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                                                                Exhibit 10.76

          ACCOUNT PURCHASE & CREDIT CARD MARKETING & SERVICES AGREEMENT

This agreement ("Agreement") is entered into as of the 9th day of March, 1999
("Effective Date"), by and among Capital One Services, Inc. ("COSI"), a Delaware
corporation and Capital One Bank ("COB"), a Virginia banking corporation
(jointly and severally, or as appropriate as to a particular party's
obligations, "Capital One"), and Hanover Direct, Inc., a Delaware corporation
located at 1500 Harbor Boulevard, Weehawken, New Jersey 07087, on behalf of its
subsidiaries and affiliates other than Compagnie Financiere Richemont AG
("HDI").

                                    RECITALS

A. General Electric Credit Corporation ("GECC") owns and services, among other
things, a portfolio of credit card receivables for a single-line house credit
card program as set forth in Exhibit A ("Existing Portfolio") pursuant to an
agreement between HDI and GECC (the "Existing Agreement") (which existing
Agreement has not been disclosed to Capital One) the terms of which provide that
a third party purchaser may purchase the Existing Portfolio under limited
conditions set forth in that certain Existing Agreement.

B. Capital One has offered to purchase the Existing Portfolio and HDI desires to
sell the Existing Portfolio and the proposed transaction has been consented to
by GECC pursuant to Section 12.3 and 12.5 of the Existing Agreement.

C. Capital One has offered to provide a dual-line credit card program to credit
card holders of the Existing Portfolio and to market and promote the dual-line
credit card program to prospective credit card applicants (the "Program") and
HDI desires to engage Capital One for the purpose of servicing such Program on
its behalf. "Dual-line" shall mean a private-label credit card line for HDI
merchant use and a standard Visa or MasterCard line of credit for third-party
use.

D. HDI owns and offers various products and services through several mail-order
catalog subsidiaries and limited liability companies ("Catalogs") and maintains
site(s) on the Internet, and owns and/or manages related Web sites
(collectively, the "HDI Sites") and markets the sale of Catalogs' goods and
services in a variety of direct response media, now known and hereafter
developed ("Media Channels").

E. HDI and Capital One desire to use all Media Channels available to them to
offer the Program to customers and prospective customers of both the Catalogs
and Capital One.

Therefore, the parties agree as follows:

I     DEFINITIONS

      A. "Accounts" = Credit account and related contractual agreements with
      holders of a MasterCard or Visa credit account, whether or not a plastic
      card has been issued against such account.

      B. "Active Account" = Program Accounts which have an open outstanding
      balance.

      C. "Affiliate" = As defined in Rule 12b-2 under the Securities Exchange
      Act of 1934, as amended, together with the rules and regulations
      promulgated thereunder other than Compagnie Financiere Richemont AG.


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      D. "Agreement" = As defined in the Preamble.

      E. "Applicable Law" = All applicable laws of any jurisdiction, including
      banking laws, consumer credit laws, securities laws, tax laws, tariff and
      trade laws, ordinances, judgments, decrees, injunctions, writs and orders
      or like actions of any Competent Authority and the rules, regulations,
      orders, interpretations, licenses and permits of any Competent Authority.

      F. "Capital One" = As defined in the Preamble.

      G. "Capital One's Closing Conditions" = As defined in Section IV.B.5.

      H. "Catalogs" = As defined in the Recitals.

      I. "Charged-off Accounts" = HDI Accounts issued under the Program that
      have been charged-off on the books and records of Capital One, net of
      recoveries, pursuant to Applicable Law and, in every event, after 180 days
      past due, under normal circumstances and immediately upon notice of
      unusual events, including due to non-payment, death or otherwise.

      J. "Closing" = As defined in Section IV.B.2.

      K. "Closing Date" = As defined in Section IV.B.2.

      L. "Competent Authority" = Any federal, state, county, local or municipal
      governmental or quasi-governmental body, bureau, commission, board, board
      of arbitration, instrumentality, authority, agent, court, department,
      inspectorate, official or public or statutory person (whether autonomous
      or not) having jurisdiction over this Agreement or any of the parties to
      this Agreement.

      M. "Credit Card Procedures" = Those policies and procedures adopted by
      Capital One in the administration of credit card operations for itself or
      its Affiliates and other third parties, as amended, from time to time in
      the absolute discretion of Capital One.

      N. "Delinquent Accounts" = Accounts which meet any one of the following
      criteria: (i) one (1) or more days Past Due and over-limit, (ii) greater
      than thirty (30) days Past Due, or (iii) is a Charged-off Account.

      O. "Dual-line" = As defined in the Recitals.

      P. "Encumbrance" = Any mortgage, lien, pledge, charge, assignment,
      hypothecation, securitization, security interest, title retention,
      preferential right, trust arrangement, lease, easement, servitude or
      encumbrance of any kind.

      Q. "Existing Portfolio" = As defined in the Recitals.

      R. "Existing Portfolio Account Contract" = An agreement between HDI and an
      account holder evidencing a Purchased Account.

      S. "Existing Portfolio Account Holder List" shall mean the list of the
      names and addresses of all account holders of a Purchased Account as of
      the Closing Date.

      T. "Existing Portfolio Account Information" = The following information
      with respect to each Purchased Account: (a) the information contained in
      the data fields listed 


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      on Exhibit A hereto; (b) the RM (returned mail) status of such Purchased
      Account; (c) the original application for such Purchased Account (or a
      copy thereof) as GECC may have in its files and (d) full file layout and
      data dictionary with metadata.

      U. "GECC" = As defined in the Recitals.

      V. "HDI Account List" = A list of HDI Accounts for which an HDI Card has
      been issued whether or not such Accounts are Active Accounts or
      Charged-off Accounts.

      W. "HDI Accounts" = Accounts issued under the Program pursuant to this
      Agreement.

      X. "HDI Card" = A plastic card bearing the HDI Mark issued to a customer
      under an HDI Account.

      Y. "HDI's Closing Conditions" = As defined in Section IV.B.6.

      Z. "HDI Customer Data" = All names, addresses and other individual level
      data associated with customers (i) originating with the Existing
      Portfolio, (ii) originating with HDI offers for credit cards including but
      not limited to HDI Customer Lists; and (iii) for customer orders for the
      products sold by HDI.

      aa. "HDI Customer List" = HDI Customer Data excluding individual level
      data for customer orders for the products sold by HDI.

      bb. "HDI Line of Credit" = The amount of credit available to a given HDI
      Account for purchases solely of HDI products.

      cc. "HDI Sites" = As defined in the Recitals.

      dd. "Initial Term" = As defined in IV.A.1.

      ee. "installment billing programs'" = Those programs which HDI offers to
      its customers pursuant to which cardmembers may accept the offer to divide
      a total transaction amount over 4 or 5 months.

      ff. "Liaison" = As defined in Section IV.G.1.

      gg. "Marks" = As to a party, means such party's trademarks, trade names,
      logos, service marks, trade styles, trade dress and other proprietary
      identifying marks whether or not registered or otherwise legally
      determined to be owned by such party.

      hh. "Media Channels" = As defined in the Recitals.

      ii. "Models" = Criteria developed by Capital One for targeting and
      identifying customers, credit products for such customers, or
      restructuring credit products provided to existing Accounts, whether
      mathematical or otherwise, including, without limitation, Confidential
      Information of Capital One used or prepared in connection with the
      development of such criteria, through analysis and modeling of risk
      parameters and customer information, including from existing databases or
      otherwise.

      jj. "multi-pay accounts" = Those Accounts in which cardmembers have
      accepted the offer to divide a total transaction amount over 4 or 5
      months.


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      kk. "open outstanding balance" = Accounts where an average daily balance
      for a given period is greater than zero dollars.

      ll. "Past Due" = An Account is past-due where payment has not been
      received by the statement due date.

      mm. "Person" = Any individual, corporation, partnership, limited liability
      company, joint venture, association, joint stock company, trust,
      unincorporated organization or government or any group or political
      subdivision thereof.

      nn. "Program" = As defined in the Recitals.

      oo. "Program Launch Date" = The date of closing of the purchase and
      conversion of the Purchased Accounts.

      pp. "Purchased Account(s)" = Accounts from the purchased Existing
      Portfolio on the Closing Date excluding accounts which are (i) more than
      180 days past due or (ii) bankrupt, deceased or otherwise subject to
      charge-off by GECC, at the Closing Date hereunder.

      qq. "Purchase Date" = The date on which Purchased Accounts are purchased
      by Capital One from GECC.

      rr. "Set-up Period" = The period of time commencing from the Effective
      Date and concluding on the Program Launch Date during which the parties
      expect to undertake systems and operations preparations necessary to
      establish the Program.

      ss. "Solicitation" = An offering of the HDI Accounts to a group of Persons
      identified as potential account holders through existing HDI Customer
      Lists, the analysis and modeling of risk parameters and credit information
      obtained from Credit Bureaus or otherwise via one or more of the following
      marketing channels: (i) take-one or other similar applications; (ii)
      direct mail; (iii) telemarketing and (iv) Internet-based application
      forms.

      tt. "Tape" = As defined in Section IV.B.3(b).

      uu. "Tax" or "Taxes" = A United States or foreign federal, state or local
      income, payroll, ad valorem, excise, sales, use, occupancy, real estate,
      capital stock, or franchise tax or other governmental charge, including
      any interest, fines, penalties, and additions relating to any such tax.

      vv. "Tax Return" = Any statement, form, return or other document required
      to be supplied to a taxing authority in connection with Taxes.

      ww. "Term" = As defined in II.C.6(c).

      xx. "Termination Date" = The date on which this Agreement shall terminate,
      including for any reason set forth in IV.C.

      yy. "Unbanked" / "Unbanked Consumer" = An individual who meet(s) either of
      the following two (2) criteria:

            i)    no record in the credit bureaus; or

            i)    a record in the credit bureaus and

                  (a)   an account that does not have at least 2 "trade lines"
                        on it; or


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                  (b)   an account with 2 or more "trade lines" on it but the
                        individual consumer has a scoring report issued on it by
                        FAIR ISAAC (or a company with a similar scoring
                        mechanism) with a score of less than 600.

      "Trade line" shall mean, for the purposes of this definition, a line of
      credit issued by an entity which has extended credit to an individual and
      reported it to the credit bureau. A credit inquiry shall not be deemed a
      trade line.

      zz. "Unbanked Market" = The consumer market wherein any entity may offer
      for sale merchandise or services on credit where 40% or more of approved
      applicants are Unbanked Consumers.

      Section 1.1. Construction. With respect to all terms used in this
Agreement, words used in the singular include the plural and words used in the
plural include the singular. The word "including" means including without
limitation, and the words "herein", "hereby", "hereto" and "hereunder" refer to
this Agreement as a whole. Unless the context otherwise requires, references
herein: (i) to Articles, Sections and Exhibits mean the Articles and Section of
and the Exhibits attached to this Agreement; (ii) to an agreement, instrument or
other document means such agreement, instrument or other document as amended,
supplemented and modified from time to time, to the extent provided by the
provisions thereof and by this Agreement; and (iii) to a statute mean such
statute as amended from time to time. The Exhibits referred to herein shall be
construed with and as an integral part of this Agreement to the same extent as
if they were set forth verbatim herein.

II    KEY POINTS OF RELATIONSHIP

      A. REPLACEMENT OF GECC AS SERVICE PROVIDER OF HDI'S PRIVATE LABEL CREDIT
      PROGRAM AND CONVERSION TO DUAL-LINE CREDIT CARD.

            1. Replacement. Capital One shall provide services generally of a
            type provided previously by GECC with respect to HDI's private label
            credit card program. Capital One shall do this by (a) purchasing
            from HDI the Existing Portfolio at a price equal to 100% of the par
            value of the outstanding receivables of accounts excluding
            Charged-off Accounts on the Closing Date and (ii) continuing to fund
            the portfolio's growth pursuant to the provisions of this Agreement.

            2. Selection of Card Association Capital One shall convert Purchased
            Account holders over to a dual-line Visa or MasterCard with the
            private label line that functions similar to the existing GECC
            program. The final selection of Visa or MasterCard for the dual-line
            card shall be made by HDI with the prior reasonable approval of
            Capital One.

            3. Visa or MasterCard Co-branded Incentive Dollars. HDI and Capital
            One shall retain the right to jointly negotiate and share equally
            (50:50) any Visa or MasterCard association "co-branded" incentive
            dollars.

