proceeding
during such 94 Day Period; and provided, further, that the release by the
Trustee Releasors of the FCNB Released Claims shall be effective upon the
Effective Date.

          21. Upon the Effective Date, except as set forth herein, each of the
Spiegel Parties, for and on behalf of itself and for and on behalf of each of
its past and present shareholders, representatives, employees, consultants,
conservators, trustees, officers, principals, agents, partners, directors,
attorneys, assigns, parent companies, subsidiaries, affiliates, successors and
predecessors (all in the capacity as such) (the "SPIEGEL RELEASORS") hereby
absolutely and unconditionally releases, acquits, waives and forever discharges
MBIA, for and on behalf of itself and for and on behalf of each of its past and
present shareholders, representatives, employees, consultants, conservators,
trustees, officers, principals, agents, partners, directors, attorneys, assigns,
parent companies, subsidiaries, affiliates, successors and


                                       18

<PAGE>

predecessors (all in the capacity as such) (the "RELEASED MBIA PARTIES") from
any and all manner of Released Claims that the Spiegel Releasors ever had, now
have or hereafter can, shall or may have relating to, on account of or in any
way arising out of any and all known and unknown, foreseen and unforeseen,
suspected and unsuspected injuries, damages and consequences of any act or
omission related to the Transaction Documents. None of Spiegel Releasors shall
file an action or in any other way seek to establish liability against the
Released MBIA Parties based, in whole or in part, upon the Transaction Documents
or any matters relating to the Transaction Documents. This waiver includes, but
is not limited to, claims arising in connection with the following: (a) changes
made to the method of reporting the Receivables portfolio composition and aging,
(b) amounts for Receivables added to the Note Trust, (c) any right to demand a
modification to the current method of allocation of Receivables, (d) amounts due
to any party based on the creation of new Receivables, (e) the District Court
Case, the Bankruptcy Case, and the Securities Litigation, including any claim
for costs or attorney's fees.

          22. Upon the Effective Date, except as set forth herein, each of the
Spiegel Releasors hereby absolutely and unconditionally releases, acquits and
forever discharges CMS from any and all manner of Released Claims that the
Spiegel Parties ever had or now have on account of or in any way arising out of
any and all known and unknown, foreseen and unforeseen, suspected and
unsuspected injuries, damages and consequences of any act or omission related to
the Transaction Documents. This waiver includes, but is not limited to, claims
arising in connection with the following: (a) changes made to the method of
reporting the Receivables portfolio composition and aging, (b) any right to
demand a modification to the current method of allocation of Receivables, and
(c) any accounting methods or procedures; provided, however, that none of the
Spiegel Releasors waives or releases any claim they may


                                       19

<PAGE>

have now or in the future against CMS for contribution, indemnification or
reimbursement, including indemnification or reimbursement for attorneys' fees
and costs, related to any claim against one or more Spiegel Releasors related to
actions and/or omissions by CMS, its affiliates or its agents, including agents
that are independent contractors, after June 26, 2003, in connection with its
collection, billing and credit bureau practices.

          23. Upon the Effective Date, except as set forth herein, each of the
Spiegel Releasors hereby absolutely and unconditionally releases, acquits,
waives and forever discharges the Trustee, for and on behalf of itself and for
and on behalf of each of its past and present shareholders, representatives,
employees, consultants, conservators, trustees, officers, principals, agents,
partners, directors, attorneys, assigns, parent companies, subsidiaries,
affiliates, successors and predecessors (all in the capacity as such) (the
"RELEASED TRUSTEE PARTIES") from any and all manner of Released Claims that the
Spiegel Releasors and anyone who may have a claim by or through any of them ever
had, now has or hereafter can, shall or may have relating to, on account of or
in any way arising out of any and all known and unknown, foreseen and
unforeseen, suspected and unsuspected injuries, damages and consequences of any
act or omission related to the Transaction Documents. None of Spiegel Releasors
shall file an action or in any other way seek to establish liability against the
Released Trustee Parties based, in whole or in part, upon the Transaction
Documents or any matters relating to the Transaction Documents. This waiver
includes, but is not limited to, claims arising in connection with the
following: (a) changes made to the method of reporting the Receivables portfolio
composition and aging, (b) amounts for Receivables added to the Note Trust, (c)
any right to demand a modification to the current method of allocation of
Receivables, (d) amounts due to any party based on the creation of new
Receivables, (e) the District Court Case, the Bankruptcy Case, and


                                       20

<PAGE>

the Securities Litigation; provided, however, that none of the Spiegel Releasors
waives or releases any claim they may in the future have against the Trustee for
any errors or omissions that occur after the date of the Agreement by the
Trustee under the Transaction Documents.

                        STANDSTILL DURING 94 DAY PERIOD

          24. During the 94 Day Period, the Spiegel Parties agree that they will
not take any action to collect or enforce any of their obligations against SAC,
including exercising any right hereunder or under applicable law (including
commencing any action or proceeding against SAC in any court or other tribunal,
seizing or otherwise foreclosing on any asset of SAC or filing an involuntary
bankruptcy petition against SAC).

          25. During the 94 Day Period, MBIA agrees that it will not take any
action to collect or enforce its rights with respect to the Transaction
Documents, District Court Case, Bankruptcy Case and Securities Litigation;
provided, however, that such forbearance shall not be effective and shall be of
no force and effect if SAC becomes subject (voluntarily or involuntarily) to any
Bankruptcy Proceeding during the 94 Day Period.

                                 MISCELLANEOUS

          26. This Agreement shall become effective on the Effective Date.

          27. This Agreement may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Agreement by telecopier shall
be effective as delivery of an original executed counterpart of this Agreement.

          28. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to conflict of law
principles.


                                       21

<PAGE>

          29. All parties hereby consent to jurisdiction in the State of New
York for purposes of enforcing this Agreement. Any action to enforce this
agreement shall be brought in the District Court or, if jurisdiction is lacking
in the District Court, then in the Supreme Court of the State of New York,
County of New York; provided that the Bankruptcy Court shall retain jurisdiction
solely with respect to matters arising out of the Spiegel Debtors' rights under
this Agreement.

          30. This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all other prior
agreements or understandings, both written and oral, between the parties with
respect thereto.

          31. Michael Crusemann, Horst Hansen, Martin Zaepfel, Michael Otto,
Spiegel Holdings, Inc. and Otto (GmbH & Co KG) (the "SECURITIES DEFENDANTS")
have not participated in the negotiation and structuring of the settlement
contained in this Agreement and assume no responsibility for any of its terms
except as they expressly relate to the Securities Litigation and the releases of
the parties. The Securities Defendants further make no representation or
admission as to the accuracy of the recitals and other factual representations
or any legal conclusions contained in this Agreement except those expressly
pertaining to the Securities Litigation. By entering into this Agreement, the
Securities Defendants do not admit there is jurisdiction over them for the
Securities Litigation and do not consent to jurisdiction or admit they are
subject to jurisdiction except as expressly stated in paragraph 29 of this
Agreement.

