EXHIBIT NO. 10.56

                               MERCHANT AGREEMENT
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<S>      <C>                                  <C>            <C>
BANK:    Household Bank (SB), N.A.            MERCHANTS:     Levitz Furniture Corporation
         1111 Town Center Drive                              Levitz Furniture Company of the
         Las Vegas, NV 89134                                 Midwest, Inc.
                                                             Levitz Furniture Company of
                                                               the Pacific, Inc.
                                                             Levitz Furniture Company of
                                                               Washington, Inc.
                                                             7887 North Federal Highway
                                                             Boca Raton, FL 33487-1613
                                                             Facsimile Nos. (561) 994-5623
                                                                            (561) 994-5615
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This Merchant Agreement ("AGREEMENT") is made and entered into as of the 4th day
of September, 1998, by and between Household Bank (SB), N.A. (herein
"HOUSEHOLD") and Levitz Furniture Corporation, a Florida corporation (herein
"PARENT"), its operating subsidiaries, Levitz Furniture Company of the Midwest,
Inc., a Colorado corporation, Levitz Furniture Company of the Pacific, Inc., a
California corporation, and Levitz Furniture Company of Washington, Inc., a
Washington corporation (collectively, the "OPERATING SUBSIDIARIES" and, together
with Parent, "MERCHANTS"), but shall be effective only as of the date (the
"Effective Date") on which the U.S. Bankruptcy Court for the District of
Delaware in the matter of IN RE: LEVITZ (Case Nos. 97-1842-97-1853) (the
"Chapter 11 Case") has entered an order, in substantially the form attached
hereto as Exhibit A (or otherwise acceptable to Household in its sole
discretion), approving and authorizing Merchants to enter into and perform this
Agreement (the "Approval Order") and, unless otherwise agreed by Household, such
Approval Order has become final and nonappealable. In consideration of the
mutual promises, covenants, and agreements set forth below and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Merchants, jointly and severally, and Household agree as follows:

SECTION 1. DEFINITIONS. In addition to the words and phrases defined above and
elsewhere in this Agreement, the following words and phrases shall have the
following meanings:

a.      "ACCOUNT" means an account resulting from the issuance of a Card. An
        Account may have more than one Card issued for it. Each Account shall be
        owned by, and deemed to be the property of, Household. In addition, for
        all periods after the closing of Household's purchase of the Existing
        Portfolio (as defined below), "Account" shall also include those
        accounts included in the Existing Portfolio, whether or not Household
        has issued a Card with respect to such accounts.

b.      "ACCOUNT BALANCES" means the amounts owed or shown as being outstanding
        receivables on each Account, including outstanding extensions of credit,
        accrued finance charges, whether billed or unbilled (including unbilled
        finance charges relating to Same-As-Cash promotions), and any other
        charges, fees and interest assessed on each Account reduced by the
        amount of credit balances, if any, on such Account.

c.      "AFFILIATE" means any entity that is owned by, owns or is under common
        control with Household or its ultimate parent.

d.      "APPLICABLE LAW" means collectively or individually any applicable law,
        rule, regulation or judicial, governmental or administrative order,
        decree, ruling, opinion or interpretation.

e.      "APPLICATION APPROVAL RATE" means, for any Month, the number of credit
        applications (excluding duplicate applications or applications that have

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        been previously submitted) submitted during such Month that are accepted
        by Household, divided by the total number of applications submitted
        during such Month (excluding duplicate applications or applications that
        have been previously submitted).

f.      "AUTHORIZATION" means permission from Household to make a Card Sale.

g.      "AUTHORIZATION CENTER" means the facility designated by HOUSEHOLD as the
        facility at which Card Sales are authorized.

h.      "AVERAGE ACCOUNT BALANCES" means, for any period, the sum of the daily
        Account Balances for such period divided by the number of days in such
        period.

i.      "BUSINESS DAY" means any day except Saturday or Sunday or a day on which
        banks are closed in the State of Nevada.

j.      "CARD" means the private label credit card bearing Merchants' Marks
        issued by Household for the Program.

k.      "CARDHOLDER" means (i) the person in whose name an Account is opened,
        and (ii) any other authorized users of the Account and Card.

l.      "CARDHOLDER LIST" means the compilation of the names, addresses, and
        telephone numbers consisting exclusively of Cardholders of and
        applicants for Cards to Merchants, regardless of whether such applicants
        were ultimately granted or denied credit.

m.      "CARD SALE" means any sale of Goods that Merchants make to a Cardholder
        pursuant to this Agreement that is charged to an Account.

n.      "CHARGEBACK" means the return to Merchants and reimbursement to
        Household of a Sales Slip for which Merchants were previously paid
        pursuant to SECTION 6 herein.

o.      "CREDIT LOSSES" means, for any Month, the aggregate amounts charged off
        during such Month (net of aggregate recoveries during such Month) in
        accordance with Household's ten-month contractual charge-off policies,
        or such other policies agreed upon by Merchants and Household or
        required by Applicable Law.

p.      "CREDIT SLIP" means evidence of credit in electronic or paper form for
        Goods purchased from Merchants.

q.      "EXERCISE RATE" means expressed as a percentage, the amount of Account
        Balances generated pursuant to a SAC Promotion which is paid off by
        Cardholders prior to the expiration of the promotional period divided by
        the total volume of Card Sales generated pursuant to the SAC Promotion.

r.      "EXISTING PORTFOLIO" means the existing portfolio of credit card
        accounts arising from the private label account purchase program
        established and maintained by General Electric Capital Corporation
        ("GE") for Merchants, which existing portfolio of credit card accounts
        Household has agreed to purchase pursuant to a Portfolio Purchase and
        Sale Agreement dated September 4, 1998 by and between Household and GE.

s.      "GOODS" means the products described in SECTION 2 below, certain
        warranties expressly authorized by Household (which authorization shall
        not be unreasonably withheld), and related services sold by Merchants in
        the ordinary course of Merchants' business to consumers for individual,
        family, personal or household use.

t.      "INTEREST COVERAGE RATIO" means the result of dividing (i) net income
        before income taxes, depreciation, amortization and interest expense by


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        (ii) interest expense, calculated at the end of each of Merchants'
        fiscal quarters using the previous twelve months' data from Merchants'
        financial statements prepared in accordance with generally accepted
        accounting principles.

u.      "LIBOR" means, for each Month under this Agreement, the daily average of
        the end-of-business-day quotations of the one-month London Interbank
        Offered Rate as published by Bloomberg Financial Markets.

v.      "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
        business, assets, operations, prospects, or financial condition of
        Parent and the Operating Subsidiaries taken as a whole or (b) the
        ability of Parent and the Operating Subsidiaries taken as a whole to pay
        the obligations under the terms hereof.

w.      "MERCHANTS MARKS" means Merchants' names, logos, registered trademarks
        and service marks, if any, and other proprietary designations.

x.      "MONTH" means a calendar month.

y.      "OPERATING INSTRUCTIONS" means (i) the operating instructions and/or
        procedures agreed to by the parties from time to time concerning the
        Program and (ii) the Regulatory Guidelines provided by Household from
        time to time.

z.      "PRIME RATE" means the rate of interest per annum appearing in the Wall
        Street Journal as the prime rate.

aa.     "PROGRAM" means the private label revolving credit card program
        associated with Merchants whereby Accounts will be established and
        maintained by Household, Cards issued by Household to qualified
        consumers purchasing Merchants' Goods, and Card Sales funded all
        pursuant to the terms of this Agreement. Program shall also include
        Household's administration of the Existing Portfolio following its
        purchase by Household.

bb.     "PROGRAM YEAR" means any consecutive twelve-month period beginning with
        the Effective Date or an anniversary thereof.

cc.     "SAME AS CASH OR SAC CARD SALE" means any Card Sale or Sales Slip which
        is subject to a SAC Promotion.

dd.     "SAC PROMOTION" means any credit promotion program with or without
        monthly payments whereby interest accrues but is not assessed if the
        Account Balance is paid off prior to the expiration of the promotional
        period.

ee.     "SALES SLIP" means evidence of a Card Sale in electronic or paper form
        for Goods purchased from Merchants.

ff.     "STIPULATED JUDGMENT" means that certain Stipulated Final Judgment
        ordered and filed on August 18, 1997 in THE PEOPLE OF THE SATE OF
        CALIFORNIA V. LEVITZ, ET AL., Alameda Superior Court Case No. 787452-5.

gg.     "TERM" means the time period set forth in Section 16.

hh.     "TERMINAL" means an electronic terminal or computer capable of
        communicating by means of an on-line or dial-up electronic link with an
        Authorization Center.

SECTION 2. SCOPE AND PURPOSE. Merchants engage in the sale of home furnishings
and other related products and related services ("Goods"), and Merchants desire
to make financing available to consumers purchasing Goods from Merchants.
Household, a credit card bank in the business of providing 


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revolving credit financing pursuant to a credit card, has agreed to provide such
financing under the program to individual qualified consumers purchasing
Merchants' Goods pursuant to the terms and conditions set forth in this
Agreement.

a.      FORMS AND CARDS. Household will at its expense provide to Merchants
        standard Sales Slips, Credit Slips and other forms from time to time for
        use by Merchants in the Program, which documents may be changed from
        time to time by Household, provided that Merchants may use their
        standard forms of Sales Slips and Credit Slips subject to the review and
        approval of such forms by Household. Merchants agree to pay for Card
        application/agreements. The design of Cards shall be agreed upon by
        Household and Merchants, and Cards shall be produced at Household's
        expense. The design and content of billing statements and the terms and
        conditions of Accounts and Card application/agreements shall be
        determined by Household and are subject to change by Household from time
        to time. The expense of changes to Card application/agreements shall be
        borne by the party for whose benefit the change is made, with the
        parties dividing evenly the expense of changes that benefit both
        Household and Merchants except that Merchants shall bear the expense of
        any changes to Card application/agreements required by any change in
        Applicable Law.

b.      CREDIT REVIEW, OWNERSHIP OF ACCOUNTS. All completed applications for
        Accounts submitted by Merchants to Household, whether mailed, telephoned
        or otherwise electronically transmitted, will be processed and approved
        or declined in accordance with Household's credit and other evaluation
        criteria and procedures from time to time established by Household after
        consultation with Parent, with Household having and retaining all rights
        to reject or accept such Card applications in accordance with such
        criteria and procedures. Household shall not materially change its
        credit criteria except in response to changes in economic conditions or
        credit loss experience. Household will only accept Card applications for
        revolving credit pursuant to the credit card it issues for individual,
        personal, family or household use. Household shall not be obligated to
        accept applications for a Card or to approve any Card Sale for consumers
        that do not have their principal residence and billing address in the
        Continental United Sates. Subject to the provisions of SECTION 4AI
        herein, Merchants may present any application declined by Household to
        any third party for financing. Household shall not be obligated to take
        any action under an Account, including making future advances or credit
        available to Cardholders who fail to meet, after the issuance of a Card
        to such Cardholder, Household's credit and other evaluation criteria.
        Household or its Affiliates shall own the Accounts and bear the credit
        risk for such Accounts except as otherwise provided in this Agreement.
        Merchants acknowledge and agree that they shall have no interest
        whatsoever in the Accounts; provided, however, that Merchants shall have
        the right to use the Cardholder List and Merchants' general customer
        information pursuant to SECTIONS 12 AND 21 hereof. ------------------

c.      APPROVAL RATES. If the Application Approval Rate remains below 50%
        during any three or more consecutive Months, then at either Household's
        or Parent's request made in writing within the thirty days following the
        expiration of the third such Month (an "Approval Rate Notice"),
        Household and Parent will promptly meet and confer about the causes of
        such rate. The parties will thereafter work in good faith to achieve a
        higher Application Approval Rate. If the average Application Approval
        Rate does not exceed 50% during the ninety-day period following the date
        of the Approval Rate Notice ("Approval Rate Cure Period"), Merchants
        shall have the right, for ninety days following the expiration of the
        Approval Rate Cure Period, to notify Household of their intention to
        terminate this Agreement pursuant to Section 16.b.(iv)(b).