            4. Risk offset Fee. Capital One will provide the dual-line private
            label program to HDI for a Risk offset fee recognizing in part the
            risk Capital One faces of potentially higher credit losses which
            will be:

                  o     $1.50 per Active Account per month.


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                  o     $10 per Account originated under the Program paid once
                        per Account origination, settled on a quarterly basis
                        for all Accounts generated in the quarter.

            5.    It is the intention of Capital One to accommodate, consistent
                  with Applicable Law, funding to HDI of up to $2,000,000 in
                  receivables on HDI multi-pay accounts. Capital One shall use
                  good faith best efforts to offer a reasonable funding rate for
                  such accounts. HDI shall have the option to accept the offer,
                  re-negotiate the offer, or decline the offer. The parties
                  anticipate negotiating the terms of any such arrangement
                  during the Set-up Period.

      B. SHARING OF COSTS AND PROFITS OF DUAL LINE CREDIT CARD ISSUED TO HDI'S
      EXISTING CUSTOMER PORTFOLIO

            1. Promotion. Subject to the provisions of Article III below, HDI
            will be responsible for promoting the HDI Card, both for continued
            use as well as to acquire new HDI Accounts in all Media Channels on
            a mutually agreeable basis.

                  (a) Where these programs can be added to an HDI existing
                  customer contact ( i.e. on-page in existing catalogs, as a
                  package insert or inbound telemarketing ), costs will be borne
                  by HDI.

                  (b) For stand-alone credit promotions, if any, that do not use
                  an existing customer contact of HDI, the catalog, mailing and
                  telemarketing costs of the Program will be equally split
                  between HDI and Capital One. HDI alone will bear the cost and
                  risk of catalog inventory. Where such promotions are
                  anticipated, Capital One and HDI agree to prepare detailed
                  plans including a promotion budget which outlines expected
                  costs. Once completed, both parties shall agree in writing to
                  the budget and the sharing of promotion/mailing costs,
                  including any variances to the budget.

            2. Credit Screening. As set forth in Article III below, Capital One
            shall be responsible for the credit screen which Capital One may
            deem necessary (pre-screening and at the point of application if
            required), credit underwriting and account set-up costs. Capital One
            shall be solely responsible for credit decisions, including credit
            line. HDI and Capital One shall agree in advance to the standard
            terms and conditions used for the Program. For Delinquent Accounts,
            Capital One may at its own discretion modify the Delinquent
            Account's terms and conditions; provided that Capital One will not
            change terms for any such Account the first time such Account
            becomes a Delinquent Account except Accounts that are bankrupt or
            deceased, or that Capital One in good faith believes to be
            fraudulent. Accounts which have become a Delinquent Account a second
            time shall be referred to herein as a "Longstanding Delinquent
            Account."

            3.    HDI Fees.

                  a)    HDI will receive an annual fee to be paid quarterly by
                        Capital One, being 0.625% of the quarterly average
                        outstanding receivable balance (2.5% annualized) under
                        the dual-line product, excluding Delinquent Accounts.
                        (By way of illustration, on a $1,000 quarterly average
                        outstanding balance for an account holder, 0.625% or
                        $6.25 shall be paid by Capital One to HDI.)


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                  b)    On a quarterly basis, a marketing offset fee of $10 per
                        HDI Account paid once per Account origination, settled
                        on a quarterly basis for all Accounts generated in the
                        quarter.

                  c)    Such fees shall be the sole amount paid to HDI by
                        Capital One which shall otherwise retain all profits
                        associated with the dual-line product.

            4. Shared Credit Risk for 18 Months. For a period of 18 months from
            the Closing Date, HDI shall share the credit risk on the Purchased
            Accounts with an assumed 8% total shared risk measured as a
            percentage of average receivable balance, with monthly
            reconciliation therefor. (By way of illustration, monthly
            reconciliation will examine "charge-offs"; if total losses are 10%,
            HDI shall be responsible to pay Capital One 1% of the losses; if
            total losses are 6%, Capital One shall be responsible to pay HDI 1%
            of the losses. If such month is after 18 months from the Purchase
            Date, then HDI shall share no part of credit losses or gains above
            or below 8%.)

            5. By-Pass. No interchange fee will be required to be paid by HDI
            for charges made to the private label line of the card with
            transactions billed directly to Capital One as set forth below and
            not sent through the Visa or MasterCard association payment system.

      C. JOINT DEVELOPMENT OF PROGRAM TO BUILD 'UNBANKED' CREDIT PORTFOLIO

            1. Program Development. HDI and Capital One agree to jointly develop
            a program to build a portfolio of Program credit card members who
            are Unbanked Consumers.

            2. Marketing Responsibility. HDI will act as the marketing arm of
            the two parties to generate Unbanked credit applicants. These
            applicants will be submitted to Capital One for credit approval and
            dual-line account set up.

            3. Marketing Costs. Capital One shall pay HDI a marketing offset fee
            of $10 per HDI Account paid once per Account origination, settled on
            a quarterly basis for all Accounts generated in the quarter. HDI
            will be responsible for the costs of all marketing, merchandising,
            and promotions in generating the applications but all such media
            materials will be created by Capital One, consistent with the
            provisions of Article III below, subject to the reasonable right of
            review of promotional copy as provided in Section II.E. below.

            4. Credit Analysis Responsibility and Costs. Capital One will be
            responsible for all credit evaluation, credit set up and all costs
            associated with credit account management.

            5. Account Approval Standards. Prior to each promotion by HDI to
            generate accounts, HDI and Capital One will agree to the terms and
            conditions required by Capital One to approve accounts for the
            purpose of enabling HDI to make its promotions to a more selective
            market, to more effectively take customer applications, and to
            properly communicate with both Capital One and customers. This may
            include such items as credit history (required positive or
            prohibited negative credit bureau line items), required down
            payment, APR, and account fees.


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            6. Profit Sharing for Unbanked Consumers. HDI credit sales using HDI
            Accounts by Unbanked Consumers shall result in profit sharing by the
            parties on the following schedule and in recognition of Capital One
            taking on potentially higher credit losses:

                  (a) During the 1st 12 months for each HDI Account, (i) HDI
                  will pay Capital One $2.00 per month for each Active Account.

                  (b) During the 2nd 12 months for each HDI Account:

                        (i) Capital One will pay HDI 4% of the average annual
                        receivable balance for each HDI Account excluding
                        Delinquent Accounts.

                        (ii) HDI will pay Capital One:

                             1. $1.50 per month for each Active Account.

                             2. 4% of net HDI sales on the HDI Account (net of
                             returns, cancellations, shipping, handling, tax and
                             royalties or revenue splits paid to 3rd parties).

                  (c) During the 3rd 12 months for each HDI Account, and
                  thereafter for all extensions of the Term:

                        (i) Capital One will pay HDI 4% of the average annual
                        receivable balance for each HDI Account excluding
                        Delinquent Accounts;

                        (ii) HDI will pay Capital One:

                             1. $1.00 per month for each Active Account;

                             2. 4% of net HDI sales on the HDI Account (net of
                             returns, cancellations, shipping, handling, tax and
                             royalties or revenue splits paid to 3rd parties).

                  (d) During the Term, HDI will pay Capital One a Risk offset
                  fee of $10 per Account originated under the Program in
                  recognition of the higher credit loss ratios experienced under
                  the Program.

            Payments will generally be made on a quarterly basis consistent with
            Section III.J.

      D.    INTELLECTUAL PROPERTY AND CONTENT OWNERSHIP AND LICENSE

            1. Grant of License. Subject to the terms and conditions of this
            Agreement, during the term of this Agreement, each of the parties,
            to the extent that it has any such rights which may be sublicensed,
            shall grant to the other party and does hereby grant to the other
            party, a non-exclusive royalty-free sublicense to use, copy,
            reproduce, distribute, transmit and publicly display, in the United
            States of America and in all territories in which HDI's chosen Media
            Channels are exposed, to the extent to which such party has the
            right to grant such a license, the Marks which are customarily and
            usually required to be in Promotion Copy (defined below in Section
            II.E.) (as narrowly defined for the purposes of this Agreement,


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            "Intellectual Property") with respect to such party, and to
            sub-license their Intellectual Property, to existing wholly-owned
            subsidiaries of such other party or to existing joint ventures in
            which such party holds an ownership interest for the sole purpose of
            using, reproducing, distributing, transmitting and publicly
            displaying the licensor party's Intellectual Property but only for
            the purposes described in and in accordance with this Agreement. A
            sublicense granted to a party in the manner described herein is
            personal to the sublicensee and shall not, without the written
            consent of the licensor, be assigned, mortgaged, sublicensed or
            otherwise encumbered by the sublicensee or by operation of law.

            2. Card Design. Capital One in consultation with HDI, shall develop
            HDI plastic card designs prominently featuring the HDI Marks.
            Capital One and HDI shall have the right to approve any design in
            their sole discretion to be issued to HDI Accounts. The designs
            shall conform to MasterCard and Visa rules for affinity cards. Any
            subsequent changes thereto by Capital One or HDI shall be subject to
            the prior written approval of the other party. Subject to Section
            7.1 and HDI rights to its own Marks, Capital One shall own all
            rights, title, and interest in such HDI Card designs, provided,
            however, that each party hereby disclaims any rights in any Mark of
            the other party. Neither Capital One nor HDI may use, license or
            transfer such card designs to any Person for any purpose without the
            prior written consent of the other party.

            3. Retention of Rights. Except as licensed or sub-licensed herein,
            each of Capital One and HDI shall retain all right, title and
            interest in and to their Intellectual Property and such shall remain
            the exclusive property of such party or shall be properly licensed
            to such party or an affiliate of such party.

            4. Indemnification. Each party agrees to defend, indemnify, and hold
            harmless the other against any claims or actions alleging that the
            indemnifying party's Intellectual Property infringes any U.S. patent
            or copyright or any third party trademark right and to pay costs and
            damages to the other finally awarded in any such suit, provided that
            the indemnifying party is notified promptly in writing of the suit
            and, at the indemnifying party's request and expense, is given
            control of the suit and all requested reasonable assistance for the
            defense of the suit. The foregoing obligation shall not apply with
            respect to any Intellectual Property (i) modified by any party other
            than the indemnifying party where the alleged infringement relates
            to such modification or (ii) combined with other products where the
            alleged infringement relates to such combination.

            5. Worldwide Exposure. As between HDI and Capital One, (a) HDI will
            retain all right, title and interest in and to its Intellectual
            Property worldwide, subject to the limited license granted to
            Capital One hereunder, and (b) Capital One will retain all right,
            title and interest in and to its Intellectual Property worldwide,
            subject to the limited license granted to HDI hereunder.

            6. Uses. All uses of the other party's Intellectual Property
            hereunder shall be in accordance with each party's reasonable
            policies regarding advertising and trademark usage as established
            from time to time. Except as provided herein, neither party will
            make any filing or other application for registration or recognition
            by any governmental authority in any jurisdiction worldwide as to
            any Mark of the other party.

            7. Post-Term Use of Intellectual Property. Upon the expiration or
            termination of this Agreement, each party will cease using the
            Intellectual 


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            Property of the other except: (i) as the parties may agree in
            writing; (ii) to the extent permitted by applicable law, or (iii) to
            the extent permitted by the terms of this Agreement for the purposes
            of wind-down operations.

      E.    RIGHT OF REVIEW AND APPROVAL OVER PROMOTION COPY

            1. Review and Approval. Each of the parties and its legal counsel
            shall have the right of prior approval over any use of its
            Intellectual Property, including any use in connection with
            marketing, promotion and advertising, which approval will not be
            unreasonably withheld. Each party shall submit materials to the
            other party via the Liaison for approval with enough lead time for
            such party and its counsel to have at least one week to review. It
            shall be the responsibility of each of Capital One and HDI to review
            and comment upon or approve advertising and promotion copy submitted
            to such party by the other party, in a timely manner, as follows:

                  (a) Each party's Liaison shall cause all drafts of all
                  prepared materials promoting or advertising the Program
                  containing promotion copy or use of Intellectual Property of
                  the other party, as well as notification of all modifications
                  (collectively "Promotion Copy"), to be delivered to the other
                  party's Liaison for review, comment, and approval or
                  disapproval by the appropriate person at least five (5)
                  business days in advance of a comment deadline imposed by or
                  upon such party's Liaison and also,

                        (1)   in the case of HDI, with an additional copy to
                              Attention: Lisa Green, Esq., Assistant General
                              Counsel, Hanover Direct, Inc., 1500 Harbor
                              Boulevard, Weehawken, NJ 07087, Telecopier
                              201-272-3468.