          32. If at any time the payments set forth in paragraphs 2 or 4 or any
parts thereof, are, pursuant to applicable law, rescinded or reduced in amount,
or must otherwise be restored or returned by MBIA or the Trust, whether as a
"fraudulent conveyance," or otherwise, at the option of MBIA (which it may
exercise in its sole discretion), notwithstanding paragraph


                                       22

<PAGE>

18, the Released Claims of MBIA, except the FCNB Released Claims, shall be
reinstated and such releases by MBIA shall be void ab initio. In the event that
the Released Claims of MBIA are reinstated and the releases by MBIA are void
pursuant to this paragraph 32 or otherwise, the releases and waivers by the
Spiegel Parties, except FCNB, of the Released MBIA Parties shall also be void ab
initio.

          33. Nothing in this Agreement shall be construed as or deemed to be an
admission by the parties hereto, or any of them, of any unlawful, improper, or
actionable conduct or omission by any of them, and each Party hereto expressly
denies liability of any kind whatsoever.

          34. This Agreement may be amended, modified, or supplemented, or any
portion hereof waived, only by written agreement of the parties expressly
stating that it is intended to amend this Agreement.

          35. The captions and headings included in this Agreement are for
convenience only and shall not be considered as part of this Agreement or as in
any way limiting or amplifying the terms and provisions thereof.

          36. This Agreement shall be binding upon, and specifically performable
or enforceable against, the parties hereto and their successors and assigns, and
is not subject to rejection or modification by any subsequently confirmed plan
of reorganization or chapter 7 or chapter 11 trustee of the Spiegel Debtors.


                                       23

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have duly executed this Settlement
Agreement or have caused this Settlement Agreement to be duly executed by their
respective officers as of the day and year first above written.

SPIEGEL, INC.                           MBIA INSURANCE CORPORATION


By: /s/ James M. Brewster               By: /s/ Amy Mauer-Litos
    ---------------------------------       ------------------------------------
Name:                                   Name: Amy Mauer-Litos
      -------------------------------   Title: Managing Director
Title:
       ------------------------------


NEWPORT NEWS, INC.                      THE BANK OF NEW YORK, AS TRUSTEE


By: /s/ James M. Brewster               By: /s/ Martin Feig
    ---------------------------------       ------------------------------------
Name:                                   Name: Martin Feig
      -------------------------------   Title: Vice President
Title:
       ------------------------------


EDDIE BAUER, INC.


By: /s/ James M. Brewster
    ---------------------------------
Name:
      -------------------------------
Title:
       ------------------------------


SPIEGEL CATALOG, INC.


By: /s/ James M. Brewster
    ---------------------------------
Name:
      -------------------------------
Title:
       ------------------------------


SPIEGEL CATALOG SERVICES, LLC


By: /s/ James M. Brewster
    ---------------------------------
Name:
      -------------------------------
Title:
       ------------------------------


SPIEGEL CREDIT CORPORATION III


By: /s/ James M. Brewster
    ---------------------------------
Name:
      -------------------------------
Title:
       ------------------------------

                     SIGNATURE PAGE FOR SETTLEMENT AGREEMENT

<PAGE>

SPIEGEL ACCEPTANCE CORPORATION          SPIEGEL HOLDINGS, INC.


By: /s/ James M. Brewster               By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------


FIRST CONSUMERS NATIONAL BANK           OTTO (GMBH & CO KG)


By: /s/ James E. Huston                 By: /s/ Michael Otto Illegible
    ---------------------------------       ------------------------------------
Name: James E. Huston                   Name:
Title: President, CEO and Liquidating         ----------------------------------
Agent                                   Title:
                                               ---------------------------------


MICHAEL CRUSEMANN


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


HORST HANSEN


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


MARTIN ZAEPFEL


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


MICHAEL OTTO


/s/ Michael Otto
-------------------------------------

                     SIGNATURE PAGE FOR SETTLEMENT AGREEMENT

<PAGE>

                                    EXHIBIT A

                          NOTE TRUST WIRE INSTRUCTIONS

                                 TO BE PROVIDED.

<PAGE>

                                    EXHIBIT B

                              SAC WIRE INSTRUCTIONS

Bank of America
ABA #111000012
Account Name: Spiegel, Inc.
Account # 3752186004

<PAGE>

                                    EXHIBIT C

                         MBIA SETTLEMENT TRUST AGREEMENT

<PAGE>

                                                                           Draft

                         Spiegel Acceptance Corporation,

                                  a Transferor,

                         Spiegel Credit Corporation III,

                                  a Transferor,

                                       and

                              The Bank of New York,

                                     Trustee

                         MBIA Settlement Trust Agreement

                                   ----------

                        Dated as of December [___], 2004

<PAGE>

     THIS MBIA SETTLEMENT TRUST AGREEMENT (this "Agreement"), dated as of
December [__], 2004, is made by and among Spiegel Acceptance Corporation, a
Delaware corporation, ("SAC" or a "Transferor"), Spiegel Credit Corporation III,
a Delaware corporation (a "Transferor" and together with SAC, the "Transferors")
and The Bank of New York, a New York banking corporation (the "Trustee").

     WHEREAS, Spiegel, Inc., Newport News, Inc., Eddie Bauer, Inc., Spiegel
Catalog, Inc. and Spiegel Catalog Services, LLC, the Transferors, First
Consumers National Bank, Michael Crusemann, Horst Hansen, Martin Zaepfel,
Michael Otto, Spiegel Holdings Inc., and Otto (GmbH & Co KG), The Bank of New
York, (as Trustee (the "Note Trustee") under the Master Indenture (the "Master
Indenture"), dated December 1, 2000 between the Spiegel Credit Card Master Note
Trust (the "Note Trust") and the Note Trustee) and MBIA Insurance Corporation
("MBIA") have entered into a Settlement Agreement dated as of December [__],
2004 (as amended, restated, supplemented or otherwise modified from time to
time, the "Settlement Agreement") which is attached hereto as Exhibit A; and

     WHEREAS, it is a condition to the consummation of the settlement of claims
specified more fully in the Settlement Agreement that certain assets be
transferred to this Trust (as defined herein) for the purposes more fully set
forth herein and in the Settlement Agreement;

     NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and in the Settlement Agreement, and other good and valuable
consideration, the receipt of which is hereby acknowledged, the Transferors and
the Trustee hereby agree as follows for the benefit of MBIA:

                                    ARTICLE I

                                   DEFINITIONS

     Section 1.01 Definitions. Whenever used in this Agreement, the following
words and phrases shall have the following meanings:

     "Agreement" shall mean this MBIA Settlement Trust Agreement and all
amendments hereof.