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d.      CARD PROMOTIONS, SERVICES AND ENHANCEMENTS. As part of the Program,
        Household shall provide certain marketing services to Merchants. These
        services shall include, but not be limited to, performing an initial
        marketing audit related to the Program, assisting Merchants in creating
        a credit marketing plan and with creative design and development of
        point of sale materials and other services as such become available or
        as Household offers to other customers. In addition, Household and
        Parent will confer quarterly, or on such other periodic basis as they
        may agree, at which time they may mutually agree to offer for the
        upcoming period to existing or potential Cardholders special credit
        promotions, including, but not limited to, one to twelve month SAC
        Promotions, and other additional services and/or enhancements. The terms
        of such promotions, services and enhancements shall be mutually agreed
        upon by Household and Parent.

e.      CREDIT INSURANCE PROVIDER. Merchants may select a credit insurance
        provider for the Program, subject to Household's approval, which
        approval shall not be unreasonably withheld and subject to the credit
        insurance provider's providing to Household such representations,
        warranties, covenants, certifications and indemnifications as Household
        may reasonably request as to the credit insurance provider's compliance
        with Applicable Laws, including without limitation the Stipulated
        Judgment. Household may in its reasonable sole discretion terminate any
        such credit insurance provider for any material breach of such
        representations, warranties, covenants, certifications and
        indemnifications or as otherwise provided in the agreement between
        Household and the credit insurance provider. Household shall provide
        Merchants with sixty (60) days prior written notice of its termination
        of any such credit insurance provider.

SECTION 3.  FEES, DISCOUNTS, CHARGES, RATES AND FUNDING.

a.      CONSUMER RATE. The consumer rate to be charged on purchases with the
        Card for consumers whose accounts are in good standing initially shall
        be equal to the Prime Rate plus 14.4 percentage points (14.4%), except
        that, at Household's discretion, the consumer rate to be charged on
        purchases with the Card by Cardholders who are residents of the State of
        New York may be a fixed rate of 24%. The consumer rate shall be subject
        to change from time to time by Household with notice to Merchants and,
        except with respect to changes in the Prime Rate, after consultation
        with Parent to review any proposed change in the consumer rate.

b.      ORIGINATION FEE. During the term of this Agreement and for ninety (90)
        days after the effective date of termination of the Agreement or up to
        the date of purchase of the Accounts pursuant to SECTION 16D. herein,
        whichever is earlier, Household shall pay Merchants a monthly fee
        ("Origination Fee") equal to 100% of the accrued finance charges, and
        accrued late fees, over-limit fees, and returned check charges, and in
        each case net of reversals, (each of such fees to be set initially at
        $25.00) with respect to all Accounts for such Month, less the following:

        (i)    an amount equal to the product of:

               (A)    the result of LIBOR divided by twelve, times
               (B)    the Average Account Balances for such Month, minus the
                      balance in the SAC Reserve at the end of the previous
                      Month;

        provided, however, that in the event that a plan of reorganization for
        Merchants under the United States Bankruptcy Code (11 U.S.C. Sections
        101 et seq.) is confirmed by the Bankruptcy Court and becomes effective,
        the amount under this subsection (i) for each Month in which the cash
        balance of the Portfolio Reserve is no less than the greater of the
        Fully Funded Amount (as that term is used in Section 7.a(ii)) or eight
        percent (8%) of the Account Balances at the end of such Month, shall be:

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               (A)    for each Month where the Interest Coverage Ratio at the
                      end of the previous fiscal quarter was less than 1.5, the
                      product of:

                      (1)    the result of LIBOR divided by twelve, times
                      (2)    the Average Account Balances for such Month, minus
                             the balance in the SAC Reserve at the end of the
                             previous Month; and

               (B)    for each Month where the Interest Coverage Ratio at the
                      end of the previous fiscal quarter was equal to or greater
                      than 1.5, the product of:

                      (1)    the result of LIBOR divided by twelve, times
                      (2)    the Average Account Balances for such Month, minus
                             the balance in the SAC Reserve at the end of the
                             previous Month, minus twenty-five percent (25%) of
                             the average balance in the Portfolio Reserve for
                             such Month; and

        (ii)   Subject to the limitations in Section 3b. (ii)(C) and (D) below,
               an amount equal to the Average Account Balance during such Month
               multiplied by the Origination Factor. As used herein,
               "Origination Factor" means a percentage determined as follows:

               (A)    For each of the first twelve (12) Months during the Term,
                      the Origination Factor shall be the percentage that is
                      equal to 88 basis points (.88%). Thereafter, the
                      Origination Factor shall be adjusted upward or downward as
                      of each anniversary of the Effective Date based on a
                      review by Household of historical and projected Credit
                      Losses.

               (B)    During any Month after the first twelve Months of the
                      Term, if aggregate Credit Losses since the Effective Date
                      have differed from aggregate amounts deducted by Household
                      under this Section 3b. (ii) by more than one million
                      ($1,000,000) dollars ("Credit Losses Difference"), the
                      Origination Factor shall be immediately adjusted upward or
                      downward, as the case may be, to the extent necessary to
                      compensate Household or Merchant, as the case may be, for
                      the amount by which aggregate Credit Losses since the
                      Effective Date have differed from aggregate amounts
                      deducted by Household under this Section 3b. (ii) and to
                      reflect projected Credit Losses during the next twelve
                      (12) months.

               (C)    In no event shall the amount deducted in any Program Year
                      under this Section 3b. (ii) exceed the sum of (x) the
                      product of the Average Account Balances for the Program
                      Year multiplied by fifteen percent (15%) (the "Cap
                      Amount"), plus (y) fifty percent (50%) of the amount by
                      which the Credit Losses for the Program Year exceed the
                      Cap Amount provided, however, any Credit Losses Difference
                      at the beginning of the Program Year shall not be included
                      in determining the amounts which may be payable pursuant
                      to this provision (C).

               (D)    In no event shall the amount deducted in any Program Year
                      under this Section 3b. (ii) be less than the result of the
                      following calculation: (x) the product of the Average
                      Account Balances for the Program Year multiplied by eight
                      percent (8%) (the "Floor Amount"), minus (y) fifty percent
                      (50%) of the amount by which the Floor Amount exceeds the
                      Credit Losses for the Program Year provided, however, any
                      Credit Losses Difference at the beginning of the Program


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                      Year shall not be included in determining the amounts
                      which may be payable pursuant to this provision (D).

        (iii)  An amount equal to the following: For each Month beginning during
               the first year of the Term, an amount equal to $3.55 multiplied
               by the number of Accounts with debit or credit balances ("Active
               Accounts") for which Household processes statements during such
               Month. For each Month beginning during the second year of the
               Term, an amount equal to $3.42 multiplied by the number of Active
               Accounts for which Household processes statements during such
               Month. For each Month beginning during the third, fourth and
               fifth year of the Term, an amount equal to $3.31 multiplied by
               the number of Active Accounts for which Household processes
               statements during such Month. For each Renewal Term, this amount
               will increase above the amount in effect at the end of the
               expiring term by fifty percent (50%) of the cumulative increase
               in the Consumer Price Index for the previous calendar year.
               During each Month in which Household Life Insurance Company is
               Merchants' credit insurance provider, the fee specified in this
               Section 3b. (iii) will be reduced by $0.04 per Account.

        (iv)   Household's good faith estimate of the amount of finance charges
               accrued during the Month for SAC Card Sales that will be credited
               back to the Cardholder's Account as a result of the Cardholder
               paying off all or any portion of the Account Balance prior to the
               expiration of the promotional period (the "SAC Reversal
               Estimate"); provided, however, that Household shall satisfy this
               deduction first from the SAC Reserve to the extent it contains
               funds and shall deduct only the deficiency, if any, from the
               Origination Fee. Initially, Household shall use fifty-two percent
               (52%) as the SAC Reversal Estimate, and quarterly, the parties
               shall review actual experiences of finance charges reversed due
               to SAC Promotions and compare them to withdrawals from the SAC
               Reserve and deductions from the Origination Fee under this
               Section 3b. (iv), and (A) shall make such payments or issue such
               credits as are necessary to eliminate any discrepancy, and (B)
               adjust the SAC Reversal Estimate for the following quarter based
               on such comparison and Exercise Rates for the quarter and the
               relative ratios expressed as percentages of SAC Promotions of a
               given duration then in effect, divided by the total SAC Card
               Sales for the quarter. Exhibit C illustrates Household's good
               faith estimate of the initial SAC Reversal Estimate and the
               methodology for determining the SAC Reversal Estimate as provided
               above.

        (v)    An amount equal to the product of (A) the Average Account
               Balances for the Month minus the amount in the SAC Reserve at the
               end of the previous Month, multiplied by either (B) 0.205% for
               each Month in which the balance of the Portfolio Reserve is less
               than the Fully Funded Amount (as that term is used in Section 7a.
               (ii)), or (C) 0.1867% for each Month in which the balance of the
               Portfolio Reserve is equal to or greater than, the Fully Funded
               Amount (as that term is used in Section 7a. (ii)) or Merchant's
               Interest Rate Coverage Ratio meets the requirements of Section 7a
               (iv) (A) or (C) hereof.

        In any Month in which the deductions specified in this Section 3(b)
        (excluding any deduction from the SAC Reserve) exceed 100% of the
        accrued finance charges and accrued late fees, over limit fees and
        returned check fees, in each case net of reversals, with respect to all
        Accounts for such Month, Merchants shall pay the difference
        ("Origination Fee Shortfall") to Household in accordance with Section
        3c.

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c.      ACCEPTANCE & OFFSET. Subject to the terms, conditions, warranties and
        representations in this Agreement, including Household's rights to
        offset and to establish reserves, during the Term of this Agreement,
        Household agrees to pay to Merchants (i) in accordance with Section 3d,
        and provided that Merchants have satisfied all of the conditions set
        forth in this Agreement with respect to a given Sales Slip, including,
        without limitation, SECTIONS 4A, 5A, AND 8, the amount of such Sales
        Slip presented to Household during the Term of this Agreement, less all
        amounts due for Sales Slips subject to Chargeback under Section 6
        hereof, reimbursements, refunds or customer credits and (ii) within
        fifteen days after the end of each Month (unless otherwise provided
        herein) and provided that Merchants have satisfied in all material
        respects all of the conditions set forth in this Agreement, including,
        without limitation, SECTIONS 4A, 5A, AND 8, the amount of the
        Origination Fee (if any), less any amounts deducted by Household under
        Section 3b of this Agreement. In the event that, for any Month, the
        amounts deductible by Household under this Section 3c exceed the
        Origination Fee payable for the Month, Household shall bill Merchants
        for the difference and for the Origination Fee Shortfall, if any, within
        fifteen days after the end of such Month and Merchants shall pay
        Household within fifteen (15) days after the date of such invoice. In
        the event that such amounts are not paid by Merchants within 30 days
        after the date due, Household may offset and/or recoup said amounts from
        payments to Merchants for valid and authorized Sales Slips or from other
        amounts owed to Merchants under this Agreement, and, in the event such
        offset is insufficient. Household may deduct such amounts from the
        Portfolio Reserve (as defined in Section 7(a)(i)). Any payment made by
        Household to Merchants in connection with any Sales Slip shall be
        subject to subsequent review and verification by Household within 90
        days after the date of such payment. Household's liability to Merchants
        with respect to the funding or processing of any Card Sale, Sales Slip
        or Credit Slip shall not exceed the amount on the Card Sale, Sales Slip
        or Credit Slip in connection with such transaction. In no event shall
        Household or Merchants be liable for any incidental or consequential
        damages.

d.      PAYMENTS. Subject to Section 3c, payments for Card Sales and Sales Slips
        and other amounts payable by Household to Merchants shall be made by
        deposit by wire transfer to Parent's account for itself and the
        Operating Subsidiaries.