                        (2)   in the case of Capital One, with an additional
                              copy to Attention: Tony Santillo, Capital One
                              Services, Inc., 11013 West Broad Street, Glen
                              Allen, VA 23060, Telecopier 804-967-2009.

                  (b) Capital One and its Liaison assume no responsibility or
                  liability for errors regarding HDI and its Promotion Copy
                  after it has been approved by HDI; provided, however, that
                  Capital One assumes liability for errors regarding HDI and its
                  Catalogs and the Program made by Capital One or its agents,
                  and shall indemnify HDI pursuant to Section III.I. below.

                  (c) HDI and its Liaison assume no responsibility or liability
                  for errors regarding Capital One and its Promotion Copy after
                  it has been approved by Capital One; provided, however, that
                  HDI assumes liability for errors regarding Capital One and the
                  Program made by HDI or its agents, and shall indemnify Capital
                  One pursuant to Section IV. H below.

                  (d) Neither party may amend, modify, or alter another party's
                  Promotion Copy in a material manner except with the explicit
                  written approval of the other party. "Material" shall include
                  Promotion Copy making implied or express claims and any Marks
                  or text associated with Marks.

            2. Any breach of the terms of this Section II.E may cause
            irreparable harm to a party.


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                  (a) in the event of any threatened breach, the party placed in
                  jeopardy shall be entitled to injunctive relief in addition to
                  any other available remedy; and

                  (b) any failure of a party and its Liaison to adhere to the
                  standards in this Section II.E which constitutes a material
                  breach of this Agreement shall be subject to Section IV.C.
                  below regarding "Termination."

      F.    USAGE REPORTS AND USER DATA

            1.    Each party will provide to the other party via email or other
                  agreed upon means such usage reports containing such
                  information as the Liaisons shall mutually agree is necessary
                  and desirable, including but not limited to information with
                  regard to open accounts for all HDI Customer Data, and
                  accounts in process of screening, Delinquent Accounts,
                  transaction data summaries, and open outstanding balances
                  (collectively as further defined, "User Data" and "Usage
                  Reports"). Each Usage Report will cover a calendar month and
                  will be delivered within fifteen (15) days following the end
                  of the applicable month. The parties may, by mutual written
                  agreement, alter the content of the Usage Reports.

            2.    EACH PARTY WILL USE REASONABLE EFFORTS TO ENSURE THE ACCURACY
                  OF THE USAGE REPORTS BUT NEITHER PARTY WARRANTS THAT THE USAGE
                  REPORTS WILL CONFORM TO ANY SPECIFICATIONS AT ANY GIVEN TIME.
                  NEITHER PARTY WILL BE HELD LIABLE FOR ANY CLAIMS AS THEY
                  RELATE TO SUCH USAGE REPORTS, EXCEPT TO THE EXTENT THAT SUCH
                  USAGE REPORTS SERVE AS THE BASIS FOR PAYMENTS UNDER THIS
                  AGREEMENT.

            3.    All information required to be reported by Capital One shall
                  be subject in all instances to compliance by Capital One, in
                  Capital One and its legal counsel's reasonable judgment, with
                  the requirements of Applicable Law. User Data shall be deemed
                  proprietary and confidential and subject to the
                  confidentiality provisions of this Agreement set forth in
                  Section IV.L. below.

            4.    Both parties acknowledge that any individual user of a Media
                  Channel such as the Internet could be a customer of Capital
                  One and/or HDI through activities unrelated to this Agreement.
                  Except as set forth in Section II.F(6)) below, both parties
                  further acknowledge that any User Data gathered independent of
                  this Agreement, even for credit card users that utilize both
                  parties' services, shall not be covered by this Agreement. The
                  parties also acknowledge that any information collected by
                  Capital One in media channels on which Capital One's name
                  and/or brands do not appear shall not be covered by this
                  Agreement.

            5.    Subject to the restrictions in this Section, the User Data
                  shall be deemed to be the joint property of the parties and
                  both parties shall retain all rights to any User Data obtained
                  through this Agreement. However, HDI agrees that it will not
                  use the User Data or transaction data to specifically target
                  or solicit Capital One credit card users as a subset of HDl's
                  Program credit card users (except as specifically provided
                  herein) either individually or in the aggregate during the
                  term of this Agreement.


                                       11
<PAGE>   12

            6.    User Data Opt Out. Each party agrees that it will not sell,
                  disclose, transfer, or rent the User Data of any HDI Account
                  holder to any third party, nor will either party use said User
                  Data on behalf of any third party, without the consent (either
                  negative or affirmative as the case may be) by the Account
                  holder to such sales, disclosures, transfers or rentals. In
                  such cases where Account holder permission for dissemination
                  of User Data has been obtained, HDI or Capital One, as the
                  case may be, shall use all reasonable efforts to include and
                  enforce within such dissemination contracts or agreements
                  (e.g., list rental agreements) a requirement for the inclusion
                  of an unsubscribe feature in all direct mail and email
                  communications generated by, or on behalf of, third party
                  users of said User Data.

            7.    Privacy Policy. Each of Capital One and HDI shall cooperate
                  fully in the accurate depiction of the "Privacy Policy" and
                  "Opt Out" language to be posted on HDI Sites in order to
                  clearly and conspicuously inform customers and visitors to the
                  site about the uses that will be made of customer information.
                  Capital One does hereby agree to promptly comply with any
                  reasonable requests received to remove card applicants or card
                  users from any further contact or use of User Data by Capital
                  One itself or by any third parties to whom Capital One may
                  disclose User Data to the extent permitted hereunder if at
                  all.

            8.    Marketing Reports. Upon request, Capital One shall provide a
                  reasonable number of marketing reports to HDI in a format and
                  frequency requested by HDI and containing particular aggregate
                  data requested by HDI to enable HDI to understand the general
                  nature of HDI Accounts, including but not limited to the
                  evaluation of the general nature of Capital One's HDI Accounts
                  and the potential of particular promotions or success of past
                  promotions ("Marketing Reports"), and Capital One shall make
                  good faith efforts to cooperate with HDI for such reasonable
                  requests. Such Marketing Reports shall be deemed proprietary
                  to both of HDI and Capital One except that they shall not be
                  required to be returned after the Term of this Agreement as
                  Confidential Information defined in the attached
                  Confidentiality Agreement.

III.  ISSUANCE AND MANAGEMENT OF ACCOUNTS.

      A.    Issuance of Accounts. Capital One shall be the sole and exclusive
            issuer and creditor of HDI Accounts, HDI Cards and other Accounts
            issued bearing the Marks of HDI. Nothing herein shall prevent or be
            deemed to prevent HDI or its Affiliates from accepting as a means of
            payment Accounts of other issuers. HDI Cards shall be secured or
            unsecured Platinum, Gold or Classic Accounts as Capital One, in its
            sole discretion, may determine based on credit quality. In general,
            HDI Accounts shall use the dual-line Product. To the extent
            permitted by Applicable Law, Capital One shall issue new plastic
            cards to account holders in the Existing Portfolio, including
            accounts that have been inactive for up to two years. Capital One
            shall be solely responsible, at its expense, for the administration,
            credit approval, pricing, billing, collecting, account management
            and other servicing of HDI Accounts, including preparing and
            distributing HDI Account agreements, customer disclosures, billing
            statements, collection letters, and customer service materials.
            Capital One, in its sole discretion, may have its standard vendors,
            perform any or all of these functions; provided however, whether
            such functions are performed by Capital One or third parties, the
            functions shall be performed with the same degree of care as Capital
            One customarily exercises with all Accounts of Capital One, and
            further provided that 


                                       12
<PAGE>   13

            the provisions of the Confidentiality Agreement incorporated herein
            and made a part hereof shall apply to such third parties.

      B.    Solicitations for HDI Sales and Accounts. At any time during the
            Term, the parties shall jointly work together with respect to the
            creation and implementation of Solicitations for HDI sales and HDI
            Accounts.

            1.    Creation of Solicitation Package. HDI shall be responsible for
                  the creative design and content of the marketing
                  communications to potential customers of HDI products and
                  services, including broadcast marketing, publications, other
                  advertising, catalogs, telemarketing and other direct mail
                  pieces. The parties shall work together jointly on the
                  creation and design of credit card marketing materials in
                  respect of Solicitations for HDI Accounts; provided, however,
                  that Capital One shall be responsible for the content of
                  marketing communications related to the offer of credit to be
                  made under the HDI Mark by Capital One, including content for
                  the preparation of appropriate customer disclosures to be made
                  in connection with such credit offer. HDI Liaisons shall work
                  with operational personnel of Capital One to ensure that
                  application creation and production and other Solicitation
                  processes, including online decisioning methodologies which
                  may be established from time to time and set forth in
                  subsection (3) below, are properly functioning. Each of HDI
                  and Capital One shall provide an initial Solicitation package
                  to the other for review based on the respective timeframes
                  established by the Liaisions to this Agreement prior to the
                  anticipated date of such Solicitation. Each of HDI and Capital
                  One agrees to respond to such initial Solicitation package
                  within the timeframes established. In any Solicitation, COB
                  shall provide the credit-related disclosures that it, in its
                  sole discretion, deems necessary for purposes of compliance
                  with Applicable Law, which disclosures shall be included, in
                  their entirety in the Solicitation package. The parties shall
                  continue to work together to ensure that each is mutually
                  satisfied with the content and form of all marketing
                  communications presented to potential customers; provided,
                  however, that Capital One shall have final approval over all
                  materials related to the offer of credit to be made by Capital
                  One to potential customers as described above. 

            2.    HDI Customer List. In the event of any direct mail
                  Solicitation by Capital One which includes an offer of credit
                  on a "pre-approved" basis, HDI shall provide to Capital One,
                  or a third party designated by Capital One and reasonably
                  acceptable to HDI, a HDI Customer List no later than sixteen
                  weeks prior to such Solicitation. Capital One or such third
                  party shall return to HDI one or more of such lists. HDI
                  Customer Lists may be compiled by HDI, at its discretion and
                  at its own expense, from its own customer records, lists
                  provided by third-parties or otherwise. Nothing herein above
                  shall be deemed to prohibit Capital One from using other HDI
                  lists, in its sole discretion and expense only for credit
                  purposes. 

            3.    Solicitations and On-Line Decisioning. (i) In the event that
                  the parties engage in a Solicitation which involves an offer
                  of credit anticipating application of "on-line decisioning"
                  (pursuant to which a HDI Customer service representative
                  obtains a credit decision while a HDI customer waits on the
                  telephone), and provided that the Capital One Liaison has
                  approved, the product launch date for on-line decisioning ,
                  Capital One 


                                       13
<PAGE>   14

                  shall be generally prepared to process and approve or
                  disapprove the applications generated by such Solicitations
                  online at the time of telephone application. During the Set-up
                  Period, the parties shall work together as may be mutually
                  agreeable to build the necessary infrastructure to support the
                  application of on-line decisioning by Capital One of HDI
                  customer applications for HDI Accounts. Each party shall bear
                  the cost of establishing the infrastructure within each
                  party's operational and system architectures.

            4.    Mailing of Mail Channel Solicitation Packages; Expenses. Upon
                  final approval, by HDI and Capital One of the Solicitation
                  package to be mailed to existing or potential HDI Account
                  customers, the applicable party shall undertake the
                  Solicitation in a timely manner as the parties may mutually
                  agree and as may be required by Applicable Law, including the
                  Fair Credit Reporting Act. Each of HDI and Capital One shall
                  provide to the other at the time of such approval projected
                  mailing dates and volumes, and at the time of mailing the
                  actual dates and volumes. Each party shall be responsible for
                  marketing costs as set forth above. Capital One shall be
                  responsible for costs associated with the processing of
                  applications including telephone responses (and all such calls
                  shall generally be directed to COSI's facilities). 