     "Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which banking institutions in New York, New York, are authorized or obligated
by law or executive order to be closed.

     "Collateral" shall have the meaning specified in the Master Indenture.

     "Collection Account" shall have the meaning specified in Section 4.02(a) of
this Agreement.

     "Corporate Trust Office" shall mean the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which office at the date of the


                                        1

<PAGE>

execution of this Agreement is located at 101 Barclay Street, Floor 8W, New
York, New York 10286.

     "Effective Date" shall mean the date that is two Business Days after the
Final Bankruptcy Court Order.

     "Final Bankruptcy Court Order" shall have the meaning specified in the
Settlement Agreement.

     "FDIC" shall mean the Federal Deposit Insurance Corporation.

     "Initial Deposit" shall mean the cash conveyed to the Trust pursuant to
Section 4 of the Settlement Agreement and deposited to the Collection Account.

     "Interest Rate" shall have the meaning specified in the Settlement
Agreement.

     "Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, participation or equity interest, deposit arrangement, encumbrance,
lien (statutory or other), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the UCC (other than
any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing.

     "MBIA Expenses" shall have the meaning specified in the Settlement
Agreement.

     "MBIA Future Expenses" shall have the meaning specified in the Settlement
Agreement.

     "Monthly Trustee Report" shall mean a report substantially in the form
attached as Exhibit B to this Agreement which shall contain the following
information: beginning Collection Account balance, all deposits into and
distributions from the Collection Account, the Permitted Investments, interest
received on Permitted Investments and [other].

     "Moody's" shall mean Moody's Investors Service, Inc.

     "NY UCC" shall mean the Uniform Commercial Code, as amended from time to
time, as in effect in the State of New York.

     "Officer's Certificate" shall mean a certificate signed by the President,
Treasurer, Chief Operating Officer (or any more senior officer) of a Transferor
or any successor in interest and delivered to the Trustee.

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


                                        2

<PAGE>

     "Permitted Investments" shall mean, negotiable instruments or securities or
other investments (a) which, except in the case of demand or time deposits,
investments in money market funds and Repurchase Obligations (as defined in the
Master Indenture), are represented by instruments in bearer or registered form
of ownership of which is represented by book entries by a Clearing Agency (as
defined in the Master Indenture) or by a Federal Reserve Bank in favor of
depository institutions eligible to have an account with such Federal Reserve
Bank who hold such investments on behalf of their customers and (b) which
evidence:

          (i) direct obligations of, and obligations fully guaranteed as to full
     and timely payment by, the United States of America;

          (ii) demand deposits, time deposits or certificates of deposit of
     depository institutions or trust companies incorporated under the laws of
     the United States of America or any state thereof and subject to
     supervision and examination by federal or state banking or depository
     institution authorities; provided, however, that at the time of the Trust's
     investment or contractual commitment to invest therein, the commercial
     paper, if any, and short-term unsecured debt obligations (other than such
     obligation whose rating is based on the credit of a Person other than such
     institution or trust company) of such depository institution or trust
     company shall have a credit rating from the Rating Agency (as defined in
     the Master Indenture) in the highest investment category granted by such
     Rating Agency in the case of commercial paper (which in the case of
     Standard & Poor's means A-1+);

          (iii) commercial paper having, at the time of the Trust's investment
     of contractual commitment to invest therein, a rating in the highest
     investment category granted by the Rating Agency (which in the case of
     Standard & Poor's means A-1+);

          (iv) bankers' acceptances issued by any depository institution or
     trust company referred to in (ii) above;

          (v) investments in money market funds having a rating of the highest
     investment category from the Rating Agency or otherwise approved in writing
     by the Rating Agency (which in the case of Standard & Poor's means A-1+);

          (vi) time deposits (having maturities of not more than 30 days) or
     notes which are payable on demand by an entity the commercial paper of
     which has a rating of the highest investment category granted by the Rating
     Agency (which in the case of Standard & Poor's means A-1+);

          (vii) Repurchase Obligations (as defined in the Master Indenture); and

          (viii) such other investments that MBIA shall specify to the Trustee
     in writing.

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


                                        3

<PAGE>

     "Refused Claim" shall have the meaning specified in the Settlement
Agreement.

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

     "Returned Claim" shall have the meaning specified in the Settlement
Agreement.

     "Qualified Institution" shall mean (i) a depositary institution, which may
include the Trustee, organized under the laws of the United States or any one of
the States thereof including the District of Columbia, the deposits in which are
insured by the FDIC and which at all times has a short-term unsecured debt
rating of at least A-1 by Standard & Poor's and P-1 by Moody's or (ii) a
depositary institution acceptable to MBIA; provided, however, that an
institution which shall have corporate trust powers and which maintains the
Collection Account, or any other account maintained for the benefit of MBIA as a
fully segregated trust account with the trust department of such institution
shall not be required to meet the foregoing rating requirements.

     "Responsible Officer" shall mean any officer within the Corporate Trust
Office (or any successor group of the Trustee), including any Vice President,
any Assistant Secretary, any Trust Officer or any other officer of the Trustee
customarily performing functions similar to those performed by any person who at
the time shall be an above-designated officer and in each case having direct
responsibilities for administration of this Agreement, with respect to a
particular officer to whom any corporate trust matter is referred because of
such officer's knowledge of and familiarity with the particular subject. Any
notice delivered to such corporate trust department shall be identified as
follows: Attention: Corporate Trust Officer on behalf of MBIA Settlement Trust,
MBIA Settlement Trust Agreement dated as of December [__], 2004.

     "Seller Interest" shall have the meaning specified in the Master Indenture.

     "Standard & Poor's" shall mean Standard & Poor's Ratings Services.

     "Target Balance" shall mean on any day of calculation, $9,000,000 less the
aggregate amount paid to MBIA from the Collection Account under Section 4.03 of
this Agreement for Refused Claims and Returned Claims.

     "Transferor" shall mean Spiegel Acceptance Corporation or Spiegel Credit
Corporation III, as applicable and each of their successors in interest and
permitted assigns.

     "Transferor Interest" shall mean the residual interest of the Trust
initially held by the Transferors in accordance with the value of their deposits
as shall be determined by them on the Effective Date, and thereafter, by SAC or
its permitted successors and assigns.

     "Trust" shall mean the MBIA Settlement Trust created by this Agreement.