        Household will use its best efforts to make payments for Sales Slips on
        the Business Day of receipt, verification and processing by Household of
        the transmission of the transaction data, if such transmission is
        received by 7:30 a.m. Central Standard time; if received later than 7:30
        a.m. Central Standard time, then on the first Business Day after said
        transmission, but in no event shall such payments be made later than the
        second Business Day after receipt of said transmission by Household.

SECTION 4A. MERCHANTS RESPONSIBILITIES CONCERNING CONSUMER TRANSACTIONS.
Merchants covenant and agree that Merchants shall:

a.      Honor all valid Cards without discrimination, when properly presented by
        Cardholders for payment of Goods.

b.      Not require, through an increase in price or otherwise, any Cardholder
        to pay any surcharge at the time of sale or pay any part of any charge
        imposed by Household on Merchants.

c.      Prominently display at each of its locations, advertising and
        promotional materials relating to the Card, including without limitation
        applications for the Card and use or display such materials in
        accordance with any reasonable specifications provided by Household.
        Such materials shall be used only for the purpose of soliciting Accounts


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        for the Program. Any solicitation, written material, advertising or the
        like relating to the Program or the products offered by Household
        pursuant to the Program shall be prepared or furnished by Household or
        shall receive Household's prior written approval. Merchants agree to pay
        for mutually agreed upon promotional materials; provided, however, that
        Merchants shall retain the right to use third-party vendors to produce
        the materials. Any such materials shall not be used by Merchants
        following termination of this Agreement.

d.      Use only the form of, or modes of transmission for, Card applications,
        Sales Slips and Credit Slips as are provided by Household, and not use
        any Card application/agreements, Sales Slips, and Credit Slips provided
        by Household other than in connection with a Card transaction.

e.      With respect to applications for a Card:

        (i)    Make sure all information requested on the Card application is
               complete and legible;

        (ii)   obtain the signature on the Card application of all persons whose
               name(s) will appear on the Account or will be responsible for the
               Account;

        (iii)  give the applicant the initial disclosures at the time of signing
               the Card application/agreement prior to the first transaction
               under the Account;

        (iv)   verify the identification of the individual(s) applying for the
               Account, which verification may include obtaining driver's
               license and social security numbers;

        (v)    provide all information reasonably required by Household from
               time to time for approval of Card applications by telephone or
               other electronic transmission and legibly insert the Account
               number and Approval number on the Card application in the
               designated area; and

        (vi)   send the actual original approved signed Card application to
               Household at Household's address on PAGE ONE above or such other
               address designated by Household in writing within five (5)
               Business Days of approval of the Card application by Household.

f.      With respect to Sales Slips:

        (i)    Enter legibly on a single Sales Slip prior to obtaining the
               Cardholder's signature (1) a description of all Goods purchased
               in the same transaction in detail sufficient to identify the
               transaction; (2) the date of the transaction; (3) the
               Authorization number; and (4) the entire amount due for the
               transaction (including any applicable taxes);

        (ii)   REQUEST AUTHORIZATION FROM HOUSEHOLD'S AUTHORIZATION CENTER UNDER
               ALL CIRCUMSTANCES. Household may refuse to accept or fund any
               Sales Slip that is presented to Household for payment more than
               one hundred eighty (180) days after the date of Authorization of
               the Card Sale. Merchants agree not to divide a single item
               between a Household Sales Slip and a sales slip for another
               credit provider. If Authorization is granted, Merchants will
               legibly enter the Authorization number in the designated area on
               the Sales Slip. If Authorization is denied, or if Merchants have
               reasonable grounds to believe that the Card is counterfeit,
               fraudulent, or stolen, Merchants will not complete the
               transaction and will follow any instructions from the
               Authorization Center;

                                       9
<PAGE>

        (iii)  if the transaction is to be completed electronically or otherwise
               without a Card imprint, then enter on the Sales Slip sufficient
               information to identify the Cardholder and Merchants, including
               at least Merchants' name and the Cardholder's name and Account
               number;

        (iv)   obtain the signature of the Cardholder on the Sales Slip, and
               compare the signature on the Sales Slip with the signature panel
               of the Card and if identification is uncertain or if Merchants
               otherwise question the validity of the Card, contact Household's
               Authorization Center for instructions. For telephone orders (TO)
               or mail orders (MO) only, the Sales Slip may be completed without
               the Cardholder's signature and a Card imprint, but Merchants
               shall, in addition to all other requirements under this SECTION
               4A, enter legibly on the signature line of the Sales Slip the
               letters "TO" or "MO", as appropriate, and not deliver Goods or
               perform services after being advised that the "TO" or "MO" has
               been canceled or that the Card is not to be honored;

        (v)    IDENTIFICATION OF THE CARDHOLDER IS THE RESPONSIBILITY OF
               MERCHANTS;

        (vi)   not present the Sales Slip to Household for funding until all
               Goods are delivered and all the services are performed to the
               Cardholder's satisfaction. If the Card Sale is canceled or the
               Goods or services canceled or returned the Sales Slip is subject
               to Chargeback;

        (vii)  enter the Card Sale into the Terminal; and

        (viii) deliver a true and completed copy of the Sales Slip to the
               Cardholder at the time of purchase or delivery of the Goods.

g.      CREDIT SLIPS. If Goods are returned, any Card Sale or services are
        terminated or canceled, or Merchants allow any price adjustment, then
        Merchants shall not make any cash refund, but shall complete and deliver
        promptly to Household a Credit Slip evidencing the refund or adjustment
        and deliver to the Cardholder a true and complete copy of the Credit
        Slip at the time the refund or adjustment is made. Merchants shall sign
        and date each Credit Slip and include thereon a brief description of the
        Goods returned, services terminated or canceled, refund or adjustment
        made, the date of the original Card Sale, Authorization number,
        Cardholder's name, address and Account number, and the date and amount
        of the credit, all in sufficient detail to identify the transaction.
        Merchants shall legibly reproduce on each Credit Slip the embossed
        legends from the Card. The amount of the Credit Slip cannot exceed the
        amount of the original transaction as reflected on the Sales Slip.
        Merchants shall issue Credit Slips only in connection with previous bona
        fide Card Sales and only as permitted hereunder.

h.      CARDHOLDER COMPLAINTS. Merchants shall within three (3) Business Days of
        receipt provide Household with a copy of any written complaint from any
        Cardholder concerning his/her Account.

i.      RIGHT OF FIRST REFUSAL; DISPLAY OF THIRD-PARTY MATERIALS. Merchants
        shall actively promote the Program. Merchants agree to give Household
        right of first refusal in presenting consumer credit applications and/or
        Sales Slips. During the term of this Agreement, Merchants shall not
        issue, arrange to issue, or accept any private label credit card or
        account other than the Card, under any of Merchants' Marks, except with
        respect to consumer credit applications declined by Household. To the
        extent Merchants display other third party credit or charge card
        materials, they shall display the advertising and promotional materials


                                       10
<PAGE>

        relating to the Card in a manner and with a frequency equal to or
        greater than that accorded any other third party credit or charge card.

j.      Satisfy all other requirements designated in any Operating Instructions
        or as may be reasonably required from time to time by Household. In the
        event there is any inconsistency between any Operating Instructions and
        this Agreement, this Agreement shall govern unless otherwise expressly
        indicated by Household in any Operating Instructions.

k.      Present each Sales Slip and Credit Slip to Household or such other
        person designated by Household in writing, for funding within five (5)
        Business Days after the date of the respective sale or credit
        transaction.

SECTION 4B. HOUSEHOLD'S SERVICE STANDARDS AND RESPONSIBILITIES CONCERNING
CONSUMER TRANSACTIONS. During the term of this Agreement, Household covenants
and agrees to provide the services and maintain the standards ("Service
Standards") set forth below:

a.      For debit balance Accounts serviced by Household, Household will
        maintain a customer service representative to statemented Account ratio
        of 1 to 14,500. To the extent that Household can maintain the standards
        set forth in PARAGRAPH B. below, then this PARAGRAPH A. will not apply.

b.      The Service Standard for customer service calls to Household from
        Cardholders shall be either an average abandonment rate of 5.0% or an
        average speed of answer ("ASA") of thirty (30) seconds, whichever is
        better.

c.      The average systems "up time" for any Month will not be less than 98.5%.

d.      The average speed of automated credit decisions for any Month will not
        exceed 30 seconds from the receipt of transmission by Household from
        Merchants to the transmission to Merchants by Household.

e.      For Accounts collected by Household, and not referred to a collection
        agency, Household will maintain an overall collector to delinquent
        Account ratio of 1 to 1600 delinquent Accounts. With respect to Accounts
        which are 4 or more payments past due Household will maintain a
        collector to delinquent Account ratio of 1 to 525 delinquent accounts.
        To the extent that Household can increase the number of delinquent
        accounts handled by a collector and remain in compliance with PARAGRAPH
        F. below, then this PARAGRAPH E. will not apply.

f.      For Accounts collected by Household, and not referred to a collection
        agency, the average number of payment promises obtained as a percent of
        contacts made will be 43% and the average number promises kept as a
        percent of promises made will be 59%.

g.      Household will use its best efforts to collect or cause to be collected
        the indebtedness due on delinquent Accounts and in connection therewith
        shall conduct, or cause to be conducted collection activities in such a
        manner and use or cause to be used, such technology as is generally
        consistent with the consumer debt collection industry and Household's
        standard debt collection policies, procedures, resources and its
        existing or future technology and in accordance with Applicable Law.

h.      Household shall advise Merchants of any governmental investigation or
        legal action, which Household determines in its reasonable sole
        discretion impairs Household's ability to fulfill its responsibilities
        under the Agreement or which may have a material effect on the Program
        or for which Merchants may be subject to joint or several liability with
        Household as a result thereof.

                                       11
<PAGE>

i.      Household shall provide Merchants with copies of any proposed change in
        terms notices within a reasonable period prior to mailing for Merchants'
        to review provided that in the event any such change in terms notices
        affects accrued finance charges, accrued late fees, over-limit fees,
        returned check fees, the Origination Fee payable to Merchants herein,
        grace periods, minimum payments, or calculation of Account Balances,
        Merchants shall be afforded the opportunity to review and approve such
        notices. The foregoing notwithstanding change in terms notices required
        by changes in Applicable Law shall not require Merchants' prior
        approval.