            5.    Alternative Vehicles. In addition to Solicitation vehicles
                  described above, HDI and Capital One may use telemarketing or
                  similar means to acquire HDI Accounts; and the parties shall
                  coordinate their efforts so that outbound Solicitations for
                  HDI Accounts are made to customers on a mutually agreeable
                  basis. In the event of Solicitations by telemarketing by HDI,
                  HDI shall obtain Capital One's prior written approval of the
                  offer of credit and the portion of the telescripts pertaining
                  thereto. Telemarketing operations whether performed by HDI
                  third party vendors or otherwise shall meet the service
                  standards generally adhered to by HDI or as reasonably
                  requested by Capital One consistent with Applicable Law. In
                  all such oral communications, HDI and its employees and any
                  third party vendor shall clearly disclose that Capital One
                  solely is the issuer of the HDI Card. Based on its prior
                  review of relevant telemarketing scripts, Capital One shall
                  ensure that telemarketing scripts for offers of credit comply
                  with Visa or MasterCard regulations, including any
                  registration requirements and HDI shall ensure that offers of
                  credit are made in accordance with such telemarketing scripts.
                  If applicable, HDI shall be responsible for registering, at
                  its cost, as necessary, as an "independent service
                  organization" as required by Visa or MasterCard, respectively.

            6.    Limited Audit Rights.

                        (i) Subject to reasonable security requirements of
                  Capital One, Capital One shall grant HDI and its designated
                  representatives, at HDI's expense, reasonable access upon
                  advance notice during business hours to the premises and books
                  and records of Capital One relating to the HDI Accounts and
                  other activities undertaken by Capital One hereunder for the
                  purpose of auditing the financial results of such HDI Accounts
                  and compliance by Capital One with this Agreement, subject to
                  the confidentiality provisions of Section __ hereof. Any such
                  activity by 


                                       14
<PAGE>   15

                  HDI shall be conducted in such a manner as not to unreasonably
                  interfere with Capital One's normal business activities.

                        (ii) Subject to reasonable security requirements of HDI,
                  HDI shall grant Capital One and its designated representatives
                  and COB's primary regulatory agencies, at Capital One's
                  expense, reasonable access upon advance notice during business
                  hours to the premises and books and records of HDI relating to
                  the HDI Accounts and telemarketing and other Solicitation
                  activities being undertaken by HDI hereunder, for the purpose
                  of determining compliance by HDI with this Agreement, subject
                  to the confidentiality provisions of Section IV.L. hereof. Any
                  such activity by Capital One shall be conducted in such a
                  manner as not to unreasonably interfere with HDI's normal
                  business activities.

      C.    Credit Approval by Capital One. Capital One shall evaluate all
            applications for HDI Accounts and shall approve such individual
            applicants and establish such credit lines as it deems appropriate
            in its sole discretion, subject to Applicable Law.

            1.    Decisioning. Prior to the launch of solicitations for HDI
                  Accounts and in addition to arrangements with respect to
                  on-line decisioning, the parties on a commercially reasonable
                  basis shall work jointly to ensure that mail and telephonic
                  linkages necessary to permit decisions to be made with respect
                  to prospective customers that seek a HDI Account are in place
                  and working properly. To the extent that HDI customer service
                  representatives are expected to take applications by
                  telephone, they shall ask for pre-determined information from
                  prospective customers and shall provide such information to
                  Capital One personnel. During the Set-up Period, Capital One
                  shall provide a list of information that HDI customer service
                  representatives shall request from prospective HDI Account
                  customers. From time to time during the Term, Capital One may
                  add or delete items from this list, in its discretion. In
                  addition, during the Set-up Period, the parties shall agree
                  upon the script and similar materials used by HDI customer
                  service representatives with respect to telephonic
                  applications for credit by prospective HDI customers. Such
                  scripts and customer service representatives shall generally
                  present themselves as representatives of HDI in communications
                  with existing and potential customers, consistent with
                  Applicable Law.

            2.    Responses. Within processing times to be established by the
                  parties during the Set-up Period, Capital One shall provide to
                  HDI's customer service representative a response to such
                  customer's application, including whether the application has
                  been approved or requires further review by Capital One
                  personnel and, if approved, the terms of such offer. Capital
                  One shall also provide to the HDI customer service
                  representative information regarding the amount of credit
                  available to such customer under the HDI Line of Credit.
                  Capital One shall be responsible, at its sole expense, for the
                  communication of any denial to a prospective customer by mail
                  or phone. Capital One, at its expense, shall be responsible
                  for all application processing, including credit bureau report
                  fees.

            3.    Credit Criteria. Capital One shall employ credit criteria and
                  offer credit lines to prospective HDI Accounts for HDI
                  Accounts as it may determine, in its sole discretion,
                  consistent with the Credit Card Procedures and safe 


                                       15
<PAGE>   16

                  and sound banking practices. Except as set forth herein, under
                  no circumstances, shall Capital One be required to disclose
                  information to HDI regarding individual customer credit data,
                  regarding credit policies or any other Confidential
                  Information of Capital One or any Affiliates thereof,
                  including delinquency, charge-off or any other data.

            4.    Response Time. Capital One shall meet response time standards
                  for decision processes for purposes of inquiries from
                  applicants concerning the approval or denial of their HDI
                  Account applications and increased credit line requests
                  consistent with the treatment of its own Accounts, the Credit
                  Card Procedures and Applicable Law.

            5.    Welcome Packages. Capital One shall be responsible, at its own
                  expense, for additional processing, including the creation and
                  mailing of letters to prospective customers approving or
                  denying an application, the mailing of a standard welcome kit
                  to approved customers and related actions.

      D.    HDI Account Management.

            1.    Management. Except as may otherwise be set forth herein,
                  Capital One shall perform all standard Account management and
                  operational functions related to the HDI Accounts originated
                  hereunder, in its sole discretion, and at its own expense,
                  including correspondence, statement rendering, and similar
                  communications with HDI Account customers of a type generally
                  set forth in the Credit Card Procedures, line increases,
                  payment processing and account repricing such Account
                  management shall cover both Active and Inactive Accounts,
                  including Accounts acquired in the purchase of the Existing
                  Portfolio.

            2.    Pricing. Capital One shall have the right to change the
                  pricing applicable to the HDI Accounts as set forth herein.
                  COB will provide 30 days advance notice to HDI of a full file
                  change to HDI Accounts, provided that COB shall not charge new
                  fees (fees not currently charged by Capital One to its
                  customers) without the prior consent of HDI, such consent not
                  to be unreasonably withheld. Such changes shall not affect
                  pricing between the parties pursuant to this Agreement. Except
                  with the prior consent of HDI, the parties hereto agree that
                  no annual fee shall be imposed upon HDI Accounts at any time
                  during the term of this Agreement except in limited
                  circumstances of Longstanding Delinquent Accounts.

            3.    Billing Statement Inserts. Subject to the reasonable agreement
                  between the Liaisons of each party, HDI shall have the right
                  to include inserts not to exceed more than 2 per quarter in
                  billing envelopes of HDI Accounts subject to Capital One
                  procedures and operational requirements. HDI shall be
                  responsible for the cost of preparing such inserts and Capital
                  One shall be responsible for the cost of stuffing and mailing
                  such inserts. If there shall be any unused stuffing or postage
                  capacity in any billing envelope, HDI shall be granted the
                  option to provide a statement insert for such mailing, for no
                  fee; provided, however, if there is an incremental verifiable
                  expense to Capital One for such participation by HDI (e.g.,
                  stuffing, postage), the payment thereof and exercise of such
                  option to participate in such mailing shall be in HDI's sole
                  discretion.


                                       16
<PAGE>   17

      E. Systems Upgrades. The parties agree to use commercially reasonable
      efforts to invest in systems upgrades as may be necessary or reasonable to
      ensure that their duties and the objectives set forth hereunder can
      continue to be achieved during the Term. Each party agrees to give the
      other party commercially reasonable notice of any system change or upgrade
      that might require a system change or upgrade by the other party,
      including those relating to time frames and quality assurance testing.

      F. Compliance with Applicable Law. As the issuer and creditor and servicer
      of the HDI Accounts, Capital One shall comply with Applicable Law in
      respect of the HDI Cards and the HDI Accounts, including Applicable Law
      pertaining to credit applications, finance charges, HDI Card transactions
      and collections.

      G. Status of HDI as Issuer

            1.    At no time will any party hereto represent to any Person that
                  HDI or any Affiliate thereof, or any entity other than Capital
                  One or a financial institution affiliate of COB, as the case
                  may be, is the Person extending credit to any holder of an HDI
                  Account; provided, however, that nothing shall limit HDI's
                  ability to promote multi-pay accounts or installment billing
                  programs to its customers.

            2.    Except as set forth in Section II.B.4 above (loss-sharing on
                  Purchased Accounts) HDI shall bear no credit risk or risk of
                  loss with respect to any HDI Account. HDI and its Affiliates
                  shall have no responsibility to Capital One or an Affiliate of
                  Capital One or to any Person for any chargebacks, claims or
                  defenses with respect to goods or services purchased, leased
                  or otherwise acquired through use of an HDI Card (except to
                  the extent that HDI is the merchant with respect to such goods
                  or services or as provided in Section III.I hereof).

            3.    Except as set forth herein, under no circumstances shall HDI
                  be required to disclose information to Capital One regarding
                  individual customer data not related to the provision of
                  credit, catalog mail strategies or policies or any other
                  Confidential Information of HDI.

      H. Role of Each Party. Capital One will use reasonable efforts to respond
      to inquiries from HDI Accounts relating to the HDI products and programs
      working with HDI customer service representatives to resolve issues from a
      credit perspective.

            1.    Inquiries regarding HDI Products and Services. Capital One
                  will refer inquiries concerning HDI products and services sold
                  by HDI to the Customer Service Department of HDI at telephone
                  numbers provided by HDI. HDI will use reasonable efforts to
                  address such inquiries in a timely and effective manner.

            2.    Inquiries re: Capital One Products and Services. HDI will
                  refer HDI Account holders' inquiries concerning HDI Accounts
                  to the Capital One's Customer Service Department at telephone
                  numbers provided by Capital One. Capital One will use
                  reasonable efforts to address any such inquiries in a timely
                  and effective manner consistent with the Credit Card
                  Procedures.


                                       17
<PAGE>   18

            3.    Customer Service Support. Each of Capital One and HDI will
                  provide, at its own expense, one or more customer service
                  contacts who will be available during Capital One's or HDI's
                  respective normal business hours to assist the other party's
                  Customer Service Department in resolving all issues related to
                  the Program and disputes that may arise with customers.

      I. Customer Disputes. HDI hereby agrees that the time limits and
      procedures set forth in operating rules and restrictions of MasterCard and
      Visa respecting billing disputes and charge back transactions shall not
      apply to limit the rights of HDI Account holders or of Capital One, under
      state or federal law, to respecting HDI products and services which are
      disputed charges, billing errors, unauthorized charges, and charges for
      which a customer can assert a "claim or defense" against HDI or other
      similar right of such holder under federal or state law. HDI further
      agrees that it shall cooperate fully with Capital One to resolve any such
      issue as may arise from time to time.

      The parties agree that they shall follow Visa/MasterCard rules regarding
      interchange disputes, whether or not the Visa/MasterCard systems have been
      used.

      J. Statements and Payments. On or before the twentieth (20th) day after
      the end of each calendar quarter during the Term, each party which is owed
      fees hereunder ("Payee") shall deliver to the other party ("Payor") a
      statement for the net fees due to Payee hereunder for the preceding
      calendar quarter. Within five (5) days of receipt of such statement, the
      receiving party shall confirm amounts owed by it and within three days
      therefrom, Payor shall pay such invoice to Payee by wire transfer.

            1.    Statements sent to Capital One hereunder shall be delivered by
                  facsimile or overnight mail to Finance and Accounting Special
                  Projects Group;

            2.    Statements sent to HDI shall be delivered by facsimile or
                  overnight mail to the name and address set forth in Section
                  IV.G. and

            3.    All payments required to be made by wire transfer shall be
                  made by wire transfer pursuant to written instructions
                  provided by each party to the other at the Closing Date.

      K. Daily Payments to HDI and By-pass of Card Payment Networks. On a daily
      basis, HDI shall send to Capital One documentation confirming HDI Account
      transactions involving the purchase of HDI products, as well as returned
      item and dispute information, in the form and containing information as
      the parties shall reasonably agree (which shall generally be the type of
      information provided by HDI to its Visa or MasterCard merchant bank for
      processing of non-Capital One Account charges). Such information shall be
      processed by Capital One and, on the next Business Day following receipt
      of such information, Capital One shall pay HDI by wire transfer the
      aggregated amount, but net of credits made to HDI Accounts for returned
      items. The Liaisons shall agree upon appropriate and reasonable procedures
      for authorizing daily transactions.