                                        4

<PAGE>

     "Trust Assets" shall have the meaning specified in Section 2.01 of this
Agreement.

     "Trust Termination Date" shall mean the earliest of (a) December [__],
2025, (b) the date on which the Note Trustee disburses funds from the Spread
Accounts to the Trust following the payment of all claims made by MBIA pursuant
to paragraphs 9, 12 and 13 of the Settlement Agreement), and (c) the later of
(i) two years from the Final Maturity Date or (ii) the entry of a final
non-appealable judgment with respect to any Potential Returned Claim (as defined
in the Settlement Agreement) filed within two years from the Final Maturity Date
and payment to MBIA from the Trust of any Returned Claims arising in connection
with such Potential Returned Claim.

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

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

     Section 1.02 Other Definitional Provisions.

     (a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. Capitalized terms used but not otherwise
defined herein shall have the meanings set forth in the Settlement Agreement.

     (b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.01, and accounting terms partially defined in Section 1.01 to the extent not
defined, shall have the respective meanings given to them under generally
accepted accounting principles or regulatory accounting principles, as
applicable. To the extent that the definitions of accounting terms herein are
inconsistent with the meanings of such terms under generally accepted accounting
principles or regulatory accounting principles, the definitions contained herein
shall control.

                                   ARTICLE II

                           CONVEYANCE OF TRUST ASSETS;
                              PERMITTED ACTIVITIES;

     Section 2.01 Conveyance of the Trust Assets and Collateral; Permitted
Activities.

     (a) The Transferors hereby transfer, assign, set-over, and otherwise convey
to the Trustee for the benefit of MBIA without recourse, all of their right,
title and interest, whether now owned or hereafter acquired, in and to the
Initial Deposit, the Seller Interest and their interest in the Collateral and
the Note Trust, if any, all monies due or to become due with respect to the
Seller Interest and Collateral, if any, all amounts received after the date
hereof with respect


                                        5

<PAGE>

thereto, and all proceeds of such Initial Deposit, Seller Interest and interest
in the Collateral and the Note Trust (collectively, the "Trust Assets").

     (b) In connection with such transfer, assignment, set-over and conveyance,
the Transferors agree to (i) deliver, on or prior to the Effective Date, to the
Note Trustee and to the Owner Trustee (as defined in the Master Indenture) of
the Note Trust (A) written notice of such transfer, assignment set-over and
conveyance and irrevocable instructions to pay and deliver any and all proceeds
of the Initial Deposit, the Seller Interest and their interest in the Collateral
and the Note Trust to the Trustee, and (B) the tax opinion described in Section
3.4(v) of the Trust Agreement (as defined in the Master Indenture), and (ii)
have MBIA record and file financing statements (including any continuation
statements with respect to such financing statements when applicable) meeting
the requirements of applicable state law in such manner and in such
jurisdictions as are necessary to perfect the assignment of the Trust Assets and
the proceeds thereof to the Trustee, and have MBIA deliver a file-stamped copy
of such financing statements or continuation statements or other evidence of
such filing to the Trustee as soon as practicable after receipt thereof. The
foregoing transfer, assignment, set-over and conveyance to the Trust shall be
made to the Trustee, on behalf of the Trust, and any reference in this Agreement
to any transfer, assignment, set-over and conveyance to the Trust shall be
construed as transfer, assignment, set-over, and conveyance to the Trustee.

     (c) MBIA shall cause this Agreement, all amendments hereto and/or all
financing statements and continuation statements and any other necessary
documents covering the Trustee's right, title and interest to the Trust to be
promptly recorded, registered and filed, and at all times to be kept recorded,
registered and filed, all in such manner and in such places as may be required
by law fully to preserve and protect the right, title and interest of the
Trustee, as the case may be, hereunder to all property comprising the Trust.
MBIA shall deliver to the Transferors and the 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.
The Transferors shall cooperate fully with MBIA in connection with the
obligations set forth above and will execute any and all documents reasonably
required to fulfill the intent of this section.

     (d) Any costs incurred with respect to the foregoing shall be paid from the
Trust Assets.

     (e) The parties hereto intend that the transfer of the Initial Deposit,
Seller Interest, and the Transferors' interest in the Collateral and the Note
Trust and the proceeds thereof and any other property pursuant to this Agreement
constitute a true conveyance or sale, in consideration of the premises, mutual
benefits and agreements contained in the Settlement Agreement and not a secured
borrowing. If, and to the extent that, such transfer is not deemed to be a true
and complete conveyance or sale, or, if for any reason any interest in the
Initial Deposit, Seller Interest, and the Transferors' interest in the
Collateral and the Note Trust, or the proceeds thereof is held to be the
property of the Transferors, the Transferors shall be deemed to have granted and
the Transferors hereby grant, to the Trustee as a collateral agent acting on
behalf of MBIA, a first priority perfected security interest in all of the Trust
Assets. This Agreement shall constitute a security agreement under all
applicable law, including without limitation, the NY


                                        6

<PAGE>

UCC, to secure the payments and obligations specified herein. This Agreement
creates a valid and continuing security interest (as defined in the NY UCC) in
the Trust Assets and the proceeds thereof in favor of the Trustee, which (i) is
enforceable upon execution of this Agreement against creditors of and purchasers
from the Transferors, and (ii) upon filing of the financing statements described
herein will be prior to all other Liens.

     (f) The Transferors hereby authorize MBIA to cause, on or prior to the
Effective Date, the filing of all appropriate financing statements in the proper
filing office in the appropriate jurisdictions under applicable law in order to
perfect the security interest in the Trust Assets granted by the Transferors to
the Trust under this Agreement. Each Transferor hereby authorizes MBIA to file
financing statements under the UCC without such Transferor's signature where
allowed by applicable law.

     (g) It is the intention of the parties hereto that, for income tax
purposes, the Trust shall be treated as a nullity or security device and
disregarded as an entity and its assets shall be treated as owned in whole by
the Transferors. The Transferors shall be responsible for all tax matters. The
parties hereto agree that they will take no action contrary to the foregoing
intention.

     (h) The permitted activities of the Trust are hereby declared to be:

          (i) accepting and holding the Trust Assets and proceeds thereof;

          (ii) receiving proceeds of the Trust Assets and making payments and
     distributions in accordance with the terms of this Agreement;

          (iii) engaging in other activities that are necessary or incidental to
     accomplish these limited activities and to carry out the terms of this
     Agreement and the Settlement Agreement.

     Section 2.02 Acceptance by Trustee.