If Household fails to maintain any two or more of the Service Standards set
forth in paragraphs, a. through f., to the extent any such Service Standards are
then applicable, and the failure to maintain those Service Standards continue
for two consecutive Months, Household will reduce its account servicing fee set
forth in Section 3b(iii) above by $1.00 per Active Account (annualized) until
such time that Household has again achieved all of the above Service Standards
for two consecutive Months; provided, however, that such reduction in the
account servicing fee shall not take effect (x) with respect to paragraph a.,
b., or e. unless Household's actual performance measure varies negatively from
such Service Standard by more than 20%, and (y) with respect to paragraph f.
unless Household's actual performance measure varies negatively from such
Service Standard by more than 10%. If Household fails at any time to maintain
any two or more of the above Service Standards subject to the provision in the
preceding sentence and the failure to maintain any two or more of the Service
Standards continues for three consecutive Months, Household will reduce the
account servicing fee set forth in Section 3b(iii) above by an additional $1.00
per Active Account (annualized) until Household has performed all of the above
Service Standards for two consecutive Months. If Household fails to maintain any
two or more of the Service Standards for four (4) consecutive Months and fails
to cure such failure within 60 days, Merchants shall have the right to terminate
this Agreement under Section 16b(iv)(c) hereof.

SECTION 5.  REPRESENTATIONS AND WARRANTIES.

a.      Merchants represent and warrant to Household as of the Effective Date
        and throughout the term of this Agreement the following:

        (i)    That each Card Sale will arise out of a bona fide sale of Goods
               by Merchants and will not involve the use of the Card for any
               other purpose.

        (ii)   That each Card Sale will be to a consumer for personal, family,
               or household purposes.

        (iii)  That Card applications/agreements will be available to the public
               (a) without regard to race, color, religion, national origin,
               sex, marital status, or age (provided the applicant has the
               capacity to enter into a binding contract) and (b) not in any
               manner which would discriminate against an applicant or
               discourage an applicant from applying for the Card.

        (iv)   That, subject to entry of the Approval Order, (a) they have full
               corporate power and authority to enter into this Agreement; (b)
               all corporate action required under any organization documents to
               make this Agreement binding and valid upon Merchants according to
               its terms has been taken; and (c) this Agreement is and will be
               binding, valid and enforceable upon Merchants according to its
               terms.

        (v)    That, subject to entry of the Approval Order, neither (a) the
               execution, delivery and performance of this Agreement, nor (b)
               the consummation of the transactions contemplated hereby will


                                       12
<PAGE>

               constitute a violation of law or a violation or default by
               Merchants under their respective articles of incorporation,
               bylaws or any organization documents, or any material agreement
               or contract and no authorization of any governmental authority is
               required in connection with the performance by Merchants of their
               obligations hereunder.

        (vi)   That they have or will acquire and retain all required licenses
               to perform their obligations under this Agreement and to conduct
               their business, including without limitation, all licenses
               required in connection with the sale of credit insurance or other
               insurance policies.

        (vii)  That dates after December 31, 1999 will be properly recognized,
               and date-related calculations will be correctly made, in the
               operation of computer systems and functions material to the
               operation of the Program.

        (viii) That they are and will remain in compliance in all material
               respects with Applicable Law, and are and will remain in
               compliance with all respects of the Stipulated Judgment
               applicable to Merchants. Parent shall deliver to Household a
               quarterly certification of Merchants' compliance with the
               Stipulated Judgment.

b.      Household represents and warrants to Merchant as of the Effective Date
        and throughout the term of this Agreement the following:

        (i)    That Accounts will be available to applicants without regard to
               race, color, religion, national origin, sex, marital status, or
               age (provided the applicant has the capacity to enter into a
               binding contract).

        (ii)   That (a) it has full corporate power and authority to enter into
               this Agreement; (b) all corporate action required under any
               organization documents to make this Agreement binding and valid
               upon Household according to its terms has been taken; and (c)
               this Agreement is and will be binding, valid and enforceable upon
               Household according to its terms.

        (iii)  Neither (a) the execution, delivery and performance of this
               Agreement, nor (b) the consummation of the transactions
               contemplated hereby will constitute a violation of law or a
               violation or default by Household under its articles of
               incorporation, bylaws or any organization documents, or any
               material agreement or contract and no authorization of any
               governmental authority is required in connection with the
               performance by Household of its obligations hereunder.

        (iv)   That it has and will acquire and retain all required licenses to
               perform its obligations under this Agreement and to conduct its
               business.

        (v)    That dates after December 31, 1999 will be properly recognized,
               and date-related calculations will be correctly made, in the
               operation of computer systems and functions material to the
               operation of the Program.

        (vi)   That it is and will remain in compliance in all material respects
               with Applicable Law.

SECTION 6.  CHARGEBACKS TO MERCHANTS.  Merchants agree as follows:

                                       13
<PAGE>

a.      CHARGEBACKS. Any Sales Slip or Card Sale is subject to Chargeback under
        any one or more of the following circumstances, and thereupon the
        provisions of SECTION 6.B. below shall apply:

        (i)    The Card application or any information on the Card application
               or the Sales Slip or any required information on the Sales Slip
               (such as the account number, description of Goods purchased,
               transaction amount or date) is illegible or materially
               incomplete, or the Sales Slip or Card application is not executed
               by the Cardholder; or Authorization is not obtained from
               Household's Authorization Center, or a valid Authorization number
               is not correctly and legibly entered on the Sales Slip; or the
               Sales Slip is a duplicate of an item previously paid, or the
               price of the Goods or services shown on the Sales Slip differs
               from the amount shown on the Cardholder's copy of the Sales Slip;

        (ii)   Household determines that (1) any of Merchants has breached or
               failed to satisfy in any material respect, any term, condition,
               covenant, warranty, or other provision of this Agreement,
               including, without limitation, SECTIONS 4A AND 5A above, or of
               the Operating Instructions, in connection with a Sales Slip or
               the transaction to which it relates, or an application for a Card
               or the opening of an Account; or (2) the Sales Slip, Card
               application or Card Sale is fraudulent or is subject to any claim
               of illegality, cancellation, rescission, avoidance or offset for
               any reason whatsoever, including, without limitation, negligence,
               fraud, misrepresentation, or dishonesty on the part of the
               customer or Merchants or their agents, employees, licensees, or
               franchisees, or that the related transaction is not a bona fide
               transaction in Merchants' ordinary course of business;

        (iii)  the Cardholder disputes or denies the Card Sale or other Card
               transaction, the execution of the Sales Slip or Card application,
               or the delivery, quality, or performance of the Goods, services
               or warranties purchased, or the Cardholder has not authorized the
               Card Sale, or alleges that a credit adjustment was requested and
               refused or that a credit adjustment was issued by Merchants but
               not posted to the Account; or

        (iv)   Merchants fail to deliver to Household the Sales Slip, Credit
               Slip, Card application or other records of the Card transaction
               within the times required in this Agreement.

b.      RESOLUTION AND PAYMENT. Merchants are required to resolve any dispute or
        other of the circumstances described above in (a) of this SECTION 6 to
        Household's reasonable satisfaction within twenty-one (21) days of
        notice of Chargeback or Merchants shall pay to Household the full amount
        of each such Sales Slip subject to Chargeback or the portion thereof
        designated by Household, as the case may be, plus the finance charges
        thereon, any attorney fees incurred by Household, and other fees and
        charges provided for in the Cardholder agreement; provided, however,
        that payment by Merchants under this Section 6.b. shall not be required
        with respect to any Cardholder dispute relating to the delivery, quality
        or performance of the Goods, services or warranties purchased where (A)
        Merchants have attempted in good faith to resolve the dispute, but
        reasonably determine, and certify to Household, that the delivery,
        quality, and performance of the Goods, services or warranties purchased
        are not defective or where (B) Merchants are unable to schedule an
        appointment within 21 days of notice of charge back or establish contact
        with the Cardholder to resolve the dispute despite Merchants' good faith
        efforts, and Merchants' so certify to Household; and provided, further,
        however, that payment by Merchants under this Section 6.b. with respect
        to any Sales Slips subject to Chargeback under Section 6.a.(i) (except
        Chargebacks related to a duplicate Sales Slip of an item previously


                                       14
<PAGE>

        paid, or the price of the Goods or services shown on the Sales Slip
        differs from the amount shown on the Cardholders copy of the Sales Slip)
        shall be required only when the Cardholder's payment on such Sales Slip
        has become ninety days delinquent. Upon chargeback to Merchants of a
        Sales Slip, Merchants shall bear all liability and risk of loss
        associated with such Sales Slip or Card Sale, or the applicable portion
        thereof, without warranty by, or recourse or liability to, Household.
        Household may deduct amounts owed to Household under this Section from
        any amounts owed to Merchants under this Agreement.

c.      The terms and provisions of this SECTION 6 shall survive the termination
        of this Agreement.

SECTION 7.  RESERVES.

a.      PORTFOLIO RESERVE.

        (i)    As soon as is commercially practicable after Household's
               acquisition of the Existing Portfolio, Household and Merchants
               shall establish a portfolio reserve (the "Portfolio Reserve") for
               the sole benefit of Household. The purpose of the Portfolio
               Reserve is to provide for payment of any amounts due Household at
               the end of the Term or upon earlier termination of this
               Agreement. Household may also deduct from the Portfolio Reserve
               during the Term any amounts not paid by Merchants under Section 3
               of this Agreement. In order to secure the performance of
               Merchants' obligations hereunder, Merchants hereby grant
               Household a first priority security interest in and lien upon the
               Portfolio Reserve, and agree to execute such documents and take
               such other actions as Household reasonably determines are
               necessary in order to perfect such security interest and lien.

        (ii)   The Portfolio Reserve shall first be considered fully funded for
               the Month when the balance of the Portfolio Reserve is no less
               than eight percent (8.00%) of the Account Balances at the end of
               such Month (the "Fully Funded Amount"). Notwithstanding the
               foregoing, Household may, in its reasonable sole discretion,
               elect to increase the Fully Funded Amount (and such increased
               amount shall thereupon become the Fully Funded Amount);

               (A)    in accordance with the following chart and based on
                      Household's good faith estimate of Credit Losses, in the
                      event that Credit Losses for the previous twelve months
                      have exceeded twelve percent (12%) of Average Account
                      Balances on an annualized basis:
<TABLE>
<CAPTION>
                      ---------------------------------- ---------------------------------------
                        CREDIT LOSSES AS A PERCENT OF       CUMULATIVE RESULTING INCREASE IN
                          AVERAGE ACCOUNT BALANCES          FULLY FUNDED AMOUNT OF PORTFOLIO
                                                                        RESERVE
                      ---------------------------------- ---------------------------------------
                      <S>                                <C>
                               12.1% to 12.9%                    1% of Account Balances
                      ---------------------------------- ---------------------------------------
                               13.0% to 13.9%                    2% of Account Balances
                      ---------------------------------- ---------------------------------------
                               14.0% to 14.9%                    3% of Account Balances
                      ---------------------------------- ---------------------------------------
                               15.0% to 15.9%                    4% of Account Balances
                      ---------------------------------- ---------------------------------------
                               16.0% to 16.9%                    5% of Account Balances
                      ---------------------------------- ---------------------------------------
                               17.0% to 17.9%                    6% of Account Balances
                      ---------------------------------- ---------------------------------------
</TABLE>

               , or

               (B)    in accordance with the following chart in the event that
                      the amount of credit volume generated in any Program Year
                      through SAC Promotions greater than six months ("Long-Term


                                       15
<PAGE>

                      Promotions") is fifty percent (50%) or more of the total
                      credit volume for the Program Year:

<TABLE>
<CAPTION>
        PERCENT OF LONG-TERM PROMOTIONS               CUMULATIVE RESULTING INCREASE IN FULLY
             TO TOTAL CREDIT VOLUME                     FUNDED AMOUNT OF PORTFOLIO RESERVE
        <S>                                           <C>
                 Less than 50%                                         -0-
                    50%-59%                                 1.00% of Account Balances
                    60%-69%                                 2.00% of Account Balances
                    70%-79%                                 3.00% of Account Balances
                    80%-89%                                 4.00% of Account Balances
                    90%-100%                                5.00% of Account Balances
</TABLE>

               However, the Fully Funded Amount shall not be increased until
               after the first time that the balance in the Portfolio Reserve
               equals or is greater than 8%. Except as otherwise provided
               herein, if the Portfolio Reserve contains an amount of funds in
               excess of the Fully Funded Amount at the end of any Month,
               Household shall pay such excess amounts to Merchants in
               accordance with the payment procedures provided in Section 3.d.
               of this Agreement.