      L. Delinquent Accounts. Notwithstanding anything contained herein to the
      contrary, Capital One shall be under no obligation to approve charges to a
      HDI Account which would normally be denied approval pursuant to the Credit
      Card Procedures, including Delinquent Accounts.

IV.   GOVERNING PROVISIONS


                                       18
<PAGE>   19

      A.    TERM

            1. The term of this Agreement ("Term") will begin on the Effective
            Date and will end on the close of business of the date thirty-six
            (36) months from Effective Date ("Initial Term"), unless earlier
            terminated pursuant to Section IV.C. below, and shall be
            automatically renewed, except as provided below, at the end of such
            period for additional consecutive one (1) year terms.

            2. Notwithstanding the foregoing, the parties may notify each other
            in writing, with no less than one hundred eighty (180) days notice,
            of any desire not to automatically renew this Agreement for each
            one-year additional term.

      B.    CLOSING OF SALE OF PURCHASED ACCOUNTS

            1. Agreement of Purchase and Sale. On the terms and subject to the
            conditions hereafter set forth, HDI shall use best efforts to cause
            GECC to sell to HDI on or before the Closing Date in order that on
            the Closing Date HDI shall be able to sell to Capital One and
            Capital One shall be able to purchase from HDI all of HDI's right,
            title and interest in and to the Purchased Accounts for an amount
            equal to the par value of the outstanding receivables of all
            accounts in the Existing Portfolio which are Purchased Accounts (the
            "Purchase Price"). Unless otherwise expressly stated herein, Capital
            One is not, and shall in no way be deemed to be, assuming any
            liabilities, claims or other obligations of HDI or its Affiliates
            with respect to the Purchased Accounts or otherwise, or in amounts
            greater than the stated amounts assumed.

            2. Closing. Subject to the satisfaction or waiver of Capital One's
            Closing Conditions and HDI's Closing Conditions, and subject to all
            other terms of this Agreement, the consummation of the purchase and
            sale of the Purchased Accounts contemplated hereby (the "Closing")
            shall take place at the offices of Capital One Bank, 11013 West
            Broad Street, Glen Allen, Virginia or at such other time, place and
            date, or by facsimile transmission as the parties shall agree in
            writing (the "Closing Date").

            3.    Obligations of HDI at Closing. At or prior to Closing, HDI
                  shall:

                  (a)   use best efforts (provided that nothing herein shall
                        obligate HDI to institute litigation in connection
                        therewith) to cause the Purchased Accounts to be legally
                        transferred to HDI by the Closing Date in order that HDI
                        shall be able to legally sell and transfer the Purchased
                        Accounts to Purchaser free and clear of any Encumbrance;

                  (b)   use best efforts (provided that nothing herein shall
                        obligate HDI to institute litigation in connection
                        therewith) to cause to be delivered to Capital One a
                        magnetic tape containing the Existing Portfolio Account
                        Holder List and all Existing Portfolio Account
                        Information (the "Tape") and other data as reasonably
                        requested by Capital One;

                  (c)   deliver to Capital One a certificate signed by an
                        officer of HDI certifying that: (i) the representations
                        and warranties of HDI 


                                       19
<PAGE>   20

                        contained in Section IV.I.3 are true and correct as of
                        the Closing Date; and (ii) all obligations and covenants
                        required by this Agreement to be performed or complied
                        with by HDI on or prior to the Closing have been duly
                        performed or complied with; and

                  (d)   use best efforts (provided that nothing herein shall
                        obligate HDI to institute litigation in connection
                        therewith) to support the transfer of the Purchased
                        Accounts to Capital One and to cause GECC to support the
                        transfer of the Purchased Accounts to Capital One,
                        including, without limitation, providing adequate
                        personnel on a timely basis to enable Capital One to
                        proceed in a timely manner, and to provide transferred
                        data in a timely manner as may be reasonably requested
                        by Capital One. As between Capital One and HDI, HDI
                        shall be responsible for its own and GECC's costs of
                        conversion and Capital One shall not be responsible for
                        GECC's costs of conversion.

            4.    Obligations of Purchaser at Closing. At Closing Capital One
                  shall:

                  (a)   pay to HDI the Purchase Price by wire transfer pursuant
                        to written instructions provided by HDI upon or prior to
                        the Closing; and

                  (b)   deliver to HDI a certificate signed by an officer of
                        Capital One certifying that: (i) the representations and
                        warranties of Capital One contained in Section IV.I.1&2
                        are true and correct as of the Closing Date; and (ii)
                        all obligations and covenants required by this Agreement
                        to be performed or complied with by Capital One on or
                        prior to the Closing have been duly performed or
                        complied with.

            5.    Capital One's Conditions to Closing. Capital One's obligation
                  to purchase the Purchased Accounts shall be subject to the
                  satisfaction by HDI or waiver by Capital One of the following
                  conditions precedent ("Capital One's Closing Conditions"):

                  (a)   Representations and Warranties. All of the
                        representations and warranties of HDI contained in this
                        Agreement shall be true, correct and complete as of the
                        Closing Date; all of the terms, covenants, agreements
                        and conditions of this Agreement to be complied with,
                        performed or satisfied by HDI on or before the Closing
                        Date shall have been duly complied with, performed or
                        satisfied; and Capital One shall have received a
                        certificate dated the Closing Date and signed by an
                        officer of HDI to the foregoing effect.

                  (b)   No Litigation. No action or proceeding before a court or
                        any other Competent Authority shall have been instituted
                        or threatened to restrain or prohibit the transactions
                        contemplated by this Agreement.

                  (c)   Consents. All necessary consents and approvals of, and
                        filings with, any Competent Authority or third party
                        relating to the 


                                       20
<PAGE>   21

                        consummation by HDI of the transactions contemplated
                        hereby, if any, shall have been obtained and made.

                  (d)   Obligations. Any and all actions required to be taken or
                        documents to be delivered by HDI shall have been taken
                        or delivered by HDI.

            6.    HDI's Conditions to Closing. HDI's obligation to sell the
                  Purchased Accounts shall be subject to the satisfaction by
                  Capital One or waiver by HDI of the following conditions
                  precedent ("HDI's Closing Conditions"):

                  (a)   Representations and Warranties. All of the
                        representations and warranties of Capital One contained
                        in this Agreement shall be true, correct and complete as
                        of the Closing Date; all of the terms, covenants,
                        agreements and conditions of this Agreement to be
                        complied with, performed or satisfied by Capital One on
                        or before the Closing Date shall have been duly complied
                        with, performed or satisfied; and HDI shall have
                        received a certificate dated the Closing Date and signed
                        by an officer of Capital One to the foregoing effect.

                  (b)   No Litigation. No action or proceeding before a court or
                        any other Competent Authority shall have been instituted
                        or threatened to restrain or prohibit the transactions
                        contemplated by this Agreement.

                  (c)   Consents. All necessary consents and approvals of, and
                        filings with, any Competent Authority or third party,
                        including GECC, relating to the consummation by HDI of
                        the transactions contemplated hereby, if any, shall have
                        been obtained and made.

                  (d)   Obligations. Any and all actions required to be taken or
                        documents required to be delivered by Capital One shall
                        have been taken or delivered.

            7.    Conversion Matters

                  HDI shall use best efforts (provided that nothing herein shall
                  obligate HDI to institute litigation in connection therewith)
                  to provide assistance with respect to the conversion of the
                  Existing Portfolio, including the following:

                  1.    HDI will cause GECC to produce file layouts and sample
                        files of all conversion-related data within two weeks of
                        a signed contract.

                  2.    HDI will also provide both systems and operational
                        support capable of defining HDI and GECC business and
                        operational practices.

                  3.    HDI will provide support and assistance for data mapping
                        and will facilitate the conversion.

                  4.    HDI will support a full test conversion process one full
                        month prior to the conversion, and provide data and
                        resources to ensure successful conversion.


                                       21
<PAGE>   22

                  5.    HDI will provide all necessary files at time of
                        conversion to ensure successful conversion.

                  6.    HDI will provide operational resources to design
                        conversion process and timeline to ensure continuous
                        customer service.

                  7.    HDI will facilitate communication between COB and GECC.

      C.    TERMINATION

            1. Material Breach in Performance of Contractual Obligations. At any
            time after 3 months following the Purchase Date:

                  (a) if either party shall materially breach any term of this
                  Agreement, or fail, neglect or refuse to perform any of its
                  material obligations hereunder including, but not limited to,
                  its responsibility and that of its subcontractors to maintain
                  service levels satisfactory to the other party
                  ("Neglect/Failure Breach"), or

                  (b) if either party shall have committed any act or do
                  anything that will injure or is reasonably likely to injure
                  the success or prospects of the other party or its businesses
                  ("Possible Injury Breach").

                  Then at any time after a party learns of any such act or
                  omission by the other party, such party shall have the right,
                  at its sole option and subject to the next succeeding
                  sentence, to terminate this Agreement by giving written notice
                  containing a detailed description of the Neglect/Failure
                  Breach or Possible Injury Breach to the other party.

                  In the event that either party shall be accused of a
                  Neglect/Failure Breach or a Possible Injury Breach, then
                  within (10) days of receipt of notice, the defaulting party
                  shall submit a written plan to the non-defaulting party,
                  containing the detailed steps it plans to take to cure such
                  breach, in which case the non-defaulting party shall have five
                  (5) days to approve of such plan of cure. If disapproved, the
                  non-defaulting party shall have the option to terminate this
                  Agreement immediately, effective 90 days after receipt of such
                  notice by the other party. If approved, the defaulting party
                  shall take all steps described in the plan to cure such
                  breach.

            2.    Insolvency or Dissolution of Any Performing Party. If any of
                  the following occurs,

                  (a) the commencement of any voluntary bankruptcy, insolvency,
                  reorganization, readjustment of debt, dissolution, liquidation
                  of debt or other insolvency proceeding in which the other
                  party, is debtor; or

                  (b) the suspension or termination of the other party's
                  business or dissolution thereof or the appointment of a
                  receiver, trustee or similar officer to take charge of a
                  substantial part of such entity's assets;

                  either party may terminate this Agreement immediately upon
                  written notice to the other party.

                  (c) Force Majeure. This Agreement may be terminated by HDI on
                  the one hand, or COB and COSI on the other hand, on or after
                  the ninetieth (90th) day following the giving of notice to the
                  other party that such notice-giving party's 


                                       22
<PAGE>   23

                  performance is prevented or delayed by a force majeure event
                  listed in Section III.P herein, if the inability to perform
                  has not been cured at the end of such ninety (90) day period.

            3. Wind Down of Operations. At the date of expiration of this
            Agreement or earlier termination, as the case may be,

                  (a) Fulfillment Obligations. All fulfillment obligations of
                  HDI and Capital One with respect to credit card transactions
                  processed until the earlier to occur of the date of
                  termination or date of termination advertised to cardholders,
                  as mutually agreed-upon, shall continue with regard to orders
                  received prior to and through the close of business on the
                  termination date, including all items on backorder, in
                  compliance with the Mail and Telephone Merchandise Order Rule;

                  (b) Reporting Obligations. All reporting obligations and fee
                  payment of the parties required herein, shall continue until
                  there is nothing more contained in such reports, and nothing
                  more to be paid on account of orders taken up to and including
                  the termination date, including all orders for which credit
                  card billing has not yet been processed due to backorder
                  situations for which shipment is delayed;

                  (c) Profit Sharing Arrangements. Profit sharing arrangements
                  will continue in effect for existing customers until both
                  parties agree to an alternative profit sharing arrangement;

                  (d) Final Accounting and Reconciliation. Any final accounting
                  and reconciliation shall be done in accordance with the
                  requirements of this Agreement, including the verification and
                  audit of records; and

            4. Survival of Provisions. The provisions of this Section, Section
            II.F. (Usage Reports and User Data), Section II.D. (Trademark
            Ownership and License), Section IV.L. (Confidentiality), Section
            IV.I.4. (Warranty), Section IV.J. (Indemnity), Section IV.H.
            (Insurance), Section IV.K. (Limitation of Liability) and Section
            IV.F. (Dispute Resolution) will survive any termination or
            expiration of this Agreement.

