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                                  EXHIBIT 10.2





                AMENDED AND RESTATED MERCHANT SERVICES AGREEMENT


                    BETWEEN THE COMPANY AND HURLEY STATE BANK


                            DATED AS OF JULY 1, 2000


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                AMENDED AND RESTATED MERCHANT SERVICES AGREEMENT


         This AMENDED AND RESTATED MERCHANT SERVICES AGREEMENT ("Agreement")
made as of July 1, 2000, by and between HURLEY STATE BANK ("Bank"), a banking
corporation organized and existing under the laws of the State of South Dakota,
with its offices at Sioux Falls, South Dakota, and THE CHILDREN'S PLACE RETAIL
STORES, INC. ("Company"), a corporation organized and existing under the laws of
the State of Delaware, with its offices at 915 Secaucus Road, Secaucus, New
Jersey 07094.


                                   WITNESSETH:

         WHEREAS, Bank and Company entered into a Merchant Services Agreement
dated December 12, 1994, (the "Predecessor Agreement"), under which Bank issues
to consumers private label credit cards for use at Company's retail
establishments and via the Internet; and

         WHEREAS, Bank and Company desire to continue their relationship but
wish to amend and supplement certain provisions.

         NOW, THEREFORE, in consideration of the foregoing premises and mutual
covenants hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Bank and Company
agree as follows:

                             ARTICLE I - DEFINITIONS

         1.1      DEFINITIONS. Except as otherwise specifically indicated, the
following terms will have the meaning specified herein:

                  "Account" means a Card account, whether issued under this
Agreement or the Predecessor Agreement. An Account may have more than one Card
issued for it. All Accounts are deemed to be the property of Bank. Bank will
determine the terms and conditions under which Accounts will be established.

                  "Active Account" means any Account that has not been written
off and that has a debit or credit balance at any time during a billing period.

                  "Application" means Bank's credit application which must be
completed by persons who wish to become Cardholders and which must be submitted
to Bank for review.

                  "Authorization" means permission from Bank to make a Card
Sale.

                  "Authorized Goods and Services" means goods and services
normally and customarily offered by Company at Stores and through the Internet.

                  "Authorization Center" means the facility designated by Bank
as the facility at which Card Sales are authorized.


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                  "Business Day" means Mondays through Fridays except days when
Bank is closed for business.

                  "Card" means a credit card issued by Bank with Company's name
and logo appearing on such card or with such other design as mutually acceptable
to the parties, which evidences an Account.

                  "Card Plan" means the program under which Accounts will be
established and Cards issued to qualified applicants.

                  "Card Sale" means any sale of Authorized Goods and Services
that Company makes to a Cardholder pursuant to this Agreement that is charged to
an Account.

                  "Cardholder" means any person to whom a Card has been issued
and/or any authorized user.

                  "Chargeback" means the refusal of Bank to pay Company for a
Card Sale or the return to Company and reimbursement to Bank of a Card Sale for
which Company was previously paid.

                  "Company Mark" means any name, logo, trademark, service mark
or other proprietary designation selected for use in connection with the Card
Plan. The Company Marks are set forth in Schedule C, as amended from time to
time.

                  "Credit" means a non-cash refund issued by Company to a
Cardholder of all or a portion of the amount of a Card Sale.

                  "Credit Slip" means evidence of a Credit in electronic or
paper form.

                  "Effective Date" means the date set forth in Section 4.4(a) of
this Agreement.

                  "Electronic Location" means a Company location at which there
is an Electronic Terminal.

                  "Electronic Terminal" means an electronic terminal or computer
capable of communicating by means of an on-line or dial-up electronic link
(whether routed through Bank's facilities or otherwise) with an Authorization
Center to obtain Authorization.

                  "Floor Limit" means the United States dollar amount designated
by Bank, as it may be changed from time to time, at or above which Authorization
must be obtained to make a Card Sale.

                  "Net Card Sales" means the total amount of Card Sales properly
remitted to Bank minus the total amount of Credits properly remitted to Bank.

                  "Operating Regulations" means the standard operating
procedures of Bank, as

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they may be changed by Bank from time to time in accordance with Section 2.4 of
this Agreement. The current version of the Operating Regulations is attached
hereto as Exhibit A. For purposes of this Agreement, the Operating Regulations
are deemed an integral part of this Agreement and references to this Agreement
will be deemed to include the Operating Regulations.

                  "Regular Revolving Card Plan" means all Card Plans other than
Special Credit Plans.

                  "Required Disclosures" means forms of credit disclosures and
disclosure documents provided by Bank which must be used by Company in
connection with advertising, marketing and promoting the Card Plan, accepting
Applications and making Card Sales.

                  "Sales Data" means the electronic data transmission of Card
transactions (e.g., Card Sales and Credits).

                  "Sales Slip" means evidence of a Card Sale in electronic or
paper form.

                  "Second Look Account" means an Account which did not qualify
for an Account under the Bank's standard credit granting criteria but which did
qualify for an Account under a higher risk - score model maintained by the Bank,
which shall have the sole and exclusive right to establish and modify credit
granting criteria for Second Look Accounts. Either party shall also have the
right to terminate the establishment of new Second Look Accounts at any time.

                  "Settlement" means the reimbursement to Company for the Net
Card Sales.

                  "Settlement Account" means the deposit account(s) at the
financial institution(s) designated by Company as the account(s) to be debited
and/or credited, as applicable, for the Settlement of Card transactions and the
payment of any fees and charges due hereunder.

                  "Special Credit Plan" means a Card Plan under which interest
is either waived or deferred for a period of time after the Card Sale. Payments
may or may not be required during the interest deferral or waiver period, and a
minimum purchase amount may be required. Special Credit Plans include without
limitation those described in Schedule E of this Agreement: "90 Days Same As
Cash".

                  "Store" means a retail store in the United States and its
territories owned and operated by Company.

         1.2.     CONSTRUCTION. Unless the context otherwise clearly indicates,
words used in the singular include the plural and words used in the plural
include the singular.

ARTICLE II - ISSUANCE OF ACCOUNTS AND ACCEPTANCE OF CARDS

         2.1      CONDITIONS OF OPENING ACCOUNTS. Subject to the terms and
conditions of this Agreement, Bank shall receive Applications for Card Accounts
and approve or decline Accounts in accordance with Bank's Account issuance
criteria.


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                  (a) WRITTEN APPLICATIONS. Applications which are received by
Bank through the mail and are not made contemporaneously with a sale will be
reviewed in accordance with Bank's customary practice for written Applications.

                  (b) APPLICATIONS WITH ACCOMPANYING SALE. Applications
transmitted to Bank in a mutually acceptable manner and format by Company's
employees in conjunction with a sale will be reviewed by Bank in accordance with
Bank's Account issuance criteria. Company shall be responsible for the
following:

                      (i) Providing all information required on
                  the Application which has been requested by Bank's
                  representative.

                      (ii) Obtaining positive identification and
                  verification of the person applying for the Account in
                  accordance with the Operating Regulations, which includes but
                  is not limited to obtaining the person's driver's license
                  number or state issued identification card number and social
                  security number.

                      (iii) Obtaining the signature on the
                  Application of all persons whose names will appear on the
                  Account or who will be responsible for the Account.

                      (iv) Upon either approval or decline,
                  sending the Application to Bank at the designated address
                  within five (5) Business Days.

                      (v) Entering the sale into Company's Electronic
                  Terminal. If requested to do so by Bank's representative,
                  Company's employee shall also enter into the Electronic
                  Terminal the approval code provided by Bank to Company.

                      (vi) Providing to each applicant a copy of the Hurley
                  State Bank Credit Card Agreement and any other Required
                  Disclosures Bank provides to Company for distribution to
                  applicants.

                  (c) INTERNET APPLICATIONS. Customers of Company who wish to
apply for a Card Account may do so via Company's Internet website, when such
becomes available. All Applications received by Bank via the Internet will be
processed only if all of the information requested on the website Application
form has been completed. Bank will request Customers who submit incomplete
Applications to provide missing information.

Failure to adhere to the above procedures may result in a Chargeback in
accordance with Section 2.10 of this Agreement.

         2.2      HONORING OF CARDS.

                  (a) CONDITIONS FOR HONORING CARDS. Subject to the terms and
conditions of this Agreement, Company agrees to accept the Card for payment of
Authorized Goods and Services in those instances when a Cardholder wishes to
charge the purchase of Authorized

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Goods and Services to his/her Account and Company shall not attempt to suppress
or discriminate against use of a Card by a Cardholder (except in accordance with
this Agreement). Company shall not knowingly permit Authorized Goods and
Services sold to commercial enterprises to be charged to Accounts. Company shall
accept the Card at all of its Stores in the United States and its territories
for the purchase of Authorized Goods and Services, provided the Sales Data
resulting from such acceptance of the Card is submitted to Bank in United States
dollars. Bank will advise Company if Bank develops the capability to accept
Sales Data in currencies other than United States dollars. In such event, Card
transactions may be made in such other currencies upon terms and conditions to
be mutually determined at that time. If any facility or service is operated on
Company premises under a franchise, lease or license from Company and such
franchisee, lessee or licensee (which is not a party to a merchant services
agreement with Bank) agrees with Company to accept Cards, Card transactions made
at such facility or service will be subject to the terms and conditions of this
Agreement and must be handled through Company as if Company had transacted such
Card transactions. Company shall be obligated to pay its franchisee, lessee or
licensee with respect to such Card transactions.