        (iii)  The Portfolio Reserve shall be funded as follows: (A) When
               Household purchases the Existing Portfolio, Household shall
               deposit in the Portfolio Reserve an amount equal to the
               difference between (x) 99% of the Account Balances that are
               outstanding on Accounts contained in the Existing Portfolio at
               the time of such purchase and (y) the sum of the actual purchase
               price paid by Household for the Existing Portfolio plus the
               amount of funds contained in the SAC Reserve; and (B) for any
               Month in which the amount in the Portfolio Reserve is less than
               the Fully Funded Amount, Household shall deduct from payments to
               Merchants (x) during such Month commencing during the first year
               of the Term, an amount equal to two and one-half percent (2.5%)
               of each valid and authorized Sales Slip presented to Household
               during such Month, and (y) during such Month commencing after the
               first year of the Term, an amount equal to three and one-half
               percent (3.5%) of each valid and authorized Sales Slip presented
               to Household during such Month.

        (iv)   In the event a plan of reorganization for Merchants under the
               United States Bankruptcy Code (11 U.S.C. Sections 101 et seq.)
               has been confirmed by the Bankruptcy Court and becomes effective,
               then:

               (A)    The first time that the Merchants' Interest Coverage Ratio
                      equals or exceeds 1.75 at the end of a fiscal quarter,
                      Household (A) shall pay to Parent an amount sufficient to
                      reduce the balance in the Portfolio Reserve to fifty
                      percent (50%) of the Fully Funded Amount (the "Portfolio
                      Reserve Payment"), and (B) provided that the Merchants'
                      Interest Coverage Ratio has not fallen below 1.75 at the
                      end of two consecutive fiscal quarters, shall restrict
                      further funding of the Portfolio Reserve to amounts
                      necessary to maintain the Portfolio Reserve at fifty
                      percent (50%) of the Fully Funded Amount.

               (B)    The first time after the Portfolio Reserve Payment has
                      been made that the Merchants' Interest Coverage Ratio is
                      (A) less than 1.75 at the end of two consecutive fiscal
                      quarters or (B) less than 1.50 at the end of any fiscal
                      quarter. Household will resume building the Portfolio
                      Reserve to the Fully Funded Amount, by thereafter
                      deducting from payments to Merchants an amount equal to
                      eight percent (8%) of each 


                                       16
<PAGE>

                      valid and authorized Sales Slip presented to Household
                      until the balance in the Portfolio Reserve has reached the
                      Fully Funded Amount.

               (C)    Each time thereafter that the Merchants' Interest Coverage
                      Ratio equals or exceeds 1.75 at the end of two consecutive
                      fiscal quarters after having dropped below 1.75 for two or
                      more consecutive fiscal quarters, Household shall (A) pay
                      to Parent the Portfolio Reserve Payment and (B) provided
                      that the Merchants' Interest Coverage Ratio does not fall
                      below 1.75 at the end of two consecutive fiscal quarters,
                      restrict further funding of the Portfolio Reserve to
                      amounts necessary to maintain the Portfolio Reserve at
                      fifty percent (50%) of the Fully Funded Amount; and each
                      time thereafter that the Merchants' Interest Coverage
                      Ratio is (x) less than 1.75 at the end of two consecutive
                      fiscal quarters or (y) less than 1.50 at the end of any
                      fiscal quarter. Household will resume building the
                      Portfolio Reserve to the Fully Funded Amount, by
                      thereafter deducting from payments to Merchants an amount
                      equal to eight percent (8%) of each valid and authorized
                      Sales Slip presented to Household until the balance in the
                      Portfolio Reserve has reached the Fully Funded Amount.

b.      SAC RESERVE. After Household's acquisition of the Existing Portfolio,
        Household will establish a SAC reserve (the "SAC Reserve") for its sole
        benefit to cover the promotional finance charges subject to reversal.
        Household shall fund the SAC Reserve upon receipt and in the amount of
        any funds that Household receives from GE that represent GE's
        unamortized promotional discount amounts related to the Existing
        Portfolio. In order to secure the performance of Merchants' obligations
        hereunder, Merchants hereby grant Household a first priority security
        interest in and lien upon the SAC Reserve, and agree to execute such
        documents and take such other actions as Household reasonably determines
        are necessary in order to perfect such security interest and lien.

c.      LETTER OF CREDIT SUBSTITUTE. At any time that Merchants are not in
        default under this Agreement, Merchants may obtain the release of the
        amounts held in the Portfolio Reserve by delivering to Household an
        irrevocable revolving standby letter of credit in form and substance
        satisfactory to Household, and issued by a commercial bank acceptable to
        Household in its reasonable sole discretion (the "Letter of Credit").
        The face amount of the Letter of Credit or the combination of a Letter
        of Credit and cash shall be no less than the Fully Funded Amount of the
        Portfolio Reserve provided, however, if the amount of funds required to
        be held in the Portfolio Reserve is increased or decreased pursuant to
        the provisions of Section 7a(iv) above the face amount of the Letter of
        Credit shall be adjusted accordingly. Upon delivery of the Letter of
        Credit to Household, funds in the Portfolio Reserve shall be transferred
        to Parent to the extent of the amount of such Letter of Credit. The
        Letter of Credit shall remain in place for not less than twelve (12)
        months from the date of issuance. Merchants shall renew or replace the
        Letter of Credit not less than thirty (30) days prior to its expiration.
        The Letter of Credit may be drawn upon by Household upon presentation to
        the issuing bank of a statement issued by a duly authorized officer of
        Household, (i) to recover amounts as and when due under this Agreement
        that it would otherwise be entitled to deduct from the Portfolio Reserve
        or (ii) to fund the Fully Funded Amount of the Portfolio Reserve if (A)
        Merchants have not delivered to Household a new letter of credit at
        least thirty (30) days prior to the expiration of the then existing
        Letter of Credit, (B) Household is entitled under this Agreement to
        withdraw amounts from the Portfolio Reserve, or (C) this Agreement
        terminates and Merchants owe Household any amounts that are subject to
        payment from the Portfolio Reserve.

                                       17
<PAGE>

d.      CAPITALIZATION OF HOUSEHOLD. Household shall deliver to Parent an annual
        certification that its capital measures meet the "Well capitalized"
        category as that term is used and defined by the Office of the
        Comptroller of the Currency.

SECTION 8. TAPE OR ELECTRONIC TRANSMISSION & RECORDS. Data, records and
information shall be transmitted and maintained as described below.

a.      TRANSMISSION OF DATA. In lieu of forwarding paper Sales Slips and Credit
        Slips to Household, Merchants shall transmit to Household, by electronic
        transmission or other form of transmission reasonably designated by
        Household all data required by this Agreement to appear on Sales Slips
        and Credit Slips. Household shall provide at its expense a
        telecommunication link between Merchants' computer system and
        Household's computer system. All data transmitted shall be in a medium,
        form and format reasonably designated by Household and shall be
        presorted according to Household's instructions. Any errors in data
        originated by Merchants or in Merchants' transmission of such data
        shall, as between Household and Merchants, be the sole responsibility of
        Merchants. The means of transmission indicated above in this Section
        shall be the exclusive means of electronic transmission utilized by
        Merchants for the transmission of Sales Slip or Credit Slip transaction
        data to Household. Merchants shall use a leased line, supplied by
        Household, for communicating with Household pursuant to the guidelines
        set forth in SECTION 4A. Household's voice Authorization Center will be
        available for use for times when the leased line authorization system is
        not in operation. In the event the Authorization processing line is not
        in operation as a result of a technical failure from Household, and as a
        result the authorizations for Cardholder purchases cannot be obtained,
        Merchants shall have a $750.00 floor release per transaction and/or
        Cardholder. In the event that the system is not in operation as a result
        of a problem from Merchants, and as a result the authorizations for
        Cardholder purchases cannot be obtained, Merchants shall have a $750.00
        floor release per transaction and/or Cardholder; provided, however, if
        Household has closed or placed a hold on the Cardholder's Account to any
        further sales transactions, Household shall be under no obligation to
        purchase such Sales Slip. Merchants must obtain Authorization for any
        sales amount exceeding $750.00. If either party finds that this floor
        limit is not acceptable, this may by changed by mutual agreement of the
        parties.

b.      RECEIPT OF TRANSMISSION. Upon successful receipt of any transmission,
        Household shall accept such transmission and pay Merchants in accordance
        with this Agreement, subject to subsequent review and verification by
        Household as provided in Section 3.c. and to all other rights of
        Household and obligations of Merchants as set forth in this Agreement.
        If data transmission is by tape, Merchants agree to deliver upon demand
        by Household a duplicate tape of any prior tape transmission, if such
        demand is made within forty-five (45) calendar days of the original
        transmission and, with respect to any closed location, within ninety
        (90) calendar days.

c.      RECORDS. Merchants shall maintain the actual paper Sales Slips, Credit
        Slips, and other records pertaining to any transaction covered by this
        Agreement for such time and in such manner as Household or any law or
        regulation may require, but in no event less than two (2) years after
        the date Merchants presents each transaction data to Household, and
        Merchants shall make and retain for at least seven (7) years legible
        copies of such actual paper Sales Slips, Credit Slips or other
        transaction records. Consistent with the foregoing record retention
        requirements, within fifteen (15) days (thirty (30) in the case of a
        closed Merchant store location), or such earlier time as may be
        reasonably required by Household, or receipt of Household's request,


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<PAGE>

        Merchants shall provide to Household the actual paper Sales Slips,
        Credit Slips or other transaction records, and any other documentary
        evidence available to Merchants and reasonably requested by Household to
        meet its obligations under law (including its obligations under the Fair
        Credit Billing Act) or otherwise to respond to questions, complaints,
        lawsuits, counterclaims or claims concerning Accounts or requests from
        Cardholders, or to enforce any rights Household may have against a
        Cardholder, including, without limitation, litigation by or against
        Household, collection efforts and bankruptcy proceedings, or for any
        other reason. In the event Merchants fail to comply in any respect with
        the provisions of this Section, Household may process a Chargeback for
        each Card Sale involved pursuant to SECTION 6 above.

d.      Promptly upon termination of this Agreement or upon the request of
        Household, Merchants will provide Household with all original and
        microfilm copies of documents required to be retained under this
        Agreement.

e.      Subject to Section 20, Parent, by its officers, employees or other
        professionals who agree to be bound by the provisions of Section 20,
        shall have the right, at its own expense, to conduct reasonable audits
        of Household's calculation and collection of the fees and charges
        payable by or to Merchants hereunder and of Household's credit approval
        and collection efforts, such audits to be conducted in a manner which
        will minimize interference with Household's normal business operations.

f.      Household will provide such reports to Merchants as are agreed to from
        time to time.

g.      The terms and provisions of SECTION 8C AND D shall survive the
        termination of this Agreement and the provisions of SECTION E shall
        remain in effect for ninety (90) days from the effective date of
        termination of this Agreement.