      D.    EXCLUSIVITY

            1. Except as provided herein and other than existing ventures or
            business on the date hereof, during the term of this Agreement, both
            parties agree to engage in no new ventures or businesses with third
            parties in the Unbanked Market;

            2. The exclusivity agreement contained in Section IV.D.1. above
            shall remain in effect until the following event occurs:

                  (a) If Capital One should have an offer of an opportunity in
                  the Unbanked Market, it shall provide 90 days advance written
                  notice to HDI of the intended date of its binding agreement
                  (or similar) to pursue such opportunity, with such notice
                  containing sufficient detail to enable HDI to construe its
                  competitive effect upon HDI in its agreement with Capital One
                  to pursue the Unbanked Market hereunder; and

                  (b) HDI, in its sole discretion, shall have the right and
                  option to permit Capital One to proceed with such third party
                  opportunity upon


                                       23
<PAGE>   24

                  terms and conditions acceptable to HDI hereunder and this
                  Agreement will be amended to permit such activity upon
                  mutually agreeable terms; provided, however, if HDI chooses
                  not to permit such activity or amendment of this Agreement, it
                  shall declare such third party activity to be directly
                  competitive and the parties hereto shall declare a termination
                  of the exclusivity agreement between them, enabling each of
                  HDI and Capital One to pursue new ventures or businesses in
                  the Unbanked Market.

      E.    CUSTOMER DATA AND CAPITAL ONE MARKETING TO HDI CUSTOMERS

            1. Except as set forth in Section III.D.2 below with respect to
            Unbanked Consumers who become Program card members, all HDI Customer
            Data shall be deemed proprietary and confidential and subject to the
            confidentiality provisions of this Agreement set forth in Section
            IV.L. below and shall be and/or shall remain the property of HDI.
            However, Capital One may use the information for internal purposes
            to market financial services and other Capital One products using
            HDI Customer Data provided that such products and services do not
            directly compete with HDI products and services.

                  (a) "competitive products and services" shall be as defined on
                  Appendix 2 attached hereto and made a part hereof;

                  (b) All such HDI Customer Data shall not be disclosed by
                  Capital One on an individual customer level to any third party
                  for any purpose, by sale, rental, gift, or otherwise, without
                  HDI's prior written consent, nor used by Capital One itself
                  for any purpose other than for the purposes of carrying out
                  its obligations under this Agreement and except as provided
                  herein, except with respect to Capital One's standard industry
                  credit reporting practices which Capital One is required to
                  make in the ordinary course of its business. Any breach of the
                  terms of this section may cause irreparable harm to HDI and in
                  the event of any breach or threatened breach, HDI shall be
                  entitled to injunctive relief in addition to any other
                  available remedy.

            2. Unbanked Consumers. For Unbanked Consumers approved by Capital
            One for a Program credit card account, HDI and Capital One shall
            both have unencumbered rights to the customer and may use, sell,
            transfer, or exchange such customer names and data in the same
            manner as for its non-credit card program customers, including but
            not limited to its discount buying club members;

            3. Capital One understands that HDI makes a privacy pledge to its
            customers. Except with respect to Capital One's standard industry
            credit reporting practices which Capital One is required to make in
            the ordinary course of its business, Capital One shall not promote,
            sell, or transfer the HDI Customer Data if HDI informs Capital One
            that such customer has opted out of such promotion, sale, or
            transfer; and

            4. Capital One and HDI agree to be in full compliance with all such
            laws and regulations applicable to each of the parties respectively,
            which may be in effect from time to time.


                                       24
<PAGE>   25

            5. During the Term, Capital One and HDI agree to work together to
            ensure that customers do not from time to time receive competing
            offers for products or services at the same time.

      F.    DISPUTE RESOLUTION

            1. Disputes Regarding Intellectual Property and/or Confidentiality.
            The parties agree that any breach of either of the parties'
            obligations regarding the Marks and/or confidentiality would result
            in irreparable injury for which there is no adequate remedy at law.
            Therefore, in the event of any breach or threatened breach of a
            party's obligations regarding the Marks or confidentiality, the
            aggrieved party will be entitled to seek equitable relief in
            addition to its other available legal remedies in a court of
            competent jurisdiction.

            2. All Other Disputes. In the event of disputes between the parties
            arising from or concerning in any manner the subject matter of this
            Agreement, other than disputes arising from or concerning the Marks
            and/or confidentiality,

                  (a) the parties will first attempt to resolve the dispute(s)
                  through good faith negotiation. In the event that the
                  dispute(s) cannot be resolved through good faith negotiation,
                  the parties will refer the dispute(s) to a mutually acceptable
                  mediator for hearing in a mutually agreed-upon neutral county.

                  (b) in the event such disputes cannot be resolved through good
                  faith negotiation and mediation, the parties will refer the
                  dispute(s) to the American Arbitration Association for
                  resolution through binding arbitration by a single arbitrator
                  pursuant to the American Arbitration Association's rules
                  applicable to commercial disputes. The arbitration will be
                  held in a mutually agreed-upon neutral county.

            3. Customer Disputes. For customer disputes, HDI and Capital One
            agree to use the standard dispute resolution procedures as outlined
            in the Visa/MasterCard merchant agreements unless otherwise required
            by Applicable Law.

      G.    GENERAL MANAGEMENT

            1. Each of HDI and Capital One hereby agrees to appoint a general
            manager or liaison of its own (each, a "Liaison") for the purposes
            of managing, staffing, overseeing, and bearing responsibility for
            the business operations of the Program on a day-to-day basis. The
            Liaison shall be an employee of the respective party in the offices
            of such party. Each of the parties has appointed its Liaison prior
            to the execution of this Agreement. They are as follows:

            For HDI:

            Primary Liaison:    Richard Hoffmann, Chief Marketing Officer

            Alternate Liaison:  Peter Bather, Vice President Corporate Marketing

            For Capital One:

            Primary Liaison:    Scott Barton, Director, Partnership Finance


                                       25
<PAGE>   26

            Alternate Liaison:  Tony Santillo, Manager, Partnership Finance

            2. Each Liaison shall have the authority to make or convey decisions
            on behalf of the respective party and to be the liaison with the
            other party for all production and content matters.

            3. Each Liaison shall cause there to be kept complete and accurate
            books and records of all Program transactions of such party with
            respect to its activities.

            4. Each party shall have the right to examine or appoint an
            independent certified public accountant to examine and audit, at the
            expense of such party, not more than once a year, during normal
            business hours, all records and accounts as may contain information
            bearing upon the Program transactions maintained by the other party.
            If such audit uncovers a deficiency in accounting of greater than
            ten percent (10%), then the audited party shall immediately
            reimburse the auditing party for the costs of such audit, which it
            has reasonably verified.

      H.    INSURANCE

            1. Capital One. Capital One shall have and continue to keep in force
            for the Term of this Agreement, (i) full general liability insurance
            coverage with a broad form vendor endorsement, in amounts not less
            than $1 million per occurrence and $2 million in the aggregate and
            (ii) full advertising injury liability insurance coverage for errors
            and omissions relating to advertising claims for the Program credit
            cards with the same limits of coverage. This general liability and
            errors and omissions insurance coverage will list HDI as an
            additional named insured, and will provide that the coverage will
            not be modified or terminated without at least 30 days prior written
            notice to HDI. Within thirty (30) days of execution of this
            Agreement, Capital One shall provide HDI with a certificate
            evidencing such insurance coverage.

            2. HDI. HDI shall have and continue to keep in force for the life of
            this Agreement , (i) full product liability insurance coverage with
            a broad form vendor endorsement, in amounts not less than $1 million
            per occurrence and $2 million in the aggregate and (ii) full
            advertising injury liability insurance coverage for errors and
            omissions relating to advertising claims for the Program catalogs
            with the same limits of coverage. This product liability insurance
            coverage will list Capital One Services, Inc. ("COS") and Capital
            One Bank ("COB"), jointly and severally, as an additional named
            insured, and will provide that the coverage will not be modified or
            terminated without at least 30 days prior written notice to Capital
            One. Within thirty (30) days of execution of this Agreement, HDI
            shall provide to Capital One a certificate evidencing such insurance
            coverage.

      I.    REPRESENTATIONS AND WARRANTIES

            1.    By Capital One.

                  (a) COSI. COSI represents and warrants to HDI that: (i) it is
                  a corporation organized, validly existing and in good standing
                  under the laws of the State of Delaware; (ii) it has the full
                  right, power and authority to enter into, and to perform the
                  obligations contemplated in, this Agreement, and the person
                  signing on its behalf has the full right, power and authority
                  to enter into this Agreement on behalf of COSI; (iii) the
                  Agreement constitutes a legal, valid and binding obligation of
                  COSI, 


                                       26
<PAGE>   27

                  enforceable in accordance with its terms except as such
                  enforcement may be limited by bankruptcy, insolvency,
                  reorganization, moratorium and other laws relating to or
                  affecting creditors' rights generally and by general
                  principles of equity; and (iv) the execution of this Agreement
                  will not conflict in any way with any pre-existing agreements
                  of COSI with any other person or entity.

                  COSI represents and warrants further as follows:

                  (b) None of the execution and delivery of this Agreement, the
                  performance by COS of its obligations hereunder nor the
                  consummation of the transactions contemplated by this
                  Agreement will conflict with, or result in a breach of the
                  terms, conditions, or provisions of, or constitute a default
                  under, and no condition exists that with notice or the lapse
                  of time or both would constitute a violation or default under,
                  or result in the violation or acceleration of, COS's charter
                  or bylaws, or their equivalent, or any agreement, order,
                  award, judgment, decree, statute, law, rule, regulation or any
                  other instrument to which COS is a party or by which it or its
                  properties may be bound. COS is not subject to any agreement
                  with any regulatory authority which would prevent the
                  consummation by COS of the transactions contemplated by this
                  Agreement.

                  (c) Except for those consents, licenses, permits, approvals,
                  authorizations, notices, reports, registrations, filings or
                  declarations which have been obtained or made no consent of
                  any Person (including, without limitation, any stockholder or
                  creditor of COS) and no consent, license, permit or approval
                  or authorization or exemption by notice of or report to, or
                  registration, filing or declaration with, any Competent
                  Authority is required in connection with the execution or
                  delivery of this Agreement by COS, the validity of this
                  Agreement with respect to COS, the enforceability of this
                  Agreement against COS, consummation by COS of the transactions
                  contemplated hereby, or the performance by COS of its
                  obligations hereunder.

                  (d) There is no claim, action, suit, trial, demand,
                  arbitration, governmental investigation or other proceeding
                  (whether or not purportedly on behalf of COS or its
                  Affiliates) (an "Action") pending, threatened against or
                  involving COS or any of the Purchased Accounts, which: (i)
                  might adversely affect the Purchased Accounts or COS's ability
                  to consummate the transactions contemplated by this Agreement;
                  (ii) questions the validity of this Agreement or (iii) seeks
                  to prohibit, enjoin, recover damages or otherwise challenge
                  any of the transactions contemplated in this Agreement and, to
                  the best of COS's knowledge and information, no facts exist
                  which would provide a basis for an Action.

            (2) COB represents and warrants as follows:

                        (a) COB. COB represents and warrants to HDI that: (i) it
                  is a banking corporation organized, validly existing and in
                  good standing under the laws of the Commonwealth of Virginia;
                  (ii) it has the full right, power and authority to enter into,
                  and to perform the obligations contemplated in, this
                  Agreement, and the person signing on its behalf has the full
                  right, power and authority to enter into this Agreement on
                  behalf of 


                                       27
<PAGE>   28

                  COB; (iii) the Agreement constitutes a legal, valid and
                  binding obligation of COB, enforceable in accordance with its
                  terms except as such enforcement may be limited by bankruptcy,
                  insolvency, reorganization, moratorium and other laws relating
                  to or affecting creditors' rights generally and by general
                  principles of equity; and (iv) the execution of this Agreement
                  will not conflict in any way with any pre-existing agreements
                  of COB with any other person or entity.

                  (b) None of the execution and delivery of this Agreement, the
                  performance by COB of its obligations hereunder nor the
                  consummation of the transactions contemplated by this
                  Agreement will conflict with, or result in a breach of the
                  terms, conditions, or provisions of, or constitute a default
                  under, and no condition exists that with notice or the lapse
                  of time or both would constitute a violation or default under,
                  or result in the violation or acceleration of, COB's charter
                  or bylaws, or their equivalent, or any agreement, order,
                  award, judgment, decree, statute, law, rule, regulation or any
                  other instrument to which COB is a party or by which it or its
                  properties may be bound. COB is not subject to any agreement
                  with any regulatory authority which would prevent the
                  consummation by COB of the transactions contemplated by this
                  Agreement.