                  (b) COMMENCEMENT OF CARD ACCEPTANCE; PROMOTION OF CARD PLAN.
Acceptance of Cards by Company will commence on or about the date of this
Agreement or as soon thereafter as agreed to by the parties and will continue
until the termination of this Agreement. Company shall actively and consistently
promote, participate in and support the Card program and Card Plan throughout
the term of this Agreement. Company shall encourage customers to apply for Cards
and shall encourage Cardholders to use Cards for purchases of Authorized Goods
and Services. During the term of this Agreement neither Company nor any other
party on behalf of Company will enter into any arrangement or agreement with a
third party provider under which Company issues, sponsors, participates in or
accepts another private label credit card, or private label credit account; nor
shall Company or any other party on behalf of Company enter into any arrangement
or agreement with a third party provider under which Company issues, sponsors or
participates in the marketing of any cobranded credit card or credit account.
Notwithstanding the foregoing, nothing contained in this Agreement will be
construed to prohibit Company from accepting any major general purpose credit
card (e.g., NOVUS, American Express, MasterCard, Visa, Diner's Club and JCB) as
a means of payment by customers for purchases of Authorized Goods and Services.
Company agrees that Bank shall have the right to review, and approve or decline
each credit application submitted by a customer or prospective customer of
Company before such credit application is provided to any other party. Subject
to the foregoing sentence, Company may offer secondary sources of financing to
those of its customers that do not qualify for an Account, provided Company does
not issue, arrange to issue, or accept any private label credit card or private
label credit account in connection with such financing.

         2.3      ACCEPTANCE OF CARDS. Company shall accept each Card or valid
Active Account number presented by a Cardholder as payment for Authorized Goods
and Services provided that all of the following conditions are met with respect
to each Card Sale and that Company further complies with all of the procedures
set forth elsewhere in this Agreement and in the Operating Regulations relating
to the acceptance of Cards each time it makes a Card Sale:

                           (a)      The Card or valid Active Account number is
                  presented to


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                  Company on or before the expiration date, if any, shown on its
                  face;

                           (b)      The Card or valid Active Account number is
                  used as payment for Authorized Goods and Services purchased by
                  a Cardholder;

                           (c)      Company will not accept a Card or valid
                  Active Account number for the purpose of advancing money to a
                  Cardholder or paying money to a Cardholder for any amount that
                  is included in a Card Sale;

                           (d)      Company has followed the procedures for
                  the completion of Sales Slips as set forth in Section 2.5 of
                  this Agreement; and

                           (e)      Company has obtained Authorization for the
                  Card Sale if required pursuant to Section 2.6 of this
                  Agreement.


         2.4      OPERATING REGULATIONS. The Operating Regulations may be
changed by Bank from time to time upon not less than sixty (60) days prior
written notice to Company, provided, however, that changes which do not require
major systems or operational modifications and changes required for security
measures shall become effective as soon as possible following Company's receipt
of notice thereof but in all events shall become effective within ten (10) days
of Company's receipt of notice thereof. In the event of any conflict or
inconsistency between the terms of this Agreement and those of the Operating
Regulations, the former shall govern.

         2.5      COMPLETION OF SALES SLIPS.

                  (a) GENERAL REQUIREMENTS. For each Card Sale, Company shall
prepare a Sales Slip using a form that is mutually acceptable to Bank and
Company, E.G., a universal sales slip. Each Sales Slip must be legible and fully
completed with the information required under Section 2.5 of this Agreement, as
applicable. Company shall include all Authorized Goods and Services purchased in
a single transaction on one Sales Slip.

                  (b) MAIL/TELEPHONE/INTERNET ORDERS.  For each
mail/telephone/Internet order Card Sale, Company shall record the following on
the Sales Slip:

                      (i)   The date and location (city/state) of the Card
                  Sale, unless otherwise provided to Bank, E.G. batch reports,
                  etc.;

                      (ii)   A brief description of the Authorized Goods and
                  Services;

                      (iii)  The total amount of the Card Sale, including
                  tax;

                      (iv)   The Account number;

                      (v)    The expiration date, if any, of the Card;

                      (vi)   The Authorization number or code (where
                  applicable);


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                      (vii)  Company's merchant number, unless otherwise
                  provided to Bank, E.G. batch reports;

                      (viii) Work or daytime telephone number;

                      (ix)   The shipping address; and

                      (x)    The shipping date.

                  (c) RETAIL SALES. Each Sales Slip must be legible and fully
completed with the same information required for mail/telephone/Internet order
Card Sales (specified in Section 2.5(b) of this Agreement) excluding information
pertaining to a shipping address, work or daytime telephone number or shipping
date. Each Sales Slip relating to a Card transaction made at a retail location
must be imprinted to obtain a clear imprint of the Card; provided that in the
case of Sales Data which are electronically produced by Company, Company shall
not be required to obtain an imprint of the Card. A Sales Slip must be signed by
the Cardholder for each Card Sale at the time the Card Sale is made and in the
presence of an authorized representative or employee of Company. The signature
on the Sales Slip must be reasonably similar to the signature appearing on the
signature panel of the Card. After completion of the Card Sale, Company shall
provide a legible and completed copy of the Sales Slip to the Cardholder. If
Company fails to obtain the signature of the Cardholder on a Sales Slip and the
Cardholder has not authorized the Card Sale or denies the validity of the Card
Sale, the Card Sale shall be subject to Chargeback pursuant to Section 2.10 of
this Agreement.

         2.6      AUTHORIZATION.

                  (a) GENERAL REQUIREMENTS. In accordance with the terms of this
Section 2.6, Company must obtain Authorization for each proposed Card Sale at or
above the Floor Limit. For purposes of this Agreement, the purchase of one or
more items or other Authorized Goods and Services made by a Cardholder at one
Company Store and at one time will be deemed to constitute a single Card Sale.

                  (b) FLOOR LIMIT. The Floor Limit is $0. Bank may change the
Floor Limit upon notice to Company.

                  (c) OBTAINING AUTHORIZATION.

                      (i) ELECTRONIC LOCATIONS. To obtain Authorization for
                  Card Sales made at Electronic Locations, Company shall utilize
                  an Electronic Terminal in accordance with procedures
                  applicable for the use of that terminal. Company agrees that
                  the Electronic Terminals it uses will be those provided to
                  Company by Bank or its designee (at Company's expense) or will
                  be otherwise reasonably acceptable to Bank. At an Electronic
                  Location, if a referral code is displayed on an Electronic
                  Terminal, Company shall telephone Bank to obtain further
                  instructions, using a toll-free telephone number provided by
                  Bank for such purpose.

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                      (ii) NON-ELECTRONIC AUTHORIZATION. To obtain
                  Authorization when Bank's electronic capability to provide
                  Authorization or Company's electronic capability to obtain
                  Authorization is not operational, Company shall contact Bank
                  using a toll-free telephone number provided by Bank for such
                  purpose. If the Authorization Center approves the Card Sale,
                  Company will be given an Authorization code or number which
                  must be written on the Sales Slip.

                  (d) RIGHT OF CHARGEBACK. If Authorization for any Card Sale
is not obtained by Company, or requested by Company but declined by Bank, Bank
may process a Chargeback for such Card Sale pursuant to Section 2.10 of this
Agreement.

                  (e) CANCELLATION OF ACCOUNT/AUTHORIZATION. Once a consumer has
received the terms and conditions which apply to the credit card account, they
will have the option to not accept the terms and conditions and close their
Account. If this occurs, no sale can be posted to nor billed through the
Account. Bank will promptly notify Company and Company will be responsible for
making alternate payment arrangements with the consumer. In addition, at Bank's
expense, Bank will make available during Bank's normal authorization hours, a
toll-free number which Company may call in the event a previously authorized
Card Sale is canceled by the Cardholder.

         2.7      SETTLEMENT OF CARD TRANSACTIONS.

                  (a) REMITTANCE OF SALES DATA BY COMPANY. At least weekly,
Company shall remit Sales Data to Bank. All such remittances must be in Bank's
form and format. Remittances of Sales Data must contain all of the information
specified in this Agreement and the Operating Regulations. Upon receipt thereof,
Bank will balance and edit the data submitted and make appropriate adjustments
for errors or invalid or incomplete transactions. In the event all or a portion
of the required data is not received by Bank or such data is unreadable, Bank
shall not be required to process the Sales Data containing the missing or
unreadable data, but shall promptly inform Company or its designated agent of
the missing or unreadable data. Company shall be responsible for retrieving and
resubmitting the Sales Data in completed form. Company shall be responsible for
the loss, damage or destruction of Sales Data until such Sales Data is received
by Bank or by Bank's designated processor.

                  (b) OBLIGATION TO REIMBURSE COMPANY FOR SALES DATA. Subject to
Bank's right of Chargeback, Bank shall reimburse Company for all Card Sales
properly remitted by Company and received by Bank. Bank will pay Company an
amount equal to the total amount of Card Sales submitted to and received by
Bank, less the amount of Credits, if any, submitted by Company, plus or minus
the applicable amount, if any, for other adjustments to the amounts so
submitted. Bank will not be required to reimburse Company for any Card Sale not
submitted within sixty (60) days of the date of the Card Sale.