SECTION 9. PAYMENTS BY CARDHOLDER AND ENDORSEMENT. Merchants agree that
Household has the sole right to payments on any Sales Slip funded by Household.
Unless specifically authorized in writing by Household, Merchants agree not to
make any collections on any such Sales Slip. Merchants may accept Cardholder
payments at Merchants' store locations in trust for Household, and agree to
deliver the same to Household within two (2) Business Days of Merchants'
receipt, together with the Cardholder's name, Account number, and any
correspondence accompanying the payment. Merchants agree that Merchants shall be
deemed to have endorsed any Sales Slip, Credit Slip, or Cardholder payments by
check, money order, or other instrument made payable to Merchants that a
Cardholder presents to Household in Household's favor, and Merchants hereby
authorize Household to supply such necessary endorsements on behalf of
Merchants.

SECTION 10. MERCHANTS CREDIT INFORMATION. Household may periodically review
Merchants' financial stability. To assist Household in doing this, Merchants
shall deliver to Household (i) an unaudited, condensed, consolidated financial
statement, including, without limitation, the Interest Coverage Ration, no later
than forty-five (45) days after the end of each quarter and (ii) an audited
consolidated financial statement no later than ninety (90) days after the end of
each fiscal year, including, without limitation, the all footnotes, and
supporting materials with sufficient detail to accurately portray the financial
condition of Merchants. Merchants warrant and represent that its credit
application and financial statements submitted to Household by or on behalf of
Merchants are true and accurate and Merchants agree to supply such additional
credit information as Household may reasonably request from time to time.
Merchants understand that Household, at its own expense, may verify the
information on any financial statement or other information provided by
Merchants and, from time to time, may seek credit and other information
concerning Merchants from others and may provide financial and other 


                                       19
<PAGE>

information to its affiliates or others for purposes of its asset 
securitizations and sales.

SECTION 11. MERCHANTS' BUSINESS PRACTICES. Merchants agree to provide adequate
services in connection with each Card Sale pursuant to standard customs and
trade practices and any applicable Merchants' warranties, and to provide such
repairs, service and replacements and take such other correction action as may
be required by law.

SECTION 12. CARDHOLDER ACCOUNT INFORMATION. Merchants shall not sell, provide,
or exchange Account information in the form of imprinted Sales Slips, carbon
copies of imprinted Sales Slips, or other media obtained by reason of a Card
transaction to any third party other than to Merchants' agents for the purpose
of assisting Merchants in their business with Household or pursuant to a
government request; provided, however, that the foregoing shall not limit
Merchants' rights to maintain and use information as to its customers generally,
regardless of whether or not such information is also Account information.

SECTION 13. CHANGE IN OWNERSHIP. Merchants agree to send Household at least
thirty (30) days prior written notice of any change in Merchants' names or
locations, any material change in ownership of Merchants' business or any change
in Sales Slip or Credit Slip information concerning Merchants.

SECTION 14.  INDEMNIFICATION.

a.      INDEMNIFICATION BY MERCHANTS. Merchants shall be liable to and shall
        indemnify and hold harmless Household and its Affiliates and their
        respective officers, employees, agents and directors from any losses,
        damages, claims, judgments, penalties, counterclaims, offsets costs,
        expenses (including reasonable attorneys' fees) against Household or any
        Affiliate of Household or their respective officers, employees, agents
        and directors arising out of: (i) Merchants' failure to comply with this
        Agreement or any of the Operating Instructions; (ii) any claim, dispute,
        complaint or setoff made by a Cardholder with respect to anything done
        or not done by Merchants in connection with Card Sales or credits; (iii)
        anything done or not done by Merchants in connection with the furnishing
        of any Goods, warranties or services purchased by Cardholders; (iv) the
        death or injury to any person or the loss, destruction or damage to any
        property arising out of the design, manufacture or furnishing by
        Merchants of any Goods, warranties or services purchased by Cardholders;
        (v) any claim or complaint of a third party in connection with
        Merchants' advertisements and promotions relating to the Card which were
        prepared by Merchants or at Merchants' direction (other than those that
        are prepared by Household); (vi) any illegal or improper conduct of
        Merchants or their employees or agents; and (vii) any claim or complaint
        by a consumer that Merchants have violated the Equal Credit Opportunity
        Act, Truth in Lending Act, or any other act and related Applicable Laws
        and (viii) as provided in Section 19 (b) hereof, any claim of
        infringement by virtue of Household's use of the Merchants Marks in
        accordance with Section 19 hereof. Household may deduct any amounts
        incurred by Household under this Section from amounts owed Merchants
        under this Agreement pursuant to Section 14.d. below.

b.      INDEMNIFICATION BY HOUSEHOLD. Household shall be liable to and shall
        indemnify and hold harmless Merchants and its subsidiaries and
        affiliates and their respective officers, employees, agents and
        directors from any losses, damages, claims, judgments, penalties,
        counterclaims, offsets, costs, expenses (including reasonable attorneys'
        fees) against Merchants or their respective officers, employees, agents
        and directors arising out of (i) Household's failure to comply with this
        Agreement or any of the Operating Instructions; (ii) any claim, dispute,
        complaint or set off by a Cardholder resulting from anything done or not
        done by Household in connection with such Cardholder's Account; (iii)


                                       20
<PAGE>

        any illegal or improper conduct of Household, or its employees or agents
        with respect to the Card, a Card Sale, an Account or any other matters
        relating to the Program, including but not limited to matters relating
        to collection and servicing the Accounts and repossession of Goods; (iv)
        any claim, dispute, complaint or setoff by a consumer resulting from a
        violation by Household, with respect to those portions of the
        application/agreement, billing statement and other materials provided by
        Household that are prepared by Household or at Household's direction
        (other than those that are prepared by Merchant), of the Equal Credit
        Opportunity Act, Truth in Lending Act or any other act and related
        Applicable Laws and regulations; (v) any claim, dispute or complaint of
        any third party in connection with advertisements and promotions
        prepared or furnished by Household or at Household's direction relating
        to the Program; (vi) Household's breach of Section 5.b.; and (vii) GE's
        or any GE subcontractor's use of Merchant's Marks, pursuant to Section
        19 below, or any illegal or improper conduct of GE or any GE
        subcontractor under the Interim Servicing Agreement in connection with
        the servicing of the Accounts. Notwithstanding the foregoing, the
        indemnification by Household shall not apply to any claim or complaint
        relating to (x) materials, including insurance election forms to be
        included on the application/agreement form, that are provided to
        Household by the credit insurance provider selected by merchant pursuant
        to Section 2.e. or (y) the failure of Merchants to resolve a billing
        inquiry or dispute with where such failure was not caused by Household.

c.      NOTICE OF CLAIM & SURVIVAL. In the event that Household or Merchants
        shall receive any claim or demand or be subject to any suit or
        proceeding of which a claim may be made against the other under this
        Section, the indemnified party shall give prompt written notice thereof
        to the indemnifying party and the indemnifying party will be entitled to
        participate in the settlement or defense thereof with counsel
        satisfactory to indemnified party at the indemnifying party's expense.
        In any case, the indemnifying party and the indemnified party shall
        cooperate (at no cost to the indemnified party) in the settlement or
        defense of any such claim, demand, suit, or proceeding. The terms of
        this SECTION shall survive the termination of this ------- Agreement.

d.      When an event giving rise to indemnification reaches final resolution
        the party seeking indemnification under this Section shall forward to
        the indemnifying party written notice of any amounts due and owing by it
        along with any supporting documentation for such amount for which
        indemnification is being sought and the indemnifying party shall within
        thirty (30) days of receipt of such notice pay such amount to the
        indemnified party or notify such party in writing why such amounts are
        not due and owing to the indemnified party. The parties shall use their
        best efforts to reach agreement on the amounts due and owing for
        indemnification.

SECTION 15. NONWAIVER. Merchants' liability under this Agreement, including,
without limitation, their liability under SECTION 6 above, shall not be affected
by any settlement, extension, forbearance, or variation in terms that Household
may grant in connection with any Sales Slip or Account or by the discharge or
release of the obligations of the Cardholder(s) or any other person by operation
of law or otherwise.

SECTION 16.  TERM AND TERMINATION.

a.      TERM. This Agreement shall be effective as of the Effective Date;
        provided, however, that if the Effective Date has not occurred by
        September 30, 1998, or such later date agreed to by Household and
        Merchants, this Agreement shall not become effective and shall be null
        and void. If this Agreement becomes effective, it shall remain in effect
        until the fifth (5th) anniversary of the Effective Date ("INITIAL


                                       21
<PAGE>

        TERM"), and shall be automatically renewed for successive two year terms
        (the "RENEWAL TERM(S)") unless and until terminated as provided herein.
        The Initial Term and any Renewal Terms are referred to collectively as
        the "TERM". The termination of this Agreement shall not affect the
        rights and obligations of the parties with respect to transactions and
        occurrences which take place prior to the effective date of termination,
        except as otherwise provided herein.

b.      TERMINATION.  This Agreement may be terminated:

        (i)  effective at the end of the Initial Term or any Renewal Term, by
             Household or Merchants upon not less than three hundred and sixty
             (360) days written notice prior to the end of such term;

        (ii) by Household or Merchants upon written notice to the other in the
             event the other party shall elect to wind up or dissolve its
             operation or is wound up and dissolved; becomes insolvent or
             generally fails to pay its debts as they become due (other than
             debts incurred by Merchants prior to the commencement of the
             Chapter 11 Case); makes an assignment for the benefit of creditors;
             files a voluntary petition in bankruptcy, or for reorganization or
             is adjudicated as bankrupt or insolvent (other than the
             continuation of Merchants as debtors in the Chapter 11 Case); or
             has a liquidator or trustee appointed over all or substantially all
             of its affairs;

        (iii) by Household upon not less than ninety (90) days written notice
             (a) if a change occurs in Merchants' financial condition taken as a
             whole and such change has a Material Adverse Effect, (b) if there
             occurs any material change in the ownership (other than a change in
             ownership as a result of the Chapter 11 Case) of any of Merchants
             or of their business (regardless of the form of the transaction)
             and such change has a Material Adverse Effect except if the
             Material Adverse Effect is caused by any action or inaction of
             Household, (c) in the event any of Merchants materially breaches
             its obligations or any warranty or representation under this
             Agreement and such breach has not been cured within ninety (90)
             days after receipt of such notice, or (d) if any law, rule or
             regulation by any federal, state or local authority takes effect
             that materially impairs or restricts Merchants' or Household's
             ability to perform their respective obligations hereunder or that
             would, in Merchants' and Household's reasonable judgment, reduce by
             more than ten percent (10%) the then current ratio of (A) collected
             finance charges, late fees, overlimit fees and returned check
             charges over (B) Average Account Balances;

        (iv) by Merchants upon not less than ninety (90) days written notice in
             the event that (a) Household materially breaches its obligations or
             any warranty or representation under this Agreement including,
             without limitation, SECTION 5B, and such breach has not been cured
             within ninety (90) days after receipt of such notice; (b) Household
             fails to maintain the Approval Rates in accordance with the
             provisions of SECTION 2C; (c) Household materially breaches its
             responsibilities under SECTION 4B of this Agreement; (d) there
             occurs a material change in the ownership of Merchants or of the
             Merchants' business (regardless of the form of the transaction) and
             the new owner has a private label credit card program with
             receivables in excess of $100 million that has been in existence
             for 2 years, and in such event termination shall be effective six
             months after Household's receipt of such written notice; or (e) if
             any law, rule or regulation by any federal, state or local
             authority takes effect that materially impairs or restricts
             Merchants' or Household's ability to perform their respective
             obligations hereunder or that would, in Merchants' and Household's
             reasonable judgment, reduce by more than ten percent (10%) the 