                  (c) Except for those consents, licenses, permits, approvals,
                  authorizations, notices, reports, registrations, filings or
                  declarations which have been obtained or made, no consent of
                  any Person (including, without limitation, any stockholder or
                  creditor of COB) and no consent, license, permit or approval
                  or authorization or exemption by notice of or report to, or
                  registration, filing or declaration with, any Competent
                  Authority is required in connection with the execution or
                  delivery of this Agreement by COB, the validity of this
                  Agreement with respect to COB, the enforceability of this
                  Agreement against COB, consummation by COB of the transactions
                  contemplated hereby, or the performance by COB of its
                  obligations hereunder.

                  (d) There is no Action pending, threatened against or
                  involving COB or any of the Purchased Accounts, which: (i)
                  might adversely affect the Purchased Accounts or COB's ability
                  to consummate the transactions contemplated by this Agreement;
                  (ii) questions the validity of this Agreement or (iii) seeks
                  to prohibit, enjoin, recover damages or otherwise challenge
                  any of the transactions contemplated in this Agreement and, to
                  the best of COB's knowledge and information, no facts exist
                  which would provide a basis for an Action.

            3. By HDI.

                  (a)   HDI represents and warrants to Capital One that: (i) it
                        is a corporation organized, validly existing and in good
                        standing under the laws of the State of Delaware; (ii)
                        it has the full right, power and authority to enter
                        into, and to perform the obligations contemplated in,
                        this Agreement, and the person signing on its behalf has
                        the full right, power and authority to enter into this
                        Agreement on behalf of HDI; (iii) the Agreement
                        constitutes a legal, valid and binding obligation of
                        HDI, enforceable in accordance with its terms except as
                        such enforcement may be limited by bankruptcy,
                        insolvency, reorganization, moratorium and other laws
                        relating to or affecting 


                                       28
<PAGE>   29

                        creditors' rights generally and by general principles of
                        equity; and (iv) the execution of this Agreement will
                        not conflict in any way with any pre-existing agreements
                        or understandings of HDI with any other person or
                        entity, including GECC.

                  (b)   It has received any consents, approvals or other
                        agreements of GECC necessary to perform the conversion
                        of the Existing Portfolio to Capital One.

                  (c)   None of the execution and delivery of this Agreement,
                        the performance by HDI of its obligations hereunder nor
                        the consummation of the transactions contemplated by
                        this Agreement will conflict with, or result in a breach
                        of the terms, conditions, or provisions of, or
                        constitute a default under, and no condition exists that
                        with notice or the lapse of time or both would
                        constitute a violation or default under, or result in
                        the violation or acceleration of, HDI's charter or
                        bylaws, or their equivalent, or any agreement, order,
                        award, judgment, decree, statute, law, rule, regulation
                        or any other instrument to which HDI is a party or by
                        which it or its properties may be bound. HDI is not
                        subject to any agreement with any regulatory authority
                        which would prevent the consummation by HDI of the
                        transactions contemplated by this Agreement.

                  (d)   Except for those consents, licenses, permits, approvals,
                        authorizations, notices, reports, registrations, filings
                        or declarations which have been obtained or made, no
                        consent of any Person (including, without limitation,
                        any stockholder or creditor of HDI) and no consent,
                        license, permit or approval or authorization or
                        exemption by notice of or report to, or registration,
                        filing or declaration with, any Competent Authority is
                        required in connection with the execution or delivery of
                        this Agreement by HDI, the validity of this Agreement
                        with respect to HDI, the enforceability of this
                        Agreement against HDI, consummation by HDI of the
                        transactions contemplated hereby, or the performance by
                        HDI of its obligations hereunder.

                  (e)   There is no Action pending, threatened against or
                        involving HDI or any of the Purchased Accounts, which:
                        (i) might adversely affect the Purchased Accounts or
                        HDI's ability to consummate the transactions
                        contemplated by this Agreement; (ii) questions the
                        validity of this Agreement or (iii) seeks to prohibit,
                        enjoin, recover damages or otherwise challenge any of
                        the transactions contemplated in this Agreement and, to
                        the best of HDI's knowledge and information, no facts
                        exist which would provide a basis for an Action.

                  (f)   Purchased Accounts

                        (i)   All of the Purchased Accounts were validly and
                              lawfully established, and remain currently open
                              and eligible for charging.

                        (ii)  Except as set forth on Schedule 3 hereto, neither
                              HDI nor any predecessor of HDI has charged off any
                              loan or portion thereof with respect to any
                              Purchased Account.


                                       29
<PAGE>   30

                        (iii) To the knowledge of HDI, none of the Purchased
                              Accounts: (1) has a non-U.S. address; (2) has a
                              returned mail (RM) status; (3) has a deceased
                              account holder status; (4) is a fraudulent
                              account, (5) is a re-aged or re-affirmed account;
                              (6) is a bankrupt account, (7) is securitized or
                              has otherwise been sold by HDI; (8) is a co-brand
                              or affinity account or contains any brand name
                              other than that of Seller; or (9) is currently the
                              subject of any litigation or other Action.

                  (g) Immediately prior to and at the Closing, HDI will hold
                  good and unencumbered title to, and will be the sole owner of,
                  the Purchased Accounts and at Closing shall transfer to
                  Capital One good and valid title to the Purchased Accounts
                  free and clear of all Encumbrances. Immediately prior to and
                  at the Closing, each Existing Portfolio Account Contract will
                  be freely assignable by HDI, and the assignment of such
                  Existing Portfolio Account Contract shall not require the
                  approval of the account holder or any other third party.

                  (h)   Validity of Accounts.

                        (i) HDI has no actual knowledge pursuant to information
                        provided by GECC, which would lead it to believe that
                        any Existing Portfolio Account Contract is not the
                        legal, valid and binding obligation of the account
                        holder enforceable against such account holder in
                        accordance with its terms under the applicable laws of
                        the state of Delaware (except as such enforcement may be
                        limited by bankruptcy, insolvency, reorganization,
                        moratorium and other laws relating to or affecting
                        creditors' rights generally and by general principles of
                        equity) and, upon consummation of the transactions
                        contemplated hereby, Capital One shall possess the
                        rights and obligations of lender to the Purchased
                        Accounts held by HDI immediately prior to Closing.

                        (ii) HDI has no actual knowledge pursuant to information
                        provided by GECC, which would lead it to believe that
                        either HDI or any account holder of a Purchased Account
                        has breached, closed, canceled or otherwise terminated
                        any Existing Portfolio Account Contract, and each
                        Existing Portfolio Account Contract has been and remains
                        in full force and effect. Except for the receipt by HDI
                        of a waiver delivered by GECC, HDI has not received
                        notice of any account holder's intention to cancel an
                        Existing Portfolio Account Contract.

                        (iii) HDI has no actual knowledge pursuant to
                        information provided by GECC, which would lead it to
                        believe that either HDI or any account holder is in
                        violation of, or in default under, and no condition
                        exists that with notice or lapse of time or both would
                        constitute a violation or default under, any Existing
                        Portfolio Account Contract.

                        (iv) HDI has no actual knowledge pursuant to information
                        provided by GECC, which would lead it to believe
                        otherwise than that (1) no proceeding has been
                        instituted by or against any account holder of a
                        Purchased Account seeking to adjudicate


                                       30
<PAGE>   31

                        such account holder a bankrupt or insolvent; (2) no
                        receiver or trustee has been appointed for an account
                        holder of a Purchased Account and (3) no account holder
                        of a Purchased Account has made an assignment for the
                        benefit of its creditors, or is generally unable to pay
                        its debts as they become due.

                  (i) The solicitation, origination and administration by HDI of
                  the Purchased Accounts has been in compliance with all
                  Applicable Laws.

                  (j) HDI has filed all Tax Returns required to be filed on or
                  before the date hereof, if any, with respect to the Purchased
                  Accounts within the time prescribed by law (including
                  extensions of time approved by the appropriate taxing
                  authority). The Tax Returns so filed are complete and accurate
                  representations of the Tax liabilities of HDI in all material
                  respects and such Tax Returns accurately set forth or will
                  accurately set forth in all material respects all items to the
                  extent required to be reflected or included in such Tax
                  Returns.

                  (k) The Existing Portfolio Account Information and all
                  information generated or provided by HDI to Capital One in
                  connection with Capital One's due diligence or otherwise is
                  now, and was at the time such information was provided, true,
                  complete and accurate in all material respects.

            4. DISCLAIMER OF WARRANTY EXCEPT AS SPECIFIED IN THIS AGREEMENT,
            NEITHER PARTY MAKES ANY WARRANTY IN CONNECTION WITH THE SUBJECT
            MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS ANY AND ALL IMPLIED
            AND EXPRESS WARRANTIES, INCLUDING ALL IMPLIED WARRANTIES OF
            MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ACCURACY, AND
            RELIABILITY REGARDING SUCH SUBJECT MATTER.

      J.    INDEMNIFICATION

            1. Indemnification by Capital One. Capital One shall defend,
            indemnify and hold harmless HDI, its subsidiaries and affiliated
            companies and their respective officers, directors, shareholders,
            partners, employees, licensees, agents, successors and assignees
            from and against any and all liabilities, losses and expenses
            whatsoever, including without limitation claims, damages, judgments,
            awards, settlements, investigations, costs and expenses (including
            without limitation reasonable attorneys fees and disbursements)
            ("Claims") which any of them may incur or become obligated to pay
            arising out of or resulting from: (i) advertising and promotion of
            the Capital One credit card, except to the extent that such
            advertising was expressly approved upon review by HDI or its legal
            counsel; (ii) Capital One services provided pursuant to this
            Agreement; (iii) any Claim that Capital One infringes or violates
            any third party's copyright, patent, trade secret, trademark, right
            of publicity or right of privacy or contains any defamatory content;
            (iv) any breach by Capital One of any of its representations,
            warranties, covenants or obligations under this Agreement; (v) the
            acts or omissions of its employees, subcontractors, and agents in
            the performance of their obligations in connection with this
            Agreement; or (vi) any errors caused by Capital One's transaction
            data systems, including but not limited to errors in the amounts of
            money to be collected for merchandise, insurance, or delivery
            charges, and 


                                       31
<PAGE>   32

            errors regarding the correct calculation, collection, and refund of
            payments by customers except to the extent caused by HDI negligence.

            2. Indemnification by HDI. HDI shall defend, indemnify and hold
            harmless Capital One, jointly and severally, its parent, subsidiary
            and affiliated companies and their respective officers, directors,
            shareholders, partners, employees, licensees, agents, successors and
            assignees from and against any and all Claims which any of them may
            incur or become obligated to pay arising out of or resulting from
            (i) advertising and promotion of the Program card, except to the
            extent that such advertising was expressly approved upon review by
            Capital One or its legal counsel; (ii) HDI services provided
            pursuant to this Agreement; (iii) any alleged defects in, or product
            liability Claims involving HDI merchandise; (iv) any Claim that HDI
            infringes or violates any third party's copyright, patent, trade
            secret, trademark, right of publicity or right of privacy or
            contains any defamatory content; (v) any breach by HDI of any of its
            representations, warranties, covenants or obligations under this
            Agreement; or (vi) the acts or omissions of its employees,
            subcontractors, and agents in the performance of their obligations
            in connection with this Agreement; or (vii) any errors caused by
            HDI's transaction data systems, including but not limited to errors
            in the amounts of money to be collected for merchandise, insurance,
            or delivery charges, and errors regarding the correct calculation,
            collection, and refund of payments by customers except to the extent
            caused by Capital One negligence.

            3. Indemnification Procedure. Either party seeking indemnification
            under subsection (a) or (b) immediately above (the "Indemnitee")
            shall give the party from which indemnification is sought (the
            "Indemnitor") prompt notice of any claim for which indemnification
            is sought. The Indemnitor shall have control over the defense and
            settlement of any such claims, except that the prior written consent
            of the Indemnitee (which shall not be unreasonably conditioned,
            delayed, or withheld) shall be required for any settlement that does
            not involve only the payment of cash. To the extent reasonably
            requested by the Indemnitor, the Indemnitee shall cooperate in such
            defense, at the Indemnitor's cost and expense. The Indemnitee shall
            have the right to participate in the defense of any such claim at
            its own expense.