                  (c) METHOD AND TIMING OF SETTLEMENT. For each electronic
remittance of Sales Data received in Bank's form and format by 10:00 a.m. local
time on a Business Day at the location specified by Bank, Bank will use its best
efforts to initiate the appropriate credit or debit, as applicable, to the
Settlement Account through the Automated Clearing House Network


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or any other method, including FedWire, as mutually agreed to by the parties
("ACH Network") by the following Business Day. With respect to each such
remittance of Sales Data received by Bank after 10:00 a.m. local time on a
Business Day, Bank will use its best efforts to initiate the appropriate credit
or debit, as applicable, to the Settlement Account through the ACH Network by
the second Business Day after the date of receipt. Bank will not accept
remittance of Card transaction data in paper form (hard copy). Company hereby
(i) agrees to be bound by the terms of the operating rules of the National
Automated Clearing House Association, as in effect from time to time, and (ii)
authorizes Bank and its designated agents and representatives to initiate credit
or debit entries and adjustments to the Settlement Account. Bank shall not be
liable for any delays in receipt of funds or errors in Settlement Account
entries caused by third parties. The following obligations of Company will
survive the termination of this Agreement. Company shall not close the
Settlement Account without providing Bank at least five (5) Business Days prior
written notice of such closure and substitution of another account. Upon
termination of this Agreement, Company agrees to maintain the Settlement Account
with sufficient funds until such time as Bank has processed all Chargebacks and
other adjustments and Company agrees to permit Bank to credit and debit such
Settlement Account until all charges, Chargebacks and other adjustments are
settled as provided for in this Agreement. Company shall be solely liable for
all fees and costs associated with the Settlement Account. This authority will
remain in effect until five (5) Business Days after Bank receives written notice
from Company of its cancellation of such authorization, provided that in the
event of termination of this Agreement, Company agrees to maintain the
Settlement Account with sufficient funds until such time as Company and Bank
agree that all Chargebacks and other adjustments are processed and to permit
Bank to credit and debit such Settlement Account until all charges, Chargebacks
and other adjustments are settled as provided in this Agreement. Bank shall not
be liable to Company for any delays in receipt of funds or errors in credit
entries caused by Company or by third parties including, but not limited to, a
clearinghouse, Company's financial institution, or any agent of Company.

         2.8 CARDHOLDER CREDITS AND PAYMENTS. Unless specifically required by
law, Company shall not give cash refunds to any Cardholder in connection with a
Card Sale. For each Credit issued by Company, Company shall prepare and deliver
to the Cardholder a Credit Slip which Company shall complete in accordance with
the Operating Regulations. Company shall submit Sales Data evidencing each
Credit to Bank within seven (7) days after the Credit is issued in order that
the appropriate Credit may be entered on the Cardholder's Account. Company shall
be permitted to receive Cardholder payments to Bank at Company's retail
establishments.

         2.9 BILLING INQUIRIES AND CARDHOLDER DISPUTES. Bank will notify Company
on a current basis when a Cardholder has made a billing inquiry or filed a
billing error notice relating to a Card Sale made by Company. Company agrees to
investigate and make a good faith effort to resolve each billing inquiry or
dispute referred to it by Bank or received directly from a Cardholder. Within
fifteen (15) Business Days from the date Bank sends a billing inquiry or dispute
to Company, Company shall notify Bank in writing of the resolution thereof or
the action Company will take to resolve the billing inquiry or dispute. Company
shall provide Bank with all such information as Bank may reasonably request in
connection therewith.

         2.10     CHARGEBACK RIGHTS AND PROCEDURES.

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                  (a) CHARGEBACK RIGHTS. If Company has not complied with the
terms of this Agreement or with the Operating Regulations with respect to either
the opening of Accounts or a Card Sale made by Company, or if, at the end of the
fifteen (15) Business Day billing inquiry/dispute resolution period specified in
Section 2.9 of this Agreement, the billing inquiry or dispute is not resolved
(or Bank has not been informed of the resolution or the action Company will take
to resolve the billing inquiry or dispute), Bank may process a Chargeback to
Company for the amount of the Card Sale, the Account balance or the disputed
portion thereof, as applicable. If Bank processes a Chargeback and the disputed
amount is subsequently paid by the Cardholder, Bank will reimburse Company for
the disputed amount.

                  (b) METHOD OF RECOURSE. Bank is not required to pay Company
for a Card Sale which is being charged back. If Bank has already paid Company
for such Card Sale, Bank, at its sole discretion, may deduct the amount to be
charged back from the Settlement Account or offset such amount from a future
payment to Company. Any Chargebacks which are not paid by the aforesaid means
shall be due and payable by Company promptly on demand.

                  (c) COMPLIANCE WITH LAWS. Notwithstanding anything to the
contrary contained herein, in the event a Cardholder, in accordance with the
provisions of applicable state law or the federal Truth in Lending Act and
Regulation Z, as they may be amended from time to time, files with Bank a
billing error inquiry or alleges a quality dispute with respect to goods or
services purchased from Company, Bank has the right of Chargeback against
Company with respect to the Card Sale which is the subject of such inquiry or
dispute.

                  (d) EXCESSIVE CHARGEBACKS. If Chargebacks exceed 1.5% of the
total number of Card Sales submitted by Company with respect to an individual
Company Store in any calendar quarter, Bank reserves the right to assess, and
Company agrees to pay, a fee of $7.50 for each Chargeback in excess of the 1.5%
limit.

                  (e) NON-RECEIPT OF AUTHORIZED GOODS OR SERVICES. Bank may
offset from the Settlement Account the amount of any loss incurred by Bank which
results from a claim by a Cardholder that he or she did not receive a purchase
and receipt of such purchase is not evidenced by a valid cardholder's signature,
and was billed to the Cardholder's Account.


         2.11     REPRESENTATIONS AND WARRANTIES. Company makes the following
representations and warranties to Bank with respect to each Account, all Sales
Data remitted to Bank, and as to each Card transaction evidenced thereby. Each
and all of the representations and warranties made by Company will survive the
termination of this Agreement.

                  (a) The information set forth on each Application is accurate
and correct to the best of Company's knowledge, as provided by the applicant and
each Application has been completed in compliance with this Agreement and the
Operating Regulations.

                  (b) The Sales Data represents a bona fide sale made at a Store
or on the Internet by Company of Authorized Goods and Services, not previously
submitted and is originated by Company in compliance with this Agreement and the
Operating Regulations.


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         2.12     REPORTS. Bank shall supply Company with monthly report(s)
containing information regarding the Card program. Company may elect to receive
additional reports available from Bank at Bank's then current price for such
reports.

                               ARTICLE III - FEES

         3.1      FEES.

                  (a) For each Card Sale made by Company, Bank shall charge and
Company agrees to pay a fee in the amount set forth in Schedule E (the "Merchant
Fee"), which Merchant Fee will be subject to adjustment as provided herein and
in Schedule E. In addition, for each Card Sale made by Company on a Second Look
Account, Bank shall charge and Company agrees to pay to Bank a fee (in addition
to the Merchant Fee) in the amount set forth in Schedule E for each particular
card plan ("Supplemental Merchant Fee"). The Merchant Fee and Supplemental
Merchant Fee will be calculated in accordance with Section 3.1(c) of this
Agreement. Bank shall have the right to adjust the Merchant Fee and the
Supplemental Merchant Fee, upon not less than thirty (30) days prior written
notice to Company; provided, however, that Bank shall not adjust the Merchant
Fee more than one (1) time nor more than fifty (50) basis points in any twelve
(12) month period and that during the Initial Term, such Regular Revolving Plan
Merchant Fee shall not exceed 4.5%, net any adjustments to such fee based on
changes in the Prime Rate as provided in this Section 3.1(a). The Bank shall
provide Company with the reasons for any adjustments to the Merchant Fee at the
time such adjustments are made. The Assumptions upon which the Card Program is
based, are set forth in Schedule B. In addition, Merchant Fees are subject to
adjustment by Bank for changes in the Prime Rate as published in the "Money
Rates" section of THE WALL STREET JOURNAL.

                  (b) For each electronic remittance of Sales Data made to Bank
in accordance with Section 2.7(c) of this Agreement, Bank will determine the
amount of Card Sales made by Company and then calculate and collect the Merchant
Fee based on that amount.

                  (c) Bank may offset the amount of the Merchant Fee and any
other amounts owed by Company under this Agreement from the Settlement amount
due Company, or Bank may debit the Settlement Account in the amount of the
Merchant Fee and any other amounts owed by Company under this Agreement. If Bank
elects the former and the Settlement amount due Company is insufficient to cover
the Merchant Fee and any other amounts owed under this Agreement, Bank, at its
option, may offset the amounts owed under this Agreement or any remaining
portion thereof from subsequent amounts due Company or debit the Settlement
Account. Any amounts owed which cannot be paid by the aforesaid means shall be
due and payable by Company on demand.

                           ARTICLE IV - MISCELLANEOUS

         4.1      INDEMNIFICATION.

                  (a) INDEMNIFICATION BY COMPANY. Company shall be liable to and
shall indemnify, defend and hold harmless Bank and its officers, employees and
directors from any


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losses, damages, claims or complaints (including reasonable outside attorney's
fees and disbursements) incurred by Bank or its respective officers, employees
and directors arising out of:

                           (i)    Any claim, complaint or setoff made by or on
                  behalf of a Cardholder with respect to Card Sales or Credits
                  submitted by Company pursuant to this Agreement;

                           (ii)   Anything wrongfully done or not done by
                  Company in connection with the furnishing of any Authorized
                  Goods and Services purchased by Cardholders pursuant to this
                  Agreement;

                           (iii)  The death or injury to any person or the loss,
                  destruction or damage to any property arising out of the
                  furnishing by Company of any Authorized Goods and Services
                  purchased with the Card;

                           (iv)   Any claim or complaint of a third party in
                  connection with the use of any Company Mark on the Card or in
                  advertising, marketing, promoting or administering the Card
                  program and Card Plan;

                           (v)    Any breach by Company of an obligation under
                  this Agreement;

                           (vi)   Any Card transaction that does not represent
                  obligations of the Cardholder for the amounts in the
                  transaction and is not only for Authorized Goods and Services
                  actually sold and delivered or actually rendered (including
                  taxes) and does not involve any element of credit for any
                  other purpose.

                           (vii)  Any Sales Data that has been altered by
                  Company in any way that is not authorized by the Cardholder.

                           (viii) Any transaction that is not in compliance
                  with all applicable law except if same results from an act or
                  omission by Bank.