     (a) The Trustee hereby acknowledges its acceptance of all right, title and
interest to the Trust Assets now existing and hereafter created, conveyed to the
Trustee pursuant to Section 2.01, and declares that it shall hold such right,
title and interest, upon the Trust herein set forth, for the benefit of MBIA and
the holder of the Transferor Interest, subject to the priority provisions set
forth in this Agreement.

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

     Section 2.03 Representations and Warranties of the Transferors. Each of the
Transferors hereby represents and warrants to the Trustee as of the Effective
Date:

     (a) Organization and Good Standing. Each Transferor is a corporation duly
organized and validly existing in good standing under the laws of the State of
Delaware and has full power, authority and legal right to own its properties and
conduct its business as such


                                        7

<PAGE>

properties are presently owned and such business is presently conducted, and to
execute, deliver and perform its obligations under this Agreement and the
Settlement Agreement.

     (b) Due Qualification. Each Transferor is duly qualified to do business and
is in good standing as a foreign corporation (or is exempt from such
requirements), and has obtained all necessary licenses and approvals in each
jurisdiction in which failure to so qualify or to obtain such licenses and
approvals would have a material adverse effect on the interests of the Trust
hereunder.

     (c) Due Authorization. The execution and delivery of this Agreement and the
Settlement Agreement and the consummation of the transactions provided for in
this Agreement and the Settlement Agreement have been duly authorized by each
Transferor by all necessary action on its part.

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

     (e) No Violation. The execution and delivery of this Agreement, the
Settlement Agreement and performance of the transactions contemplated by this
Agreement and the Settlement Agreement will not conflict with or violate any
Requirements of Law applicable to either Transferor.

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

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


                                        8

<PAGE>

     Section 2.04 Representations and Warranties of the Transferors Relating to
the Agreement and the Trust Assets.

     (a) Binding Obligation; Valid Transfer and Assignment. Each of the
Transferors hereby represents and warrants to the Trustee that as of the
Effective Date:

          (i) Each of this Agreement and the Settlement Agreement constitutes a
     legal, valid and binding obligation of the Transferors, enforceable against
     such Transferor in accordance with its terms.

          (ii) This Agreement constitutes either (A) a valid transfer,
     assignment, set-over and conveyance to the Trustee of all right, title and
     interest of such Transferor in and to the Trust Assets, and all of such
     property will be held by the Trustee free and clear of any Lien or (B) a
     grant of a security interest (as defined in the UCC as in effect in the
     applicable jurisdiction) in such property to the Trustee, which is and will
     be enforceable with respect to such Trust Assets and the proceeds thereof.
     If this Agreement constitutes the grant of a security interest to the
     Trustee in such property, upon the filing of the financing statements
     described in Section 2.01, the Trustee shall have a first priority
     perfected security interest in such property. Neither the Transferors nor
     any Person claiming through or under the Transferors shall have any claim
     to or interest in the Trust Assets, except, if this Agreement constitutes
     the grant of a security interest in such property, for the interest of the
     Transferors in such property as a debtor for purposes of the UCC as in
     effect in the applicable jurisdiction.

     (b) Trust Assets. Each Transferor hereby represents and warrants to the
Trustee as of the Effective Date, that one or both of Transferors are the legal
and beneficial owners of all right, title and interest in and to the Trust
Assets and such Transferor has full right, power and authority to transfer such
rights and property to the Trust. Immediately prior to the conveyance of the
Trust Assets pursuant to this Agreement, one or both Transferors own and have
good and marketable title to the Trust Assets free and clear of any Lien, claim
or encumbrance of any Person other than any Lien created by this Agreement.

     (c) Notice of Breach. The representations and warranties set forth in this
Section 2.04 shall survive the transfer and assignment of the Trust Assets to
the Trust. The Trustee shall not be charged with knowledge of any breach of
representation and warranty unless it has received written notice or obtained
actual knowledge thereof.

     (d) Priority. Other than the security interest granted to the Trust
pursuant to this Agreement, the Transferors have not pledged, assigned, sold,
granted a security interest in, or otherwise conveyed any of the Trust Assets.
The Transferors have not authorized the filing of and are not aware of any
financing statements against the Transferors that include a description of
collateral covering the Trust Assets other than any financing statement (i)
relating to the security interest granted to Trust hereunder or (ii) that has
been terminated.

     (e) Judgments, Tax Liens. The Transferors are not aware of any judgments or
tax lien filings against the Transferors.


                                        9

<PAGE>

     Section 2.05 Covenants of the Transferors. The Transferors hereby covenant
that:

     (a) Security Interests. Except for the conveyances hereunder, the
Transferors will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien on the Trust Assets,
whether now existing or hereafter created, or any interest therein (other than
any Liens created hereby).

     (b) Delivery of All Proceeds Received. The Transferors agree to pay to the
Trustee all payments received by the Transferors in respect of the Seller
Interest or their interests in the Collateral, in the event that the Transferors
receive any payments in respect thereof, as soon as practicable but in no event
later than five Business Days, after the individuals identified in Section 7.04
hereof receive notice that such amounts have been received by a Transferor in
connection with the Seller Interest or its interest in the Collateral.

                                   ARTICLE III

                                     REPORTS

     Section 3.01 Monthly Trustee Report. On or prior to the [15th] calendar day
of each month the Trustee shall deliver to the Transferors and MBIA, the Monthly
Trustee Report.

                                   ARTICLE IV

                COLLECTION ACCOUNT AND APPLICATION OF COLLECTIONS

     Section 4.01 Rights of MBIA and the Transferors. MBIA shall have an
undivided interest in the Trust and shall have the benefit of the Trust Assets
which shall include the right to receive Trust Assets and the proceeds thereof
at the times and in the amounts specified in this Article IV. The holder of the
Transferor Interest shall have the residual benefit of the Trust Assets to the
extent provided herein. The Transferor Interest shall represent the remaining
undivided interest in the Trust not paid or payable to MBIA, including the right
to receive the Trust Assets and the proceeds thereof at the times and in the
amounts specified in this Article IV.

     Section 4.02 Establishment of Accounts.