      K. LIMITATION OF LIABILITY EXCEPT UNDER REPRESENTATIONS MADE BY EACH PARTY
      HEREUNDER IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER WITH
      RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT UNDER CONTRACT, TORT
      (INCLUDING NEGLIGENCE), STRICT LIABILITY OR ANY OTHER LEGAL OR EQUITABLE
      THEORY, WHETHER OR NOT THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
      SUCH DAMAGE (I) FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST
      PROFITS; OR (II) IN ANY CASE, FOR ANY AMOUNTS IN EXCESS OF THE FEES PAID
      TO EACH OF THE PARTIES HEREUNDER DURING THE TWELVE MONTH PERIOD PRIOR TO
      THE DATE THE CAUSE OF ACTION AROSE.

      L.    CONFIDENTIAL INFORMATION

            1. Each party agrees that all information conveyed by any party to
            the other party relating to the disclosing party's business, whether
            or not designated by the disclosing party as proprietary and
            confidential, including without limitation the terms of this
            Agreement, customer lists, merchandise, marketing techniques, sales
            information, credit information, all code, inventions, algorithms,
            know-how and ideas and all other business, technical and financial
            information, and 


                                       32
<PAGE>   33

            including all items defined as "Confidential Information" in the
            Confidentiality Agreement between the parties dated as of September
            15, 1998, attached hereto as Appendix 2, and made a part hereof,
            shall be subject to that certain Confidentiality Agreement as
            provided therein.

            2. Except as such terms and conditions were and are required to be
            submitted in whole or in extracted form to GECC, as agreed between
            the parties, for its consideration in connection with its right of
            first refusal contained in the agreement between HDI and GECC, the
            terms and conditions of this Agreement, the letter of intent between
            the parties dated as of December 23, 1998, and information contained
            in usage reports shall be deemed the Confidential Information of
            each party, subject to that Confidentiality Agreement dated as of
            September 15, 1998 between the parties, and shall not be disclosed
            without the written consent of the other party.

            3. Existence of this Agreement / Publicity. Notwithstanding any
            Section above, except as provided by law, neither party to this
            Agreement shall refer to the existence of this Agreement or its
            business relationship with the other party by virtue of this
            Agreement in any press release, advertising or materials distributed
            to prospective customers without the prior written consent of the
            other party.

      M. NOTICES Any notice under this Agreement shall be in writing and
      delivered by personal delivery, express courier, confirmed facsimile,
      confirmed email or certified or registered mail, return receipt requested,
      and will be deemed given upon personal delivery, one (1) day after deposit
      with express courier, upon confirmation of receipt of facsimile or email
      or five (5) days after deposit in the mail. Notices will be sent to a
      party at its address set forth below or such other address as that party
      may specify in writing pursuant to this Section.

            1. All notices to HDI shall have a copy delivered to its counsel at
            Brown Raysman Millstein Felder & Steiner, LLP, CityPlace I, 185
            Asylum Street, 37th Floor, Hartford, CT 06103, Attention: Monte E.
            Wetzler, Esq., Telecopier 860-275-6410.

            2. All notices to Capital One shall have a copy delivered to its
            counsel at Capital One Financial Corporation, 2980 Fairview Park
            Drive, Suite 1300, Falls Church, VA 22042, Attention: Frank R.
            Borchert, III, Telecopier 703-205-1094.

      N.    ASSIGNMENT

            1. Except as provided in subsection 2 below, no party may, without
            the other party's written consent (which consent shall not be
            unreasonably withheld), assign, sublicense, encumber, pledge or
            otherwise transfer its rights and obligations under this Agreement,
            in whole or in part, and especially in connection with a merger,
            reorganization or sale of all, or substantially all, of such party's
            assets;

                  (a)   this Agreement and the respective duties and
                        responsibilities of the parties hereunder may not be
                        assigned, in whole or in part, without the prior written
                        consent of the other parties except to a Related
                        Company. "Related Company" means (i) a company of which
                        more than 50% of the Voting Shares or Voting Interests
                        are owned by a party, (ii) a company that owns or
                        controls, directly or indirectly, more than 50% of the
                        Voting Shares or Voting Interests of a party, or (iii) a


                                       33
<PAGE>   34

                        company of which more than 50% of the Voting Shares or
                        Voting Interests are under common control or ownership,
                        directly or indirectly, with the Voting Shares or Voting
                        Interests of a party. "Voting Shares" or "Voting
                        Interests" (for non-corporate entities) means
                        outstanding shares, interests, or securities
                        representing the right to vote for the election of
                        directors or other managing authority.

            2. This Agreement may be assigned by either party, in whole or in
            part, as without the prior written consent of the other party, as
            long as

                  (a)   the assignee is not deemed a competitor with the other
                        party, at the sole discretion of such other party; and

                  (b)   the assignment shall not be deemed to be in conflict
                        with the provisions of any pre-existing agreement or any
                        agreement in a stage of active negotiation, at the sole
                        discretion of the other party; or

                  (c)   the assignment is to a wholly-owned subsidiary of such
                        party or affiliate of a party's controlling (100%)
                        owner.

            3. Any attempt to assign or transfer this Agreement other than as
            permitted above will be null and void. This Agreement is binding on
            the parties and their respective successors and permitted assigns.

      O.    GOVERNING LAW

            1. With regard to any disputes arising between the parties hereto,
            this Agreement shall be governed by and construed in accordance with
            the laws of the State of New York applicable to contracts made and
            to be performed within such state, notwithstanding the actual state
            or country of residence or incorporation of the parties which
            constitute Capital One, without regard to conflicts of laws
            principles. In any action to enforce rights under this Agreement,
            the prevailing party shall be entitled to recover costs and
            reasonable attorneys' fees.

            2. With regard to any disputes arising between the parties hereto
            and any consumer, such dispute shall be governed by and construed in
            accordance with the laws of the Commonwealth of Virginia applicable
            to contracts made and to be performed within such state.

      P.    INTEGRATION / COSTS / SEVERABILITY

            1. Entire Agreement. This Agreement is the complete and exclusive
            agreement between the parties with respect to the subject matter
            hereof, superseding any prior agreements and communications (both
            written and oral) regarding such subject matter. This Agreement may
            only be modified, or any rights under it waived, by a written
            document executed by both parties. The invalidity or
            unenforceability of any provision of this Agreement shall not affect
            the enforceability or validity of any other provision.

            2. Costs. Each party shall bear its own costs and expenses in
            connection with the transactions contemplated hereby.

            3. Severability. If any provision of this Agreement is declared
            invalid or otherwise determined to be unenforceable for any reason,
            such provision shall be 


                                       34
<PAGE>   35

            deemed to be severable from the remaining provisions of this
            Agreement, which shall otherwise remain in full force and effect.

            4. Relationship of the Parties. The parties agree that in performing
            their responsibilities pursuant to this Agreement they are in the
            position of independent contractors. This Agreement is not intended
            to create, nor does it create and shall not be construed to create,
            a relationship of partner or joint venturer or any association for
            profit between and among COB, COSI and HDI.

      Q. WAIVER OF BREACH. The failure of either party hereto at any time to
      enforce any of the provisions of this Agreement shall not be deemed or
      construed to be a waiver of any such provisions, or in any way to affect
      the right of any party hereto to thereafter enforce each and every
      provision of this Agreement. No waiver of any breach of any provisions of
      this Agreement shall be effective unless set forth in a written instrument
      executed by the party against which enforcement of such waiver is sought;
      and no waiver of any such breach shall be construed or deemed to be a
      waiver of any other or subsequent breach.

      R. FORCE MAJEURE. Any delay in or failure of performance by either party
      of its obligations under this Agreement will not be considered a breach of
      this Agreement and will be excused to the extent caused by any occurrence
      beyond the fault or reasonable control of such party including, but not
      limited to acts of "Force Majeure". "Force Majeure" shall mean any reason
      which is beyond any party's control, such as boycotts, war, acts of God,
      labor troubles, strikes, restraints of public authority, or any similar
      occurrence in which a party is prevented from having another party render
      its services hereunder or if a party is prevented from utilizing another
      party's transaction systems, processing systems, supply systems, reporting
      systems for a time.

      S. FURTHER ASSURANCES. The parties agree to execute and deliver, or to
      cause to be executed and delivered, such further instruments or documents,
      and to take such other action, as may be reasonably required to carry out
      the transactions contemplated by this Agreement, in each case provided the
      same do not impose any additional liabilities or material obligations upon
      the other party.

      T. NO EXCLUSIVE COMMITMENT. Capital One, on the one hand, and HDI, on the
      other hand, shall have no obligation to perform any services for or as
      agent of the other party other than as specifically provided for in this
      Agreement unless mutually agreed by the parties. Except as herein
      otherwise provided, each party and any Affiliate thereof may engage in any
      other business activities as it may in its sole discretion determine
      during the Term of this Agreement and any renewals thereof, including
      without limitation any solicitation, notwithstanding that such activities
      may be similar to and competitive with the activities of another party,
      provided that no such activity causes a breach of such party's obligations
      under this Agreement.

      U. PERFORMANCE BY SUBSIDIARY. HDI may cause any or all of its obligations
      or duties to be performed by, or grant any of its rights to, any majority
      owned subsidiary of HDI, which subsidiary, for the purpose of such
      obligation, duty or right, shall be considered to be "HDI" as set forth in
      this Agreement; provided that HDI shall continue to be responsible for and
      guarantee the performance of all obligations hereunder.

      V. COUNTERPARTS This letter may be executed by the parties hereto in
      separate counterparts, which, taken together, shall constitute one and the
      same agreement.


                                       35
<PAGE>   36

      IN WITNESS WHEREOF, the parties have caused this Account Purchase & Credit
Card Marketing & Services Agreement to be duly executed effective as of the date
first above written.

HANOVER DIRECT, INC.                           CAPITAL ONE SERVICES, INC.


By: /s/ Larry Svoboda                          By: /s/ Scott Barton
    -----------------                              ----------------
Larry Svoboda                                  Scott Barton
Chief Financial Officer                        Director, Partnerships
March 9, 1999                                  Date:  March 9, 1999

1500 Harbor Boulevard                          11013 West Broad Street
Weehawken, New Jersey 07087                    Glen Allen, Virginia 23060
201-272-3389 (voice)                           804-967-1605 (voice)
201-272-3270 (fax)                             804-967-8012 (fax)

                                               CAPITAL ONE BANK


                                               By: /s/ Scott Barton
                                                   ----------------
                                               Scott Barton
                                               Director, Partnerships
                                               Date:  March 9, 1999

                                               11013 West Broad Street
                                               Glen Allen, Virginia 23060
                                               804-967-1605 (voice)
                                               804-967-8012 (fax)

Attachments:

Appendix 1: Confidentiality Agreement dated as of September 15, 1998 
            [previously executed]
Appendix 2: Definition of "competitive products and services"
Exhibit A:  Data Mapping Information


                                       36
<PAGE>   37

                                   APPENDIX 1

            Confidentiality Agreement dated as of September 15, 1998

                       [To be added in conformed version]


                                       37
<PAGE>   38

                                   APPENDIX 2

"competitive products and services" shall be defined herein to include:

the following product categories:

Bedding
Bath
Furniture covers
Window treatments
Furniture
Furnishings (wall decor, rugs, accents, clocks etc.)
Lighting
Floor covering
Housewares
Table Linens
Tabletop  (dinnerware, flatware)
Food prep (cookware, bakeware, gadgets, small electric, etc.)
Christmas decorations
Apparel (mens, womens, kids, accessories) 
Books 
Storage 
Personal care 
Home office 
Cleaning supplies (other household chemicals) 
Appliances 
Pet products
Automotive products 
Cleaning equipment 
Tools 
Lawn and Garden 
Safety/security
Hardware 
Collectibles 
Jewelry 
Watches 
Sporting Goods 
Electronics

In addition, the following services:

Magazine offers
Buyer clubs


                                       38
<PAGE>   39

                                   APPENDIX 3

                         Charged-Off Purchased Accounts

                     [To be added by the Parties at closing]


                                       39
<PAGE>   40

                                    EXHIBIT A

                    [List of Accounts of Existing Portfolio]

                     [To be added by the Parties at closing]


                                       40
<PAGE>   41

                                    Exhibit B

                           [Data Mapping Information]

                     [To be added by the Parties at closing]


                                       41