                           (ix) Any indebtedness represented by the Sales Data
                  that is pledged as collateral for payment of any indebtedness
                  or obligation of Company or any other person.

                           (x) Any knowledge or notice of information that
                  Company has that would lead it to believe that the
                  enforceability or collectibility of the Sales Data is in any
                  manner impaired.

                           (xi) With respect to any transaction in which a Card
                  is not physically presented to Company, any Card and Account
                  information contained in the Sales Data that is not accurate
                  and correct.


                  (b) INDEMNIFICATION BY BANK. Bank shall be liable to and shall
indemnify,


                                       12
<PAGE>


defend and hold harmless Company and its officers, employees and directors from
any losses, damages, claims or complaints (including reasonable outside
attorney's fees and disbursements) incurred by Company or its officers,
employees and directors arising out of any claim or complaint by a Cardholder
with respect to anything wrongfully done or not done by Bank in connection with
such Cardholder's Account. Notwithstanding the foregoing, the indemnification by
Bank shall not apply to any claim or complaint relating to Company's failure to
resolve a billing inquiry or dispute with a Cardholder.

                  (c) NOTICE OF CLAIM. If any claim is made or any suit or
action is commenced against the indemnified party in respect of which
indemnification may be sought under this Section 4.1, the indemnified party
shall promptly give the indemnifying party written notice thereof and the
indemnifying party will be entitled to assume the defense thereof and to take
over and control the settlement thereof (with counsel satisfactory to the
indemnified party) at the indemnifying party's cost and expense by giving
written notice of its intention to do so to the indemnified party within thirty
(30) days after receipt by the indemnifying party of notice of the claim, suit
or action. If the indemnifying party assumes the defense of any claim, suit or
action, it shall not settle such claim, suit or action unless the indemnified
party consents to such settlement. Notwithstanding the assumption by the
indemnifying party of the defense of any claim, suit or action, the indemnified
party will be permitted to join in the defense thereof and to employ counsel at
its own cost and expense. If the indemnifying party fails to notify the
indemnified party of its desire to assume the defense of any claim, suit or
action or notifies the indemnified party that it will not assume the defense
thereof, then the indemnified party may assume the defense thereof, at the
indemnifying party's cost and expense. Any settlement or compromise of, or any
final judgment entered on or in, any claim, suit or action which the
indemnifying party declines to defend in accordance with this Agreement, will be
deemed to have been consented to by, and will be binding upon, the indemnifying
party as fully as if the indemnifying party had assumed the defense thereof and
a final judgment or decree had been entered in such suit or proceeding, or with
regard to such claim, by a court of competent jurisdiction for the amount of
such settlement, compromise, judgment or decree. 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, suit or action.

                  (d) PAYMENT OF INDEMNIFIED AMOUNTS. The indemnified party
shall notify the indemnifying party of any amounts due and owing by the
indemnifying party under this Section 4.1 and the indemnifying party shall pay
such amounts to the indemnified party within thirty (30) after receipt of such
notice.

                  (e) SURVIVAL. Except for this Section 4.1 and Sections 2.7,
2.11 and 4.7, no other terms of this Agreement will survive the termination of
this Agreement.

         4.2      CARD PLAN PROMOTION; ADVERTISING AND SERVICE MARKS.

                  (a) LIMITED LICENSE. Company hereby authorizes Bank for
purposes of this Agreement to use Company Marks on the Card and in advertising,
marketing, promoting and administering the Card program and Card Plan, subject
to Company's periodic reasonable review of such use and to Company's reasonable
specifications directly related to the legal maintenance of Company Marks. In
addition, Company authorizes Bank and Bank's affiliates to


                                       13
<PAGE>


identify Company as a client in advertising and promotional material, and to use
pictures or representations of the Card.


                  (b) PROMOTION OF THE CARD PLAN. Company shall actively and
         consistently promote, participate in and support the Card program and
         Card Plan throughout the term of this Agreement. Company shall
         prominently display at each of its Stores advertising and promotional
         materials relating to the Card Plan, including without limitation,
         take-one Applications for the Card. Further, Company shall advertise
         and promote the Card Plan at least to the same extent as it advertises
         and promotes the most favored of other credit cards, charge cards or
         credit plans. Company shall only use or display promotional materials
         relating to the Card Plan in accordance with the Operating Regulations
         and in accordance with any specifications provided by Bank. Company
         shall use and distribute Required Disclosures, as such may change from
         time to time, in accordance with Bank's requirements. Bank and Company
         agree to cooperate in the development of advertising, marketing, and
         promotional materials (in any media form), as well as operating forms
         and other materials which promote the Card and any Card related
         programs (collectively or individually, the "Promotional Materials").
         Company acknowledges and agrees that it will present all Promotional
         Materials to Bank, in writing, for Bank's review and written approval
         as follows:

                           (i) Company will deliver Promotional Materials to
                  Bank at least five (5) Business Days prior to the last date
                  upon which preliminary changes can be made to such materials.
                  Company will allow itself sufficient time to make changes as
                  required by Bank including time to provide Bank with the
                  revised Promotional Materials for Bank's review and written
                  approval before such materials are utilized.

                           (ii) Company will deliver Promotional Materials in
                  the form and/or format media as they are intended to be
                  utilized. Non-printed Promotional Materials shall be
                  accompanied by a written transcript.

                           (iii) Company acknowledges and agrees not to use,
                  publish, or distribute (in any media form) any Promotional
                  Materials without the prior written approval of Bank.

                           (iv) Notwithstanding anything else to the contrary
                  herein, (1) Company will be solely responsible for, and will
                  indemnify Bank (subject to Section 4.1(a)) against, any claim
                  and any expense incurred by Bank as a result of Company's use
                  of materials not approved by Bank in accordance with the terms
                  of this Section 4.2; and (2) Bank will have the option to
                  terminate this Agreement immediately if Bank reasonably
                  believes that Company's failure to comply with the terms of
                  this Section 4.2 places Bank at risk.

                  (c) CARDHOLDER SOLICITATION. For purposes of mutually agreed
upon solicitations for prospective Cardholders, Company shall provide Bank with
its customer lists and any other lists of consumers that Company owns or has a
right to use. Bank and Company


                                       14
<PAGE>


shall mutually agree upon plans for solicitation of Company's customers. Company
shall be responsible for the costs of providing such lists and any solicitations
which may be mutually agreed upon by Bank and Company. Any such Cardholder
solicitations of Company's customers or any other consumers by Bank shall be in
accordance with Bank's policies and procedures and subject to Bank's credit
analysis and determination. Cardholders' names and addresses are the property of
Bank. Company may use Cardholder names and addresses to conduct promotional
programs for Authorized Goods and Services during the term of this Agreement,
upon notifying Bank in writing prior to such use. Cardholder information may be
used by Bank for such purposes as it chooses so long as Bank does not use such
information in a manner that is injurious to Company's retail business. Bank and
its affiliates may from time to time make the products or services of third
parties available to Cardholders with Company's written approval.
Notwithstanding the foregoing, Bank has the right to solicit Cardholders to
purchase credit insurance four (4) times each calendar year. The dates upon
which such solicitations will occur shall be mutually agreed upon by the
parties.

                  (d) PROMOTIONAL FUNDS. Bank and Company agree to establish a
Promotional Fund for Card promotions and marketing activities related to the
Card Plan ("Marketing Activities"). Bank shall make available $200,000 each
calendar year, including the calendar year 2000, for joint Marketing Activities
for so long as the projected Annual Net Card Sales of Company as projected by
Bank, based upon the previous twelve (12) months Net Card Sales and projected
growth, are greater than or equal to $60,000,000 but less than or equal to
$67,000,000. When Company's projected Annual Net Card Sales are greater than
$67,000,000 but less than or equal to $85,000,000, Bank shall calculate the
contribution to the Promotional Fund as follows: multiply projected Annual Net
Card Sales by .0030. If Company's projected Annual Net Card Sales exceed
$67,000,000 the calculated contribution described in this paragraph will be
provided to the Promotional Fund in place of, not in addition to, the $200,000.
When Company's projected Annual Net Card Sales are greater than $85,000,000 but
less than $150,000,000, Bank shall calculate the contribution to the Promotional
Fund as follows: multiply projected Annual Net Card Sales by .0040. When
Company's projected Annual Net Card Sales are greater than or equal to
$150,000,000, Bank shall calculate the contribution to the Promotional Fund as
follows: multiply projected Annual Net Card Sales by .0045. On a semi-annual
basis, Bank shall review the actual Annual Net Card Sales of Company to
determine whether any adjustments regarding Bank's contribution to the
Promotional Fund are required for the remainder of the calendar year. Bank shall
only contribute to the Promotional Fund, provided Company contributes the same
amount during such period for such purpose. Bank and Company shall mutually
agree, in writing, upon the plans and cost for Marketing Activities prior to the
expenditure of amounts in the Promotional Fund. The party responsible for the
agreed upon Marketing Activity shall provide the funds required for the activity
and invoice the other party for the required contribution. In addition, Bank
shall contribute fifty percent (50%) of all revenue earned by Bank directly from
any fees or commissions paid by vendors whose products or services are sold to
Cardholders using inserts with monthly billing statements, with the exception of
products or services related to credit insurance. Any amounts in the Promotional
Fund that are not used for Marketing Activities during any year of the Initial
Term or any Subsequent Term will be returned to each party at the end of such
period on the same percentage basis as the amounts were contributed by each
party. Any amounts remaining in the Promotional Fund at the termination of this
Agreement will be returned to each party on the same percentage basis as the
amounts were contributed by each party.