     (a) The Collection Account. The Trustee, for the benefit of MBIA, shall
establish and maintain with a Qualified Institution, which may be the Trustee,
in the name of the Trustee, on behalf of the Trust, a non-interest bearing
segregated trust account with the corporate trust department of such Qualified
Institution (the "Collection Account") bearing a designation clearly indicating
that the funds deposited therein are held in trust for the benefit of MBIA and
shall cause such Collection Account to be established and maintained in the
State of New York. The Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Collection Account and in all
proceeds thereof. The Initial Deposit and all proceeds of the Seller Interest
and the Transferors' interest in the Collateral and the Note Trust shall be
deposited to the Collection Account upon receipt. Funds on deposit in the
Collection Account subject to receipt by the Trustee of written investment
directions, shall at all times be invested in Permitted Investments. All such
investments shall be made in the name of the Trustee for the benefit of


                                       10

<PAGE>

MBIA and the holder of the Transferor Interest. Unless otherwise directed by
MBIA after consultation with the holder of the Transferor Interest, any such
investment shall mature and such funds shall be available for withdrawal on or
prior to [the 15th of each calendar month] and shall remain uninvested to the
extent required for distribution as MBIA, in consultation with the holder of the
Transferor Interest, shall specify. The Trustee shall maintain for the benefit
of MBIA possession of the negotiable instruments or securities evidencing the
Permitted Investments described in clause (a) of the definition thereof from the
time of purchase thereof until the time of sale or maturity; provided, that, no
such investment shall be disposed of prior to its maturity date. All interest
and earnings (net of losses and investment expenses) on funds on deposit in the
Collection Account shall become part of the Collection Account. Subject to the
restrictions set forth above, MBIA or a Person designated in writing by MBIA, of
which the Trustee shall have received written notification thereof, shall have
the authority to instruct the Trustee with respect to the investment of funds on
deposit in the Collateral Account.

     Section 4.03 Distributions to MBIA. From time to time MBIA will deliver to
the Trustee a request for payment for amounts to which it is entitled pursuant
to and in accordance with the terms of Sections 9, 12, and 13 of the Settlement
Agreement. The request for payment will specify the amount requested, [and the
provision of the Settlement Agreement under which MBIA is entitled to receive
such amount]. On the [15th] calendar day of each month, the Trustee will
disburse the lesser of (i) the amount of funds requested by MBIA and (ii) the
amount of Trust Assets, in accordance with the Settlement Agreement, to pay
items (a) - (d) in the following order of priority:

          (a)  interest on MBIA Expenses calculated by multiplying the Interest
               Rate against the cumulative beginning of the monthly balance of
               MBIA Expenses;

          (b)  interest on MBIA Future Expenses calculated by multiplying the
               Interest Rate against the cumulative beginning of the monthly
               balance of MBIA Expenses;

          (c)  MBIA Expenses;

          (d)  MBIA Future Expenses;

          (e)  Refused Claims; and

          (f)  Returned Claims;

provided, however, item (e) shall be paid immediately upon delivery of a request
for payment to the Trustee and item (f) shall be paid within 15 Business Days of
delivery of a request for payment therefor to the Trustee, provided, further
that the aggregate amount paid on requests for payment for items (e) and (f) may
not exceed $9,000,000.

     Section 4.04 Distributions to the Holder of the Transferor Interest.
Pursuant to and in accordance with the terms of Section 14 of the Settlement
Agreement, upon payment to MBIA of all claims MBIA has made prior to the Final
Maturity Date pursuant to paragraphs 9, 12 and 13


                                       11

<PAGE>

of the Settlement Agreement, to the extent that cash and investments in the
Collection Account at such time exceed the Target Balance, the Trustee shall pay
to the holder of the Transferor Interest an amount equal to the excess in the
Collection Account over the Target Balance; provided, that MBIA hereby
irrevocably directs the Trustee to disburse such amount equal to the excess in
the Collection Account over the Target Balance. On the [15th] calendar day of
each month thereafter, the Trustee will pay to the holder of the Transferor
Interest the excess over the Target Balance in the Collection Account on such
day after taking into account the amounts paid or to be paid to MBIA for Refused
Claims and Returned Claims during such Calendar Month.

                                    ARTICLE V

                                   THE TRUSTEE

     Section 5.01 Duties of Trustee.

     (a) The Trustee undertakes to perform such duties and only such duties as
are specifically set forth in this Agreement and no implied covenants or
obligations shall be read into this Agreement against the Trustee. The Trustee
shall exercise such of the rights and powers vested in it by this Agreement, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.

     (b) The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
substantially conform to the requirements of this Agreement.

     (c) Subject to Section 5.01(a), no provision of this Agreement shall be
construed to relieve the Trustee from liability for its own negligent action,
its own negligent failure to act or its own misconduct; provided, however, that:

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

          (ii) the Trustee shall not be liable with respect to any action taken,
     suffered or omitted to be taken by it in good faith in accordance with the
     direction of MBIA relating to the time, method and place of conducting any
     proceeding for any remedy available to the Trustee, or exercising any trust
     or power conferred upon the Trustee under this Agreement; and

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


                                       12

<PAGE>

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

     (e) Whether expressly provided herein, every provision of this Agreement
relating to the conduct or effecting the liability of or affording protection to
the Trustee shall be subject to the provisions of this Section 5.01.

     (f) The permissive right of the Trustee to take actions enumerated in this
Agreement shall not be construed as a duty and the Trustee shall not be
answerable for other than its own negligence or willful misconduct.

     Section 5.02 Certain Matters Affecting the Trustee. Except as otherwise
provided in Section 5.01:

     (a) the Trustee may conclusively rely on and shall be fully protected in
acting on, or in refraining from acting in accord with, any notice, request,
consent, order, appraisal, bond or other paper or document believed by it to be
genuine and to have been signed or presented to it pursuant to this Agreement by
the proper party or parties;

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

     (c) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Agreement or to institute, conduct or defend any
litigation hereunder or in relation hereto, at the request, order or direction
of MBIA, pursuant to the provisions of this Agreement, unless MBIA shall have
offered to the Trustee reasonable security or indemnity satisfactory to it
against the costs, expenses and liabilities which may be incurred therein or
thereby;

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

     (e) the Trustee shall not be bound to make any investigation into the facts
of matters stated in any notification to the Trustee, any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, bond or other paper or document, unless requested in writing so
to do by MBIA;

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


                                       13

<PAGE>

     (g) the Trustee shall not be required to make any initial or periodic
examination of any documents or records related to the Trust Assets for the
purpose of establishing the presence or absence of defects, the compliance by
the Transferors with their representations and warranties or for any other
purpose;

     (h) whenever in the administration of this Agreement the Trustee shall deem
it desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part,
conclusively rely upon an Officer's Certificate; and

     (i) the Trustee shall not be deemed to know of any default or other fact
upon the occurrence of which it might be required to take action hereunder
unless an officer in its corporate trust department has actual knowledge thereof
or has received written notice thereof.