                                       22
<PAGE>

             then current ratio of (A) collected finance charges, late fees,
             overlimit fees and returned check charges over (B) Average Account
             Balances.

c.      DUTIES AND RIGHTS UPON TERMINATION. Upon termination of this Agreement,
        Merchants will promptly submit to Household all Card Sales, Sales Slips,
        credit and other data made through the date of termination. Household is
        not liable to Merchants for any incidental or consequential damages that
        Merchants may suffer as a result of Household's termination of this
        Agreement. Commencing on the ninety-first day following the effective
        date of termination of this Agreement, Merchants shall pay to Household,
        monthly, within ten (10) days of Household's request, a liquidation fee
        in the amount of $5.00 per Month for each Account for which Household
        processes a statement during such Month, until such time as the
        outstanding Account Balances are liquidated and paid in full. In the
        event this Agreement is terminated for any reason or notice of
        termination is given by either party, Household may deduct amounts owed
        to it by Merchants from the Portfolio Reserve and take such other
        reasonable actions including but not limited to establishing and
        maintaining additional reserves from payments otherwise payable to
        Merchants to protect Household's rights under this Agreement and to
        cover chargeback amounts and other amounts owing to Household. In the
        event that this Agreement is terminated by Merchants under Section
        16.b(iv)(d), then Merchants shall pay Household a termination fee (the
        "Termination Fee") equal to a percentage of the Account Balances on the
        effective date of the Termination. The percentage used to determine the
        Termination Fee shall depend upon when this Agreement is terminated by
        Merchants due a material change in the ownership of Merchants or of the
        Merchants' business. Exhibit B hereto provides a listing of Termination
        Fees applicable to termination during each year of the Agreement. The
        provisions of this subsection shall survive the termination of this
        Agreement.

d.      PURCHASE OPTION.

        (i)    Upon termination of this Agreement pursuant to this Section 16,
               Merchants shall have the option to purchase (or assign its option
               to purchase to a third party), or to arrange for the purchase of,
               the Accounts without recourse to Household and without
               representation or warranty, express or implied, at a price equal
               to the full amount of the Account Balances, less an amount equal
               to the then current balance of the Portfolio Reserve and the then
               current balance, if any, of the SAC Reserve; provided, however,
               in the event that this Agreement is terminated by Merchants
               pursuant to Section 16b(iv)(d) due to a material change in the
               ownership of Merchants or of the Merchants' business, the price
               shall be equal to the full amount of the Account Balances, plus
               the Termination Fee, less an amount equal to the then current
               balance of the Portfolio Reserve and the then current balance, if
               any, of the SAC Reserve at the time such sale is consummated. The
               percentage used to determine the Termination Fee shall depend on
               when this Agreement is terminated by Merchants due to a material
               change in the ownership of Merchants or of the Merchants'
               business. Exhibit B hereto provides a listing of Termination Fees
               applicable to such sale during each year of the Agreement.

        (ii)   The purchase shall occur not later than ninety (90) days after
               the effective date of termination of this Agreement and shall be
               under such terms and conditions as are reasonably acceptable to
               Household.

                                       23
<PAGE>

        (iii)  Household shall cooperate with Merchants to take, or cause to be
               taken, such reasonable actions as are necessary to effect the
               purchase of the Accounts.

SECTION 17. STATUS OF THE PARTIES. In performing their responsibilities pursuant
to this Agreement, Household and Merchants are in the position of independent
contractors, and in no circumstances shall either Household or Merchants be
deemed to be the agent or employee of the other. 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 an association for profit between
Household and Merchants. Any amounts ever owing by Merchants pursuant to this
Agreement represent contractual obligations only and are not a loan or debt.

SECTION 18. FORCE MAJEURE. No party to this Agreement shall be liable to the
other by reason of any failure in performance of this Agreement in accordance
with its terms if such failure arises out of a cause beyond the control and
without the fault or negligence of such party. Such causes may include but are
not limited to acts of God, of the public enemy or of civil or military
authority, unavailability of energy resources, system or communication failure,
delay in transportation, fires, strikes, riots or war. In the event of any force
majeure occurrence, the disabled party shall use its best efforts to meet its
obligations as set forth in this Agreement.

SECTION 19.  LIMITED LICENSE.

(a)     Merchants hereby grant to Household and Household accepts a
        non-exclusive, non-transferable license for purposes of this Agreement
        to use Merchants' Marks on the Cards, Card application/agreements,
        periodic statements, billing statements, collection letters or
        documents, promotional or advertising materials and otherwise in
        connection with the Program provided, however, Household may grant to GE
        or any GE subcontractor the right to use Merchants Marks in connection
        with the foregoing solely during its interim servicing of the Accounts
        and the Existing Portfolio under the terms of the Interim Servicing
        Agreement dated September 4, 1998 by and between Household and GE which
        agreement shall contain provision to protect Merchants rights, title and
        interests in Merchants' Marks. All displays of the Merchants' Marks
        shall conform to the prototypes provided by Merchants, shall include
        such notices and trademark legends as Merchants shall reasonably
        require, and shall be subject to Merchants' periodic reasonable review
        of such use and to such reasonable specifications of Merchants.
        Merchants may not use any name or service mark of Household or any of
        its Affiliates in any manner without the prior written consent of
        Household, except as in the reasonable determination by Merchants to be
        required by Applicable Law.

(b)     Merchants represent and warrant that they own appropriate federal or
        state trademark registrations or enforceable common law rights to
        protect their interest in the use and ownership of the Merchants' Marks,
        and have the right to license the Merchants' Marks to Household as
        contemplated by this Agreement. Merchants shall indemnify, defend and
        hold Household harmless from any loss, damage, expense or liability
        arising from any claims of alleged infringement of the Merchants' Marks
        (including reasonable attorneys' fees and costs). Merchants shall, at
        its expense, defend and/or settle any action that may be commenced
        against Household alleging that the use of the Merchants' Marks
        infringes upon any rights of others. In such event, Household shall, at
        the reasonable direction of Merchant and at Merchants' expense, promptly
        discontinue its use of the Merchants' Marks alleged to infringe.

(c)     Household acknowledges Merchants' exclusive ownership interest in and to
        the Merchants' Marks. Any and all goodwill arising from use of the
        Merchants' Marks under this Agreement shall inure to the benefit of


                                       24
<PAGE>

        Merchants. Household agrees that it will not directly or indirectly
        contest the validity of Merchants/ ownership of the Merchants/ Marks or
        the license granted herein. Merchants are familiar with the manner in
        which Household conducts similar programs. Household agrees that it will
        use Merchants' Marks substantially in accordance with standards of
        quality not less than those it is employing as of the date hereof in
        connection with comparable programs. Merchants' shall have the right to
        periodically inspect the use of the Merchants' Marks.

(d)     Upon termination of this Agreement, all rights with respect to the
        Merchants' Marks shall revert to Merchants and Household shall
        discontinue use of the Merchants' Marks; provided, however, that
        Household shall have the continuing right to use the Merchants' Marks to
        service and collect upon indebtedness existing on the date of
        Termination, subject to the terms of this Section 19.

SECTION 20. CONFIDENTIALITY. Merchants will keep confidential and not disclose
to any person or entity (except to employees, officers, partners, directors,
attorneys, accountants and other agents or advisors of Merchants who are engaged
in the implementation, execution, administration and enforcement of the Program)
all information, software, systems and data, that Merchants receive from
Household, or from any other source which is obligated to maintain the
confidentiality of the information, relating to the Program and matters which
are subject to the terms of this Agreement, including, but not limited to, the
Cardholder List except as permitted herein or other Account information, and,
except as otherwise permitted herein, shall use, or cause to be used, such
information solely for the purposes of the performance of Merchants' obligations
under the terms of this Agreement; provided, however, that Merchants may
disclose such information, software, systems, data, and matters (i) to the
extent that they become generally publicly available through no fault of
Merchants, or Merchants receive such information from an independent third party
not under any obligation of confidentiality directly or indirectly to Household,
or disclose thereof is required by Applicable Law, governmental request, or any
other legal process or authority having the force of law, (ii) to auditors of
Merchants, (iii) to the statutory committee of unsecured creditors and its
attorneys and financial advisors in Merchants' Chapter 11 cases, and (iv) to
advisors and agents retained by Merchants in connection with audits conducted
under Section 8.e. hereof, provided that any such information that is designated
as highly confidential by Household shall not be disclosed unless such committee
or such advisors specified in clauses (iii) and (iv) above in each case enter
into a confidentiality agreement with Merchants. Household will keep
confidential and not disclose to any person or entity (except employees,
officers, agents or directors of Household or its Affiliates who are engaged in
the implementation and execution of the Program) any information, software,
systems, or data that Household receives from Merchants, or from any other
source which is obligated to maintain the confidentiality of the information, or
which relates to the operation of Merchants' business, its Goods or the
Cardholder List except as permitted herein and, except as otherwise permitted
herein, shall use, or cause to be used, such information solely for the purposes
of the performance of Household's obligations under the terms of this Agreement;
provided, however, that Household may disclose such information (i) to the
extent that it becomes generally publicly available through no fault of
Household, or Household receives such information from an independent third
party not under any obligation of confidentiality directly or indirectly to
Merchants, or disclosure thereof is required by Applicable Law, governmental
request, or any other legal process or authority having the force of law, or
(ii) to auditors of Household. In the event Household sells or assigns the
Accounts or any portion of the Accounts under the Program, Household may
disclose any information under this provision reasonably necessary or required
to effectuate such sale or assignment, provided that such assignee agrees in
writing to maintain the confidentiality thereof to the same extent as Household.
The provisions of this SECTION 20 shall survive the termination of this
Agreement.

                                       25
<PAGE>

SECTION 21.  ADDITIONAL PRODUCTS & SERVICES.

(a)     Household and/or any of its Affiliates may at any time, whether during
        or after the term of this Agreement and whether or not the Accounts are
        owned by Household, solicit Cardholders for deposit accounts, credit
        cards or other types of loan accounts or other financial or insurance
        services or products offered by Household and/or any of its Affiliates;
        provided, however, that such solicitations shall not be targeted
        exclusively or substantially exclusively to Merchants' customers and
        Household shall not use any of Merchants' Marks in any such
        solicitation. Except as provided above, Household will not, during the
        term of this Agreement, or for ninety (90) days after the effective date
        of termination of this Agreement, in the event the Accounts are
        purchased pursuant to SECTION 16D. hereof, use, sell, license or rent
        the Cardholder List, except in connection with the administration of the
        program as provided in this Agreement.

(b)     Merchants may at any time, whether during or after the term of this
        Agreement solicit Cardholders for products and services other than
        deposit accounts, credit cards or other types of loan accounts except
        that if Merchants purchase the Accounts pursuant to SECTION 16D. hereof,
        Merchants may also solicit such Cardholders for deposit accounts, credit
        cards, or other types of loan accounts, provided that Merchants shall
        not use Household's name in any such solicitation.