                                       15
<PAGE>


         4.3      BOOKS AND RECORDS. Company shall retain an original copy of
each Sales Slip and Credit Slip for one hundred and eighty (180) days following
the date of the Card Sale and a microfilm or other copy thereof for a total of
seven (7) years. Company shall send to Bank the original or a legible copy of
any Sales Slip, Credit Slip or any other record relating to this Agreement
retained by Company within fifteen (15) Business Days of a request from Bank. In
the event of a cardholder dispute pertaining to the Authorized Goods and
Services for which Company does not send Bank the requested information as
described in the Section 4.3, Bank shall Chargeback the amount of such Sale to
Company.

         4.4      TERM AND TERMINATION.

                  (a) TERM. This Agreement will be effective as of July 1, 2000
("Effective Date") when executed by authorized officers of each of the parties.
Subject to earlier termination as provided herein, this Agreement (i) will
remain in effect for a period of five (5) years from the Effective Date
("Initial Term"), and (ii) thereafter will continue for additional three (3)
year periods ("Subsequent Term(s)") unless either party provides written notice
of termination at least one (1) year prior to the end of the Initial Term or any
Subsequent Term. The termination of this Agreement will 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 otherwise be terminated:


                           (i) by Bank or Company upon notice to the other in
                  the event the other party elects to wind up or dissolve its
                  operation or is wound up and dissolved; becomes insolvent or
                  repeatedly fails to pay its debts as they become due; makes an
                  assignment for the benefit of creditors; files a voluntary or
                  involuntary petition in bankruptcy or for reorganization or is
                  adjudicated as bankrupt or insolvent; or has a liquidator or
                  trustee appointed over its affairs and such appointment
                  continues for more than thirty (30) days.

                           (ii) by Bank or Company upon notice to the other
                  party in the event (1) the other party fails to comply in any
                  material respect with any representation, warranty, term or
                  obligation under this Agreement; or (2) the other party
                  suffers a material adverse change in its business, financial
                  condition, business practices, products or services.

                           (iii) by Bank or Company upon not less than thirty
                  (30) days notice to the other in the event the other
                  materially breaches its obligations hereunder provided that
                  such termination will be deemed ineffective if the breaching
                  party cures its breach within the thirty (30) day period.

                           (iv) by Bank upon not less than thirty (30) days
                  prior written notice to Company in the event (1) the aggregate
                  Net Card Sales made by Company during any twelve (12) month
                  period decrease by more than twenty percent (20%) from the
                  aggregate Net Card Sales made by Company during the same


                                       16
<PAGE>


                  period of the prior year; or (2) Company or Company's parent
                  sells, merges, consolidates or transfers twenty percent (20%)
                  or more of Company's business or assets without obtaining
                  Bank's prior written consent, as required under Section 4.11
                  of this Agreement.

                           (v) by Company upon six (6) months prior written
                  notice to Bank, if Bank meets three or less of the Performance
                  Standards set forth in Schedule D ("Performance Standards")
                  more than five (5) months in any twelve (12) month period.
                  Such Performance Standards are subject to adjustment by Bank
                  based on changes in the demographics of Company's applicants
                  or economic issues affecting the credit card industry
                  generally. Company shall have the right, upon request, to
                  inspect the books, records or any related source information
                  utilized by Bank for purposes of reporting Performance
                  Standards results to Company. Prior to any such adjustment,
                  Bank shall obtain Company's prior written consent, which
                  consent shall not be unreasonably withheld or delayed.


                  (c) TERMINATION OF CARD ACCEPTANCE. Bank upon notice to
Company may elect to terminate acceptance of the Card at a particular Company
Store if acceptance of the Card at such Store is subject to high fraudulent
activity, excessive Chargebacks (that is, in excess of 1.50% of the total number
of Card Sales) or other course of business conduct that is injurious to the
business relationship between Bank and Company. Termination of Card acceptance
at an individual Company Store will not affect this Agreement unless such
termination materially affects the volume of Card Sales made by Company, in
which event Bank may elect to terminate this Agreement upon not less than thirty
(30) days prior written notice to Company.

                  (d) DUTIES UPON TERMINATION. Upon termination of this
Agreement, all amounts payable by either party shall be due and payable in full
without demand or notice of any kind from the other party and Company shall
promptly submit to Bank all Sales Data for Card transactions made up to the date
of termination. Bank shall cooperate with Company in transferring any necessary
Account data and other relevant data to Company or its designees at Company's
cost, and shall perform its duties hereunder to the best of its ability
notwithstanding such notice of termination.

                  (e) PURCHASE OPTION. If this Agreement is terminated by Bank,
(except under paragraphs 4.4(b)(I), (ii), (iii), (iv), 4.4(c) or 4.11), or by
Company pursuant to its rights of termination under this Agreement, Company
shall, upon at least sixty (60) days prior written notice to Bank, given prior
to the date termination is to be effective, have the right to purchase from
Bank, all of the outstanding Card receivables (subject to the terms of any then
current securitization agreements of Bank) at the then current value as
determined by Bank. In the event that Company does not agree with the current
value as determined by Bank, the parties shall retain the services of a
designated third party which shall be an agreed upon independent public
accounting firm that is one of the five (5) largest recognized public accounting
firms. The agreed upon third party shall conduct the appraisal in accordance
with generally accepted appraisal standards as promulgated by the American
Society of Appraisers. The expense of such appraisal by such third party shall
be paid by Company. Bank and Company agree to


                                       17
<PAGE>

provide the designated third party access to information reasonably necessary to
assist in the valuation. Such information shall be deemed confidential provided
that Company may share such valuation with a bona fide prospective purchaser,
provided that such prospective purchaser first executes a confidentiality
agreement provided by Bank. The purchase shall be under such terms and
conditions that are mutually acceptable to Bank and Company, provided that Bank
shall not be required to accept as the purchase price less than 101% of the
value of all of the outstanding Card receivables as of the effective date of the
termination and that this Agreement shall remain in effect until such purchase
is consummated. In the event that Company does not purchase the outstanding Card
receivables as provided in this Section 4.4(e), Bank shall have the right to use
such Card receivables in any manner Bank deems appropriate, provided however;
during the eighteen (18) months immediately following the date termination is
effective, Bank shall not sell such receivables to a third party that is
engaged, as its primary business, in any business that directly competes with
Company's primary business.

         4.5 RESERVE ACCOUNT. If any event arises that would be a basis for
termination of this Agreement by Bank under paragraph 4.4(b)(i), Bank may
immediately establish a reserve account ("Reserve") against potential liability
to Cardholders for Credits and refunds for advance Card Sales. The amount of
such Reserve shall be determined by Bank based on Company's Chargeback history.
Company shall immediately pay to Bank the amount of such Reserve, or Bank may
debit the Settlement Account or withhold Settlement until the Reserve is fully
funded. Company agrees that Bank may set off against the Reserve any Credits,
Chargebacks or adjustments that Company does not or is unable to satisfy through
Settlement. Bank will release all remaining amounts held in the Reserve not
later than two hundred ten (210) days after the termination date of this
Agreement, upon satisfaction of all Company's obligations to Bank. Bank will
provide Company with an accounting of any amounts withdrawn from the Reserve.

         4.6 STATUS OF THE PARTIES. In performing their responsibilities
pursuant to this Agreement, Bank and Company are in the position of independent
contractors. This Agreement is not intended to create, nor does it create and
shall not be construed to create, a relationship of partner or joint venture or
an association for profit between Bank and Company. Further, notwithstanding
anything to the contrary contained in this Agreement, any third party designated
by Company to perform obligations or functions of Company under this Agreement,
including without limitation, obtaining Authorization or performing data
capture, remittance or Settlement functions, will be subject to the approval of
Bank and will be deemed to be the agent of Company for all such purposes and not
the agent of Bank and Company shall be fully liable for the fees and actions of
any such third party with respect to the performance of such functions.

         4.7 FORCE MAJEURE. Neither party to this Agreement will 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 causes beyond the
control and without the fault or negligence of such party. Such causes may
include, but are not limited to acts of God or of the public enemy, acts of
civil or military authority, fires, strikes, unavailability of energy resources,
delay in transportation, 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. The disabled party shall promptly
and in writing advise the other party if it is unable to perform due to a force
majeure event, the expected duration of such inability to perform, and of any
developments (or changes therein) that appear likely to affect the ability of
that party to perform any of its obligations hereunder in


                                       18
<PAGE>

whole or in part.

         4.8 CONFIDENTIALITY. In performing its obligations under this
Agreement, each party may have access to and receive certain confidential or
proprietary information about the other party, including, but not limited to:
such party's marketing philosophy and objectives, competitive advantages and
disadvantages, Cardholder and customer names and addresses, financial results,
technological development, Store locations, sales volume(s), merchandise mix or
other information of the business or affairs of each party, its parent company,
or its affiliated and subsidiary companies, which that party reasonably
considers confidential and/or proprietary (collectively referred to as
"Confidential Information"). Each party agrees that it will reveal such
Confidential Information only to those of its directors, officers, employees
(or, with regard to Company, directors, officers or employees of any of its
operating divisions/subsidiaries which accept or may consider accepting the
Card, and, with regard to Bank, directors, officers, employees of Bank, or its
affiliates which are involved in the development of the Card program and Card
Plan) who are engaged in the implementation of policies, programs or procedures
with regard to the acceptance of the Card by Company. Each party agrees not to
use such Confidential Information nor to disclose Confidential Information to
any third party, except as may be necessary for that party to perform its
obligations pursuant to this Agreement and except as may be agreed upon by the
parties. If either should disclose Confidential Information to a third party,
such party shall cause said third party to agree to the confidentiality
provisions set forth in this Section 4.8.

         Confidential Information does not include information in the public
domain, information already known by the party receiving the information prior
to commencing the discussions that led to this Agreement, and information
lawfully obtained from a third party. The terms of this Section 4.8 will survive
the termination of this Agreement.