     (j) The Trustee shall have no responsibility or liability for investment
losses on Permitted Investments. The Trustee shall have no obligation to invest
or reinvest any cash held in the absence of timely and specific written
investment direction from MBIA as described in Section 4.02 hereof. In no event
shall the Trustee be liable for the selection of investments or for investment
losses incurred thereon. The Trustee shall have no liability in respect of
losses incurred as a result of the liquidation of an investment prior to its
stated maturity or the failure of MBIA to provided timely written investment
direction as described in Section 4.02 hereof. The Trustee or its affiliates are
permitted to receive additional compensation that could be deemed to be in the
Trustee's economic self-interest for (i) serving as investment advisor, advisor,
administrator, shareholder servicing agent, custodian or sub-custodian with
respect to certain of the Permitted Investments, (ii) using affiliates to effect
transactions in certain Permitted Investments and (iii) effecting transactions
in certain Permitted Investments. Such compensation shall not be considered an
amount that is reimbursable or payable to the Trustee as part of the fees owed
to the Trustee pursuant to Section 5.04.

     Section 5.03 Trustee Not Liable for Recitals. The Trustee assumes no
responsibility for the correctness of the recitals contained in this Agreement.

     Section 5.04 Payment of Trustee's Fees and Expenses. The Trustee shall be
entitled to receive from the Trust reasonable compensation (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust), as set forth in a separate fee agreement, for all services
rendered by it in the execution and administration of the Trust hereby created
and in the exercise and performance of any of the powers and duties hereunder,
and utilize Trust Assets to pay or reimburse itself upon delivery of a written
notice to the holder of the Transferor Interest and MBIA for all reasonable
expenses or disbursements incurred or made by the Trustee in accordance with any
of the provisions of this Agreement, except any such expense, disbursement or
advance as may arise from its own negligence or bad faith. For the avoidance of
doubt, all expenses and indemnities of the Trustee shall be payable from the
Trust Assets.

     Section 5.05 Eligibility Requirements for Trustee. The Trustee hereunder
shall at all times be a corporation organized and doing business under the laws
of the United States of


                                       14

<PAGE>

America or any state thereof authorized under such laws to exercise corporate
trust powers, having a long-term unsecured debt rating of at least Baa3 by
Moody's and BBB- by Standard & Poor's having, in the case of an entity that is
subject to risk-based capital adequacy requirements, risk-based capital of at
least $50,000,000 or, in the case of an entity that is not subject to risk-based
capital adequacy requirements, having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal or state
authority. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section 5.05, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 5.05, the Trustee shall resign immediately in the
manner and with the effect specified in Section 5.06.

     Section 5.06 Resignation or Removal of Trustee.

     (a) The Trustee may at any time resign and be discharged from the Trust
hereby created by giving 60 days' prior written notice thereof to MBIA and the
holder of the Transferor Interest. Upon receiving such notice of resignation,
MBIA with the consent of the holder of the Transferor Interest (such consent not
to be unreasonably withheld) shall promptly appoint a successor trustee by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to the successor trustee. If no
successor trustee shall have been so appointed and have accepted within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee.

     (b) If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 5.05 hereof and shall fail to resign after
written request therefor by MBIA, or if at any time the Trustee shall be legally
unable to act, or shall be adjudged a bankrupt or insolvent, or a receiver of
the Trustee or of its property shall be appointed, or any public officer shall
take charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, then MBIA with the
consent of the holder of the Transferor Interest (such consent not to be
unreasonably withheld) may, but shall not be required to, remove the Trustee and
promptly appoint a successor trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the Trustee so removed and one
copy to the successor trustee.

     (c) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 5.06 shall
not become effective until acceptance of appointment by the successor trustee as
provided in Section 5.07 hereof and any liability of the Trustee arising
hereunder due to the acts or omissions of the Trustee prior to the appointment
of a successor trustee shall survive such appointment of a successor trustee.


                                       15

<PAGE>

     Section 5.07 Successor Trustee.

     (a) Any successor trustee appointed as provided in Section 5.06 hereof
shall execute, acknowledge and deliver to MBIA and the holder of the Transferor
Interest and to its predecessor Trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor Trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as Trustee herein. The predecessor Trustee shall deliver to the successor
trustee all documents and statements held by it hereunder, and MBIA and the
holder of the Transferor Interest and the predecessor Trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for fully and certainly vesting and confirming in the successor trustee all such
rights, powers, duties and obligations.

     (b) No successor trustee shall accept appointment as provided in this
Section 5.07 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 5.05 hereof.

     Section 5.08 Merger or Consolidation of Trustee. Any Person into which the
Trustee may be merged or converted or with which it may be consolidated, or any
Person resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any Person succeeding to the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such Person shall be eligible under the provisions of Section 5.05
hereof, without the execution or filing of any paper or any further act on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding.

     Section 5.09 Appointment of Co-Trustee or Separate Trustee.

     (a) Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust may at the time be located, the Trustee shall have the
power and may execute and deliver all instruments to appoint one or more Persons
to act as a co-trustee or co-trustees, or separate trustee or separate trustees,
of all or any part of the Trust, and to vest in such Person or Persons, in such
capacity and for the benefit of MBIA and the holder of the Transferor Interest,
such title to the trust, or any part thereof, and, subject to the other
provisions of this Section 5.09, such powers, duties, obligations, rights and
trusts as the Trustee may consider necessary or desirable.

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

          (i) all rights, powers, duties and obligations conferred or imposed
     upon the Trustee shall be conferred or imposed upon and exercised or
     performed by the Trustee and such separate trustee or co-trustee jointly
     (it being understood that such separate trustee or co-trustee is not
     authorized to act separately without the Trustee joining in such act),
     except to the extent that under any laws of any jurisdiction in which any
     particular act or acts are to be performed the Trustee shall be incompetent
     or unqualified to perform


                                       16

<PAGE>

     such act or acts, in which event such rights, powers, duties and
     obligations (including the holding of title to the Trust or any portion
     thereof in any such jurisdiction) shall be exercised and performed singly
     by such separate trustee or co-trustee, but solely at the direction of the
     Trustee;

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

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

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

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

     Section 5.10 Tax Returns. In the event the Trust shall be required to file
tax returns, the Transferors shall prepare and the Trustee (on behalf of the
Trust) shall execute, as soon as practicable after they are made aware of such
requirement, any tax returns required to be filed by the Trust and, to the
extent possible, shall file such returns at least five days before such returns
are due to be filed. The Trustee is hereby authorized to sign any such return on
behalf of the Trust. The Transferors shall prepare or shall cause to be prepared
all tax information required by law to be distributed to the holder of the
Transferor Interest and MBIA and shall deliver such information at least five
days prior to the date it is required by law to be distributed to MBIA and the
holder of the Transferor Interest. In no event shall the Trustee be liable for
any liabilities, costs or expenses of the Trust arising under any tax law,
including without limitation federal, state, local or foreign income or excise
taxes or any other tax imposed on or measured by income (or any interest or
penalty with respect thereto or arising from a failure to comply therewith).