SECTION 22. NOTICES. All notices required or permitted by this Agreement shall
be in writing and shall be sent to the respective parties: if to Household, to
the Attention of President (with a copy to the Attention of General Counsel, HRS
Law Department 2700 Sanders Road, Prospect Hights, IL 60070); and if to
Merchants, to the Attention of Sheila C. Reinken, Vice President and Treasurer
with a copy to Edward P. Zimmer, Vice President and General Counsel at
Household's and Merchants' respective addresses set forth on page one of this
Agreement or such other addresses as each party may designate to the other by
notice hereunder. Said notices shall be deemed to be received when sent to the
above addresses (i) upon five (5) Business Days after deposit in the U.S. first
class mail with postage prepaid, (ii) upon personal delivery, or (iii) upon
receipt by telex, facsimile, or overnight/express courier service or mail.

SECTION 23. AMENDMENTS AND SUPPLEMENTARY DOCUMENTS. Household may amend this
Agreement with the consent of Merchants, which shall not be unreasonably
withheld, upon ten (10) days prior notice to Merchants if such modification is
reasonably determined by Household to be required by Applicable Law. Reference
herein to "this Agreement" shall include any schedules, appendices, exhibits,
and amendments hereto. Any amendment or modification to this Agreement must be
in writing and signed by a duly authorized officer of Household and Merchants to
be effective and binding; no oral amendments or modifications shall be binding
upon the parties.

SECTION 24. ASSIGNMENT. This Agreement is binding upon the parties and their
successors and assigns. Notwithstanding, Merchants may not assign this Agreement
without the prior written consent of Household, and except as otherwise provided
in the next sentence, Household may not assign this Agreement without the prior
consent of Parent; any purported assignment without such consent shall be void.
Notwithstanding the foregoing, Household may without Merchants' consent assign
this Agreement or any of the rights or obligations hereunder to any Affiliate of
Household at any time; provided, that Household shall not be released from any
obligations under this Agreement upon such assignment. In the event of such
assignment, the assignee shall have the same rights and remedies as Household
under this Agreement.

SECTION 25. NONWAIVER AND EXTENSIONS. Neither Household nor Merchants shall, by
any act, delay, omission, or otherwise, be deemed to have waived any rights 


                                       26
<PAGE>

or remedies hereunder. Merchants agree that Household's failure to enforce any
of its rights under this Agreement shall not affect any other right of Household
or the same right in any other instance. Household agrees that Merchants'
failure to enforce any of their rights under this Agreement shall not affect any
other right of Merchants or the same right in any other instance.

SECTION 26. RIGHTS OF PERSONS NOT A PARTY. This Agreement shall not create any
rights on the part of any person or entity not a party hereto, whether as a
third party beneficiary or otherwise.

SECTION 27. SECTION HEADINGS. The headings of the sections of this Agreement are
for reference only, are not a substantive part of this Agreement and are not to
be used to affect the validity, construction or interpretation of this Agreement
or any of its provisions.

SECTION 28. INTEGRATIONS. This Agreement contains the entire agreement between
the parties. There are merged herein all prior oral or written agreements,
amendments, representations, promises and conditions in connection with the
subject matter hereof. Any representations, warranties, promises or conditions
not expressly incorporated herein shall not be binding.

SECTION 29. GOVERNING LAW/SEVERABILITY. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois. If any provision
of this Agreement is contrary to Applicable Law, such provision shall be deemed
ineffective without invalidating the remaining provisions hereof.

SECTION 30. JURISDICTION. ANY SUIT, COUNTERCLAIM, ACTION OR PROCEEDING BY THE
PARTIES ARISING OUT OF OR RELATING TO THIS AGREEMENT MUST BE BROUGHT SOLELY IN
THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF ILLINOIS OR THE STATE OF FLORIDA OR IN THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA; AND THE PARTIES
HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND ANY
APPELLATE COURTS THEREOF FOR THE PURPOSE OF ANY SUCH SUIT, COUNTERCLAIM, ACTION,
PROCEEDING OR JUDGMENT (IT BEING UNDERSTOOD THAT SUCH CONSENT TO THE EXCLUSIVE
JURISDICTION OF SUCH COURTS WAIVES ANY RIGHT TO SUBMIT ANY DISPUTES HEREUNDER TO
ANY COURTS OTHER THAN THOSE ABOVE). NOTWITHSTANDING THE FOREGOING, SO LONG AS
MERCHANTS' CHAPTER 11 CASES ARE PENDING, ANY SUIT, COUNTERCLAIM, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE BROUGHT IN THE
UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE.

SECTION 31. WAIVER OF JURY TRIAL. HOUSEHOLD AND MERCHANTS HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION,
SUIT, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT, ANY
RELATED DOCUMENT OR UNDER ANY OTHER DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY
IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR ARISING FROM
ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY
SUCH ACTION, SUIT PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY; THIS PROVISION IS A MATERIAL INDUCEMENT FOR HOUSEHOLD AND
MERCHANTS ENTERING INTO THIS AGREEMENT.

                        [Signatures appear on next page]

                                       27
<PAGE>

IN WITNESS WHEREOF, Household and Merchants have caused their duly authorized
representatives to execute this Agreement as of the date set forth above.
<TABLE>
<S>                                                   <C>
                                                      BANK:

WITNESS OR ATTEST:                                    HOUSEHOLD BANK (SB), N.A.

By:          /s/ Sharyn Murphy                        By:       /s/ Charles A. Calip
             -------------------------------                    ------------------------------
Name:        Sharyn Murphy                            Name:     Charles A. Calip
             -------------------------------                    ------------------------------
Title:       Executive Secretary                      Title:    Vice President
             -------------------------------                    ------------------------------

                                                      MERCHANTS:

                                                      LEVITZ FURNITURE CORPORATION
WITNESS OR ATTEST:                                    Federal Tax TD #23-1657490

By:          /s/ Michael E. McCreery                  By:       /s/ Sheila C. Reinken
             -------------------------------                    ------------------------------
Name:        Michael E. McCreery                      Name:     Sheila C. Reinken
             -------------------------------                    ------------------------------
Title:       Sr. V.P. / CFO                           Title:    Vice President
             -------------------------------                    ------------------------------

                                                      LEVITZ FURNITURE COMPANY OF THE
                                                      MIDWEST, INC.
WITNESS OR ATTEST:                                    Federal Tax TD #23-1731443

By:          /s/ Michael E. McCreery                  By:       /s/ Sheila C. Reinken
             -------------------------------                    ------------------------------
Name:        Michael E. McCreery                      Name:     Sheila C. Reinken
             -------------------------------                    ------------------------------
Title:       Sr. V.P. / CFO                           Title:    Vice President
             -------------------------------                    ------------------------------

                                                      LEVITZ FURNITURE COMPANY OF THE
                                                      PACIFIC, INC.
WITNESS OR ATTEST:                                    Federal Tax TD #23-1695763

By:          /s/ Michael E. McCreery                  By:       /s/ Sheila C. Reinken
             -------------------------------                    ------------------------------
Name:        Michael E. McCreery                      Name:     Sheila C. Reinken
             -------------------------------                    ------------------------------
Title:       Sr. V.P. / CFO                           Title:    Vice President
             -------------------------------                    ------------------------------

                                                      LEVITZ FURNITURE COMPANY OF
                                                      WASHINGTON, INC.
WITNESS OR ATTEST:                                    Federal Tax TD #23-1729443

By:          /s/ Michael E. McCreery                  By:       /s/ Sheila C. Reinken
             -------------------------------                    ------------------------------
Name:        Michael E. McCreery                      Name:     Sheila C. Reinken
             -------------------------------                    ------------------------------
Title:       Sr. V.P. / CFO                           Title:    Vice President
             -------------------------------                    ------------------------------
</TABLE>

                                       28
<PAGE>
                                    EXHIBIT A

                             FORM OF APPROVAL ORDER


        [Form of Approval Order To Be Attached. The Approval Order must contain
the following provisions and such other provisions as Household considers
necessary: (i) a grant of authority allowing Merchants to enter into this
Agreement; (ii) grant of an allowed administrative claim by Household for all
amounts owing to Household under this Agreement not exceeding (a) eight percent
(8.00%) of the Account Balances less any balances in the Portfolio Reserve and
the SAC Reserve, plus (b) two and one-half percent (2.5%) of the Account
Balances; (iii) grant of a right to Household to offset any amounts owed by
Merchants to Household pursuant to this Agreement against the Portfolio Reserve
and the SAC Reserve, and against any other reserve account established pursuant
to this Agreement, without a requirement of any further order of the Bankruptcy
Court or any other court in order to allow Household to offset such amounts;
(iv) grant to Household of a perfected security interest in the Portfolio
Reserve and the SAC Reserve, and in any other reserve account established
pursuant to this Agreement; and (v) modification of the automatic stay of 11
U.S.C., Section 362 to allow Household the right to take any other actions
contemplated by this Agreement without further order of the Bankruptcy court or
any other court.]

                                       29
<PAGE>
                                    EXHIBIT B

                                Termination Fees

<TABLE>
<CAPTION>
Household Gives Merchants
Notice of Termination due To
A Change of Control in Merchants
During Following Years of the
Term of this Agreement                                   Applicable Termination Fee
                  <S>                                     <C>
                  Year 1                                  1.00% x Account Balances

                  Year 2                                  0.85% x Account Balances

                  Year 3                                  0.65% x Account Balances

                  Year 4                                  0.45% x Account Balances

                  Year 5                                  0.25% x Account Balances

           All Years Thereafter                           0.20% x Account Balance
         During Term of Agreement
</TABLE>

                                       30
<PAGE>
                                    EXHIBIT C

<TABLE>
<CAPTION>
                              SAC REVERSAL ESTIMATE

            ------------------------------------ ---------------------------------
                    SAME AS CASH CREDIT
                      PROMOTION TERMS                EXERCISE RATE AS A % OF
                         (MONTHS)                             VOLUME
            ------------------------------------ ---------------------------------
            <S>                                  <C>
                             1                                 12%
            ------------------------------------ ---------------------------------
                             2                                 20%
            ------------------------------------ ---------------------------------
                             3                                 33%
            ------------------------------------ ---------------------------------
                             4                                 43%
            ------------------------------------ ---------------------------------
                             5                                 48%
            ------------------------------------ ---------------------------------
                             6                                 52%
            ------------------------------------ ---------------------------------
                             7                                 57%
            ------------------------------------ ---------------------------------
                             8                                 59%
            ------------------------------------ ---------------------------------
                             9                                 63%
            ------------------------------------ ---------------------------------
                            10                                 67%
            ------------------------------------ ---------------------------------
                            11                                 71%
            ------------------------------------ ---------------------------------
                            12                                 71%
            ------------------------------------ ---------------------------------
                            13                                 72%
            ------------------------------------ ---------------------------------
</TABLE>


<TABLE>
<CAPTION>
                          INITIAL SAC REVERSAL ESTIMATE

------------------------- ----------------------- ----------------------- -----------------------
        ASSUMED
      PROMOTIONAL              ASSUMED % OF
         VOLUME                TOTAL VOLUME           EXERCISE RATE           WEIGHTED RATE
------------------------- ----------------------- ----------------------- -----------------------
<S>                       <C>                     <C>                     <C>                    
                                    A                       B                    (A x B)
------------------------- ----------------------- ----------------------- -----------------------
      3 month SAC                  40%                     33%                    13.2%
------------------------- ----------------------- ----------------------- -----------------------
      6 month SAC                  15%                     52%                     7.8%
------------------------- ----------------------- ----------------------- -----------------------
      12 month SAC                 45%                     71%                    31.9%
------------------------------------------------------------------------- -----------------------
                                                                                  52.9%
                                                                          -----------------------
                                                   SAC Reversal Estimate          52.0%
------------------------------------------------------------------------- -----------------------
</TABLE>