         4.9 ACCESS TO CARDHOLDER LIST. Company may request, on a monthly basis,
from Bank the names and addresses of Cardholders who have opened Accounts at
Stores. With respect to any request more frequently than once per calendar
month, Bank will charge and Company agrees to pay a fee in the amount set forth
in Schedule A. Company may only use such Cardholder information in connection
with sales promotions of Authorized Goods and Services or Company may sell such
information to a third party that is mutually agreed upon by Bank and Company
provided such third party is not engaged in a business that competes either
directly or indirectly with any business that either Bank or Company or any of
their affiliates may be engaged in. Bank and Company agree to share equally in
any revenue generated by the sale or use of the Cardholder list to a third party
as provided in this Section 4.9. Except as specifically provided herein, during
the term of this Agreement any other use of such Cardholder information by
Company including, without limitation, the disclosure or sale of such
information to third parties, is prohibited and is subject to the
confidentiality provisions of Section 4.7 of this Agreement.

         4.10 FINANCIAL INFORMATION. At least annually, upon written request by
Bank, Company shall provide to Bank audited financial statements prepared for
Company by an independent public accounting firm. Quarterly, upon written
request by Bank, Company shall provide to Bank quarterly financial statements
prepared by or for Company.


                                       19
<PAGE>


         4.11 ASSIGNABILITY; SUCCESSORS AND ASSIGNS. This Agreement and any of
the rights, interests and obligations of either of the parties hereunder may be
assigned to a parent, subsidiary, or affiliate of either party, provided that
any such assignee shall have as of the date of assignment a financial net worth
equal to or greater than the assigning party as of the Effective Date. Bank may
assign this Agreement to a third party upon the sale of all or substantially all
of its assets or stock to such third party. This Agreement may not otherwise be
assigned without the prior written consent of the non-assigning party, which
consent shall not be unreasonably withheld or delayed. The rights and
obligations of the parties hereto will inure to the benefit of and will be
binding upon the successors and permitted assigns of each of them. Company shall
notify Bank and obtain Bank's written consent before Company or its parent
corporation, if any, is purchased by another entity or agrees to merge or be
consolidated into or transfer all or substantially all of either of their
respective assets to another entity.

         4.12 AMENDMENT. Except as otherwise provided herein, neither this
Agreement nor any of its provisions will be amended or modified except in
writing executed by a duly authorized officer of each party.

         4.13 SEVERABILITY. If any provision, or portion thereof, of this
Agreement is held invalid, illegal, void or unenforceable by reason of any rule
or law, administrative order, judicial decision or public policy, all other
provisions of this Agreement will nevertheless remain in full force and in
effect.

         4.14 ENTIRE AGREEMENT. This Agreement, including the Operating
Regulations and any schedules, exhibits and documents referenced herein,
constitutes the entire agreement between the parties in connection with the Card
program and Card Plan and supersedes all prior agreements, supplements,
negotiations and communications on such subject matter.

         4.15     GOVERNING LAW.  This Agreement will be governed by and
construed in accordance with the laws of the State of South Dakota.

         4.16 APPLICABLE LAW OR REGULATION. It is expressly understood that
changes in the performance of either party's obligations under this Agreement
necessitated by a change in interpretation of any applicable federal or state
statute or regulation will not constitute a breach of this Agreement.

         4.17 WAIVERS. Neither party will be deemed to have waived any of its
rights, powers or remedies under this Agreement unless such waiver is approved
in writing by the waiving party.

         4.18 NOTICES. Whenever notice or demand under this Agreement is given
to or made upon either party by the other party, such notice or demand must be
given in writing, either (i) by depositing it in the United States mail
addressed to such party at its address as set forth below, with postage thereon
prepaid, and any notice or demand so mailed will be deemed to have been given at
the time when it was mailed, or (ii) by courier, telecopier, or similar method,
and such notice or demand will be deemed to have been given when the writing or
other form of notice or demand is either personally delivered to the party or
delivered to the address set forth below. Notwithstanding the foregoing, notice
of intent to terminate this Agreement and notice of default must be sent by
certified or registered mail, return receipt requested.


                                       20
<PAGE>

If to Bank:                         Hurley State Bank
                                    1503 East 10th Street
                                    Sioux Falls, South Dakota  57103
                                    Attn:  Senior Vice President

With a copy to:                     Associates Commerce Solutions, Inc.
                                    Four Parkway North
                                    Deerfield, Illinois  60015
                                    Attn:  Vice President - Controller

If to Company:                      The Children's Place Retail Stores, Inc.
                                    915 Secaucus Road
                                    Secaucus, New Jersey 07094
                                    Attn: CFO

With a copy to:                     The Children's Place Retail Stores, Inc.
                                    915 Secaucus Road
                                    Secaucus, New Jersey  07094
                                    Attn: General Counsel


         EITHER PARTY MAY CHANGE THE ADDRESS TO WHICH NOTICE MUST BE SENT BY
GIVING WRITTEN NOTICE OF SUCH CHANGE TO THE OTHER PARTY IN THE MANNER PROVIDED
HEREIN.


         4.19 NO THIRD-PARTY RIGHTS. Nothing in this Agreement shall create or
be deemed to create any third-party beneficiary rights in any person not party
to this Agreement.

         4.20 CAPTIONS. The captions used in this Agreement have been inserted
for convenience and for reference only and will not be deemed to limit or define
the text of this Agreement.

         4.21 COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which will constitute an original but all of which will
constitute one and the same Agreement.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.


THE CHILDREN'S PLACE RETAIL                   HURLEY STATE BANK
STORES, INC.                                  (Accepted at its Home Office)

By:    /s/   Steven Balasiano                 By:    /s/   Phil Layher
       -----------------------------------       -------------------------------

Title:  Vice President and General Counsel    Title:  Senior Vice President
        ----------------------------------            --------------------------


                                       21
<PAGE>


                                   SCHEDULE A

                                      FEES

<TABLE>
<CAPTION>
                                    ITEM                                               AMOUNT
                                    ----                                               ------
<S>        <C>                                                                   <C>
1.         In-store forms, including Applications,                               Cost plus handling
           point-of-sale forms, Sales Slips and Credit Slips with
           the exception of changes to any of the forms in this
           paragraph initiated by Bank

2.         Each tape file of Cardholder names and addresses                      $150.00 per request
           in excess of one (1) per month

3.         System changes requested by Company                                   At Bank's cost

4.         Business reply mail and special handlings                             Pass-through costs
                                                                                 and Expenses
</TABLE>



                                       22
<PAGE>





                                   SCHEDULE B

                                   ASSUMPTIONS


<TABLE>

<S>        <C>                                                 <C>

1.         Account Application volume                          314,300 Applications each year

2.         Account Application processing                      100% of Applications* that are
                                                               processed at the point of sale for
                                                               submission through remote entry
                                                               application processing

3.         New Account activation rate                         85%

4.         Average number of Card Sales per
           Active Account each year                            4

5.         Average annual Card Sales per Active Account         $300

6.         Average amount of each Card Sale ticket              $78 for first purchase
                                                                $56 for subsequent purchases

7.         Percentage of aggregate regular revolving
           credit Account balances that incur finance charges   79%

8.         Minimum annual percentage rate applicable to
           Accounts                                             21.96%

9.         Average outstanding balance per Active Account       $135

10.        Aggregate Net Card Sales by Company under
           the Card program                                     $64,000,000

11.        Annual net charge-off rate                           Not to exceed 8.0% during the first
                                                                year of the Initial Term

12.        Special Credit Plan Card Sales Volume                Less than ten percent (10%) of total
                                                                Net Card Sales in any twelve (12)
                                                                month period
</TABLE>


  * provided that Bank's processing system is available by remote entry.



                                       23
<PAGE>



                                   SCHEDULE C


                                  COMPANY MARKS


                                       24
<PAGE>



                                   SCHEDULE D

                              PERFORMANCE STANDARDS


  1.  Monthly Average Speed of Answer for New Accounts:            40 seconds

  2.  Monthly Average Speed of Answer for Phoned-In
      Authorizations:                                              35 seconds

  3.  Monthly Average Speed of Answer for Customer Service:        50 seconds

  4.  Monthly Average Abandon Rate:                                5%

  5.  Minimum Year-To-Date Average Approval Rate:                  50%


                                       25
<PAGE>



                                   SCHEDULE E



  MERCHANT FEE

  1.       Regular Revolving Plan:

  Bank shall charge and Company agrees to pay a Merchant Fee equal to 3.49% of
  the Net Card Sale. On or around January 1, of each calendar year for the
  Initial Term and any Subsequent Terms, Bank shall adjust the Merchant Fee for
  the immediately following calendar year according to the chart below. Such
  adjustments shall be based on Net Card Sales for the immediately preceding
  calendar year.

  PREVIOUS CALENDAR YEAR NET CARD SALES                     MERCHANT FEE
  -----------------------------------------------           ------------
  $         0.00            -         85,000,000               3.49%
  $         85,000,001      -        115,000,000               3.24%
  $        115,000,001      -        150,000,000               2.99%
  $        150,000,001      -        175,000,000               2.74%
  $        175,000,001      +                                  2.49%


  2.       Special Credit Plans:
           90 Days Same As Cash               Current Merchant Fee plus 2.46%
                          WITH A $150 MINIMUM PURCHASE


Supplemental Merchant Fees

  For each Card Sale made on a Second Look Account, the Bank shall charge and
  Company agrees to pay, in addition to the Merchant Fee set forth above, a
  Supplemental Merchant Fee of 4.00% of each Net Card Sale.