     Section 5.11 Rights of MBIA to Direct Trustee. MBIA shall have the right to
direct the time, method, and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee; provided, however, that, subject to Section 5.02, the Trustee shall
have the right to decline to follow any such direction if the


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<PAGE>

Trustee being advised by counsel determines that the action so directed may not
lawfully be taken, or if the Trustee in good faith shall, by a Responsible
Officer or Responsible Officers of the Trustee, determine that the proceedings
so directed would be illegal or involve it in liability and provided further
that nothing in this Agreement shall impair the right of the Trustee to take any
action deemed proper by the Trustee and which is not inconsistent with the
direction of MBIA.

     Section 5.12 Representations and Warranties of Trustee. The Trustee
represents and warrants that:

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

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

          (c) this Agreement has been duly executed and delivered by the
     Trustee; and

          (d) this Agreement is the legal, valid and binding obligation of the
     Trustee, enforceable against the Trustee in accordance with its terms.

                                   ARTICLE VI

                                   TERMINATION

     Section 6.01 Termination of Trust.

     The respective obligations and responsibilities of the Transferors and the
Trustee created hereby shall terminate, except with respect to the duties
described in Section 5.04 and Section 2.04(c), on the Trust Termination Date.
Upon such termination, each Transferor shall be deemed to have released the
Trustee from any and all claims that either of the Transferors ever had, now has
or hereafter can, shall or may have relating to, on account of or in any way
arising out of any and all injuries, damages and consequences of any act or
omission related to this Agreement or the Settlement Agreement.

     Section 6.02 Termination Rights of Holder of Transferor Interest. Upon the
termination of the Trust pursuant to Section 6.01, and after payment of all
amounts due hereunder on or prior to such termination, the Trustee shall execute
a written conveyance substantially in the form of Exhibit C hereto pursuant to
which it shall convey to the holder of the Transferor Interest (without
recourse, representation or warranty) all right, title and interest of the Trust
in the amounts on deposit in the Collection Account, the Trust Assets, and all
proceeds thereof. The Trustee shall execute and deliver (but shall have no
obligation to prepare) such instruments of transfer and assignment including,
without limitation, UCC financing statements, in each case without recourse,
representation or warranty as shall be reasonably requested by the holder of the
Transferor Interest to vest in such holder all right, title and interest which
the Trust had in the Trust Assets.


                                       18

<PAGE>

                                   ARTICLE VII

                            MISCELLANEOUS PROVISIONS

     Section 7.01 Amendment.

     (a) No amendment or waiver of any provision of this Agreement, nor consent
to any departure therefrom, shall in any event be effective unless in writing
and signed by MBIA, the Trustee and the holder of the Transferor Interest;
provided that any waiver so granted shall extend only to the specific event or
occurrence so waived and not to any other similar event or occurrence which
occurs subsequent to the date of such waiver. No failure to exercise and no
delay in exercising, on the part of the Trustee or MBIA of any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.

     Section 7.02 Protection of Right, Title and Interest to Trust.

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

     (b) Each Transferor agrees to do and perform, from time to time, any and
all acts and to authorize and/or execute any and all further instruments
required or reasonably requested by MBIA or the Trustee more fully to effect the
purposes of this Agreement, including, without limitation, the execution of any
financing statements or continuation statements relating to the Trust Assets for
filing under the provisions of the UCC as in effect in any applicable
jurisdiction. The Transferors hereby authorize MBIA and the Trustee at any time
and from time to time to file any financing statements and amendments thereto as
may be necessary or desirable to preserve, maintain and protect the interests of
the Trust in the Trust Assets and the proceeds thereof.

     Section 7.03 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAW
PROVISIONS WHICH WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANY OTHER
JURISDICTION), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

     Section 7.04 Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered at, sent by courier at or mailed by registered mail, return receipt
requested, to (a) in the case of the holder of the Transferor Interest, to James
M. Brewster, Spiegel Acceptance Corporation, c/o Spiegel, Inc., 3500 Lacey Road,
Downers Grove, Illinois 60515, (b) in the case of the Trustee, to the Corporate


                                       19

<PAGE>

Trust Office, and (c) in the case of MBIA to 113 King Street, Armonk, New York,
10504 or, as to each party, at such other address as shall be designated by such
party in a written notice to each other party.

     Section 7.05 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.

     Section 7.06 Cumulative Remedies. The rights, remedies, powers and
privileges herein provided are cumulative and not exhaustive of any rights,
remedies, powers and privileges provided by law.

     Section 7.07 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 7.08 Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.

     Section 7.09 Headings. The headings herein are for purposes of reference
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.

     Section 7.10 No Bankruptcy Petition. Notwithstanding any prior termination
of this Agreement, each of MBIA, the holder of the Transferor Interest and the
Transferors (with respect to the Trust only), severally and not jointly, hereby
covenants and agrees that it will not at any time institute against, solicit or
join or cooperate with or encourage any institution against the Trust of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceeding under any United States federal or state bankruptcy
or similar law.

     Section 7.11 Transferor Interest. The Transferor Interest may be pledged,
transferred, sold, exchanged, pledged, hypothecated, participated, assigned or
otherwise disposed to any Person, in whole but not in part; provided, however,
prior to the pledge transfer, sale, exchange, pledge, hypothecation,
participation, assignment or otherwise disposition, the Trustee shall have
received (i) an Opinion of Counsel to the effect that such proposed action will
not cause the Trust or any portion thereof to be taxable as an association or
publicly traded partnership taxable as a corporation for federal income or state
income or franchise tax purposes; and (ii) information identifying the holder of
the Transferor Interest, including contact information, as it may reasonably
require (with a copy to MBIA).

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       20

<PAGE>

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

                                        SPIEGEL ACCEPTANCE CORPORATION
                                        A TRANSFEROR


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


                                        SPIEGEL CREDIT CORPORATION III
                                        A TRANSFEROR


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


                                        THE BANK OF NEW YORK
                                        NOT IN ITS INDIVIDUAL CAPACITY BUT
                                        SOLELY AS TRUSTEE


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

Acknowledged and Agreed:

MBIA INSURANCE CORPORATION


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

                Signature page to MBIA Settlement Trust Agreement

<PAGE>

                                    EXHIBIT A

                              SETTLEMENT AGREEMENT

<PAGE>

                                    EXHIBIT B

                         FORM OF MONTHLY TRUSTEE REPORT

<PAGE>

                                    EXHIBIT C

                       FORM OF CONVEYANCE OF TRUST ASSETS

<PAGE>

                                    EXHIBIT D

                     MBIA SETTLEMENT TRUST WIRE INSTRUCTIONS

                                 TO BE PROVIDED.