                                       26
<PAGE>



                                    EXHIBIT A

                                HURLEY STATE BANK
                              OPERATING REGULATIONS

                                                                 REVISED 7/30/99

1001     COMPANY SERVICE CALLS

         Bank, directly or through its servicer will staff a service department
         to handle all new Accounts, Authorization and Cardholder inquiries. The
         service department will handle Cardholder inquiries from 9:00 a.m. to
         5:00 p.m. (local time), Monday through Friday, on all Business Days.

1002     CARD LOGO

         Company will properly display the appropriate Card logo on promotional
         materials to inform the public that the Card will be honored at
         Company's place(s) of business. Use of decals, signs, and print and
         broadcast materials which bear the Card logo must comply with the
         specifications provided to Company. Company may use the Card logo or
         the Card name or representations thereof, on promotional, print or
         broadcast materials to indicate that the Card is accepted. All
         advertisements for the Card Plan or promotional uses of the Card must
         be done in accordance with the Merchant Services Agreement.

1003     ALTERED AND COUNTERFEIT CARDS

         Company's employees and representatives should be familiar with the
         appearance of a valid Card and the validity of Card Account numbers as
         issued by Bank and must check each Card and Card Account number
         presented for signs of counterfeiting or alterations. Company's
         employees and representatives should exercise reasonable care in
         checking each Card and Card Account number. Bank may issue a Chargeback
         if Company's employees or representatives process a Card Sale with
         invalid Cards or Card Account numbers. [Chargeback Code: 19]


1004     PREPARATION OF SALES SLIP AND CREDIT SLIP

         Company's employees and representatives must provide the Cardholder
         with a completed copy of the Sales Slip or Credit Slip at the time of
         each completed Card transaction. For purchases made over the telephone,
         via Company's Internet website or through Company's catalog, if
         applicable, Company's employees and representatives must provide the
         Cardholder with a completed copy of the Sales Slip or Credit Slip with
         the merchandise. Sales Slips or Credit Slips must contain the following
         information:

         1.     The Cardholder's Account number.
         2.     Company's name and store location (city/state).


                                       27
<PAGE>


         3.     The description of merchandise or service purchased.
         4.     The total amount of the transaction (including sales tax).
         5.     The transaction date.
         6.     The Cardholder's signature. (For telephone orders, Internet
                order, facsimile orders and mail orders without the Cardholder's
                signature must designate the words "phone order", "Internet
                order," "fax order" or "mail order" in the signature block.) The
                signature block must never be left blank.
         7.     Authorization code.
         8.     For credits, original sales date and reason for refund.
         9.     Company's Merchant Account number.
         10.    "Ship to" address, if applicable.

1005     AUTHORIZATION REQUIREMENTS

         Company will inform its franchisees, participating merchants,
         licensees, independent marketers or dealers, if any, that Cardholders
         may only use their Account or the Card for personal, family, household
         and charitable purposes. Bank may issue a Chargeback if Company's
         employees or representatives process a Card Sale in violation of the
         above stated consumer use. [Chargeback Code: 20]

         Bank, directly or through its servicer will provide Authorization
         services to Company's locations located within the United States.
         Company's employees and representatives will obtain an electronic
         Authorization using a point-of-sale terminal certified by Bank or its
         servicer. In the event Authorizations cannot be obtained
         electronically, each Operations Center will provide telephone
         Authorizations through the Authorization department. Bank will advise
         Company of the Authorization department's business hours. Company's
         employees and representatives must enter the following information into
         the terminal for electronic Authorization:

         1.     The Cardholder's Account number.
         2.     The total amount of the transaction (including sales tax).

         If Company's employees and representatives cannot obtain an electronic
         Authorization, Company's employees and representatives must obtain
         Authorization by telephone from the Authorization department, and must
         provide the following information to the Authorization department:

         1.     The Cardholder's Account number.
         2.     The total amount of the transaction (including sales tax).
         3.     Company's merchant account number.
         4.     Credit Plan number, if applicable.

         Company's employees or representatives must enter the above information
         into the terminal and include the Authorization code provided by the
         Authorization department.

1006     REQUEST FOR NEW ACCOUNT AT POINT-OF-SALE


                                       28
<PAGE>

         For applications taken at Company's retail locations the applicant must
         complete the application in its entirety, and sign the application.
         Both applicants must sign the application if it is a request for a
         joint Account. Company's employees or representatives must provide a
         copy of the Hurley State Bank Cardholder Agreement (the "Cardholder
         Agreement") to the applicant. If Company's employees or representatives
         fail to provide a copy of the Cardholder Agreement at the
         point-of-sale, Bank may issue a Chargeback if: (i) the applicant
         challenges or disputes the terms of the Cardholder Agreement and
         alleges that he/she did not receive the Cardholder Agreement, and (ii)
         Bank is unable to enforce collection because Company's employees or
         representatives allegedly failed to provide the Cardholder with a copy
         of the Cardholder Agreement. [Chargeback Codes: 10, 21]

         Company's employees or representatives must ask the applicant (both
         applicants if a Joint Account) for two (2) pieces of identification to
         verify the applicant's identity. For applicants residing in all states
         or territories except New Jersey, the first piece of identification
         must have the applicant's picture on it and must be a valid (as
         hereinafter defined) driver's license, state-issued I.D., military
         I.D., resident alien card or voter registration card. For purposes of
         this paragraph, the term "valid" means (i) that the applicant must be a
         resident of the state for which the identification was issued, if
         applicable; (ii) the address on the identification must match the
         address on the application unless the applicant has represented on the
         application that he/she has lived at the place of residence listed on
         the application for six (6) months or less; and (iii) the
         identification must not have expired. The second piece of
         identification can be any other form of identification that identifies
         the applicant, contains the applicant's signature and contains
         information that is consistent with the information on the first piece
         of identification. For applicants residing in the state of New Jersey,
         the first piece of identification must be a valid driver's license,
         state-issued I.D., military I.D., or resident alien card. The second
         piece of identification can be any other form of identification that
         identifies the applicant, contains the applicant's signature and
         contains information that is consistent with the information on the
         first piece of identification. If the second form of identification is
         a credit card, Company's employees or representatives cannot write down
         such credit card number. Company's employees or representatives must
         then compare the pictures, if applicable and signatures on the forms of
         identification with the applicant and the applicant's signature. If
         Company's employee or representative fails to obtain and verify the
           appropriate identification, Bank may issue a Chargeback if Bank is
         unable to enforce collection due to Company's employee's or
         representative's alleged failure in obtaining and verifying the
         appropriate identification. [Chargeback Code: 22]

         Then, the following procedure will be utilized:

         1.     Bank's New Accounts associate will request verification of
                signature and I.D. information. If the application is processed
                through Remote Entry Application Process (REAP), Company's
                employees or representatives must verify signature and I.D.
                information. In addition, Bank may require additional
                information from the store associate such as the form number of
                the application that the applicant filled out.


                                       29
<PAGE>

         2.     Company's employee or representative will be prompted to provide
                the required information contained in the application, and the
                total amount of the sale including applicable sales tax and any
                service, shipping, warranties, and handling costs.

         3.     If approved, Bank's New Accounts associate will provide the
                Account number and credit limit to Company's employee or
                representative. In order to obtain Authorization for the Card
                Sale, Company's employee or representative must enter the
                Account number and total amount of the Card Sale into the
                point-of-sale terminal.

         4.     If Bank declines an application or is unable to render an
                immediate decision, Bank will provide Company's employee or
                representative with an application pending number that Company's
                employee or representative must place in the designated area on
                the application. Company's employee or representative must then
                advise the applicant that Bank will notify the applicant of the
                final decision by mail.

                If the total amount of the Card Sale exceeds the line of credit
                offered to the applicant, Bank's associate will communicate the
                Bank's counteroffer for a lower line of credit to Company's
                employee or representative, who must communicate it to the
                applicant. Bank will provide Company's employee or
                representative with an application pending number to place in
                the designated area on the application. Company's employee or
                representative must then notify Bank's associate of the
                applicant's decision to accept or decline the counteroffer for a
                lower line of credit within twenty-four (24) hours of the
                initial credit offer. If the applicant declines the
                counteroffer, Company's employee or representative must treat
                the application as if Bank declined the application.

         5.     EACH COMPANY'S LOCATION MUST SEND ALL APPROVED, DECLINED OR
                PENDING APPLICATIONS, INCLUDING THE INFORMATION CONTAINED IN
                THOSE APPLICATIONS RECEIVED BY TELEPHONE, TO THE DESIGNATED
                CARD OPERATIONS CENTER ON A WEEKLY BASIS AND INCLUDE ALL
                APPLICATIONS IN THE SAME ENVELOPE. IF BANK DOES NOT RECEIVE
                THE APPLICATIONS ON A WEEKLY BASIS, BANK MAY ISSUE A
                CHARGEBACK FOR THESE ACCOUNTS. [Chargeback Code: 13]

1007     REQUEST FOR NEW ACCOUNT BY THE TELEPHONE IN CONJUNCTION WITH A PURCHASE

         Bank will consider a consumer's application for an Account made via the
         Internet or by telephone. For Internet applications, the Cardholder
         Agreement shall be transmitted to the consumer by Bank through the
         website. If approved, Accounts opened via the Internet application
         process are immediately available for Card Sales. For applications made
         in conjunction with the consumer's catalog order to Company, the
         Account will be immediately available for Card Sales only if the
         consumer received the full Cardholder Agreement in the catalog. If the
         consumer applies for an Account by telephone and did not receive a
         catalog containing the Cardholder Agreement, Company's employee or
         representative may not process the Card Sale on the Account opened via
         telephone until the consumer receives a written copy of the Cardholder
         Agreement by mail or express


                                       30
<PAGE>

         delivery. If Company delivers the Cardholder Agreement to the consumer
         by next-day delivery, the Card Sale for such purchase will be processed
         by Bank on the same day that the Cardholder Agreement is received by
         the Cardholder. If Company delivers the Cardholder Agreement to the
         consumer via standard U.S. Mail, Company shall submit the Card Sale to
         Bank for processing one (1) day after mailing the Cardholder Agreement,
         and Bank will post the Card Sale to the Cardholder's Account three (3)
         days later. For Card Sales made pursuant to this paragraph, Bank may
         issue a Chargeback for such Card Sale if: (i) the Cardholder challenges
         or disputes any portion of the Cardholder Agreement, (ii) or alleges
         non-receipt of the Cardholder Agreement and Bank is unable to enforce
         collection due to Company's employee's or representative's alleged
         failure to provide a copy of the Cardholder Agreement to the
         Cardholder. [Chargeback Code: 21]

1008     SPECIAL CREDIT PLANS

         Company must provide Cardholders who make a purchase under a Special
         Credit Plan with the point-of-sale disclosure that Bank provides to
         Company prior to the time Company's employee or representative
         completes the Card Sale. If Company's employee or representative fails
         to provide a Cardholder with the point-of-sale disclosure prior to the
         time the Card Sale is completed, Bank may issue a Chargeback if: (i)
         the Cardholder challenges or disputes the purchase made under the
         Special Credit Plan and alleges that he/she did not receive the
         point-of-sale disclosure, and (ii) Bank is unable to enforce collection
         because Company's employee or representative did not give the
         Cardholder the point-of-sale disclosure.
         [Chargeback Codes: 17 and 18]

1009     ADD-ON SALE AUTHORIZATION

         Company's employees or representatives must complete a Sales Slip and
         obtain an Authorization for every sale made on the Card prior to
         concluding the transaction. If Company's employees or representatives
         receive a "call center" message on the point-of-sale terminal, or a
         Company's employee or representative cannot obtain an electronic
         Authorization, Company's employees or representatives must obtain
         Authorization via the "800" Authorization system. If Company's
         employees or representatives fail to follow this procedure Bank may
         issue a Chargeback if : (i) the Cardholder challenges or disputes the
         purchase, and (ii) Bank is unable to collect the Card Sale because
         Company's employees or representatives did not provide the disclosure.
         [Chargeback Codes: 1 and 2]


1010     ADD-ON SALE WITHOUT A CARD

         1.     For purchases made at Company's retail locations:

         If a Cardholder wants to make a purchase at a retail location of
         Company and does not have his/her Card, Company's employee or
         representative must obtain two (2) pieces of acceptable identification
         (as set forth in paragraph 1006, above) from the Cardholder and verify
         the Cardholder's identity. Company's employee or representative must
         notate on

                                       31
<PAGE>


         the sales slip the two (2) types of identification (i.e., driver's
         license number and type of credit card) and that no card was present at
         the time of sale. Then, Company's employee or representative must call
         the Operations Center to obtain the Cardholder's Card number.

         2.     For catalog purchases and all other purchases made by phone or
                facsimile:

         Company's employees or representatives must obtain the following
         additional information from the Cardholder and reflect such information
         on the Sales Slip:

         (i)    The Cardholder's full address.
         (ii)   The Cardholder's telephone number.

         If Company's employees or representatives fail to follow these
         procedures, Bank may issue a Chargeback if the Cardholder disputes
         the transaction. [Chargeback Codes: 23 and 24]

1011     REQUEST FOR CANCELLATION OF AUTHORIZATION

         If a Company employee or representative, or a Cardholder cancels a Card
         Sale before Company's employee or representative completes the Card
         Sale and Company's employee or representative previously obtained an
         Authorization for the Card Sale, Company's employee or representative
         must call the Authorization Center and cancel the previous
         Authorization. Company can only cancel an Authorization on the same day
         it is made.

1012     "CODE 10" ALERT

         A Company employee or representative who is suspicious of the validity
         of a Card or Card Account number or the presenter of the Card or Card
         Account number for any reason should notify the Authorization Center
         via the "Code 10" Alert. The "Code 10" Alert should be used regardless
         of the dollar amount of the sale. The procedure is as follows:

         1.     Call the Authorization Center and ask for a "Code 10"
                Authorization.

         2.     The Authorization Center associate will request the Cardholder's
                Account number and Company's name and will immediately alert the
                Fraud Department.

         3.     The Fraud Department personnel will ask a brief series of Yes
                or No questions about the Card or the presenter, or may ask
                the Company employee to attempt to obtain a photo I.D. from
                the presenter.

         4.     If the Fraud Department is able to confirm the identity of the
                presenter as a valid Cardholder or authorized user of the Card,
                Bank will approve the Card Sale. The presenter should not be
                aware that anything unusual has transpired.


                                       32
<PAGE>



         5.     IF, ON THE OTHER HAND, COMPANY'S EMPLOYEE OR REPRESENTATIVE IS
                INSTRUCTED TO RETAIN THE CARD, OR NOT AUTHORIZE THE SALE, THE
                COMPANY'S EMPLOYEE OR REPRESENTATIVE SHOULD DO SO, BUT ONLY BY
                PEACEFUL AND REASONABLE MEANS.

                                       33
<PAGE>


1013     ARRESTS FOR FRAUDULENT CARD USAGE

         Each Operations Center through its Fraud Department may request
         Company's employee or representative to assist in the arrest of a Card
         presenter who is suspected of fraudulent use of a Card. Company
         employee or representative must use reasonable, lawful means when
         complying with this request.

         Anyone arrested for fraudulent use of a Card will be appropriately
         prosecuted. Except as provided below, each Operations Center shall bear
         all responsibility for the arrest of a person when such Operations
         Center has requested the Company employee or representative to cause
         such an arrest.

         BANK EXPECTS THAT A COMPANY EMPLOYEE OR REPRESENTATIVE WILL NOT
         INITIATE AN ARREST OF A CARD PRESENTER EXCEPT AT THE REQUEST OF BANK.
         IF A COMPANY EMPLOYEE OR REPRESENTATIVE CAUSES THE ARREST OR
         PROSECUTION OF ANY PERSON FOR THE USE OF A CARD WITHOUT THE BANK'S
         SPECIFIC REQUEST AND AUTHORIZATION OR FAILS TO USE REASONABLE, LAWFUL
         MEANS IN EFFECTING AN ARREST THAT BANK REQUESTED AND AUTHORIZED,
         COMPANY WILL BEAR ALL CLAIMS, LIABILITIES, COSTS, AND EXPENSES
         RESULTING FROM THE ARREST OR PROSECUTION.

1014     CREDIT ISSUED FOR RETURNED MERCHANDISE AND ADJUSTMENTS

         Bank will honor Company's return policy as long as the policy complies
         with all federal, state and local laws and Company clearly posts or
         otherwise notifies the Cardholder of the policy at the time of the Card
         Sale. Company must not give cash refunds to any Cardholder in
         connection with a Card Sale. If a Cardholder returns goods or services
         purchased with a Card at Company's retail establishments in accordance
         with Company's policy, Company's employees or representatives must give
         a Credit to the Cardholder's Account by completing a Credit Slip, as
         described in Section 1004. If a Cardholder receives merchandise or
         services that are defective or not as agreed upon at the time of the
         Card Sale and Cardholder requests a Credit, Company must give the
         Cardholder the Credit. Employees or representatives must send the Bank
         Sales Data for each Credit within 7 calendar days after Company's
         employees or representatives issue the Credit to the Cardholder.
         [Chargeback Codes: 5 and 8]

1015     PAYMENTS

         Company is not allowed to receive or process a Cardholder's payment to
         Bank unless the Merchant Services Agreement specifically authorizes
         Company to process Cardholder payments.



1016     TICKET RETRIEVALS

                                       34
<PAGE>


         Company has fifteen (15) Business Days to review and respond to any
         Cardholder billing dispute. Bank may issue a Chargeback if the inquiry
         or dispute is not resolved or if the Company fails to notify the Card
         Operations Center that it resolved the dispute by the end of the
         fifteenth (15th) Business Day.
         [Chargeback Code: 16]

1017     FORMS

         Company must use the Card forms provided by Bank as soon as Bank
         provides the forms to Company. Company must destroy all Card forms that
         Bank replaces. If Company fails, Bank may process a Chargeback for the
         amounts uncollectible by Bank because Company failed to use current
         Card forms. [Chargeback Code: 25]

1018     CHARGEBACKS

         Under certain circumstances Bank may return a Card Sale to Company
         unpaid, or Bank may return a previously paid Card Sale to Company for
         repayment to Bank. These returned charges are called "Chargebacks". If
         a billing error is asserted by a Cardholder with respect to a Card
         Sale, or if a Cardholder complains to Bank about the quality of goods
         or services obtained with the Card at Company's establishment, Company
         agrees to act in good faith to attempt to resolve the problem with the
         Cardholder. If the Cardholder refuses to pay Bank for goods or services
         due to a quality dispute, Bank will process a Chargeback for the charge
         or disputed portion of it. If Bank is involved in a lawsuit with a
         Cardholder relating to a Card Sale made at Company's establishment,
         Company agrees to cooperate with Bank and to provide any assistance to
         Bank. If Company does not follow all the terms of the Merchant Services
         Agreement and these Operating Regulations when making a transaction
         with a Card, or if a Card Sale which is the subject of a billing
         dispute or quality dispute is subject to Chargeback as specified in
         these Operating Regulations or the Merchant Services Agreement, Bank
         may refuse to pay Company for the Card Sale or the disputed portion of
         it. If Bank has already paid Company, Company must immediately pay the
         amount it owes Bank on demand, or Bank may deduct the amount in
         question from Company's Settlement Account or from future payments that
         they would otherwise owe Company. Bank will notify Company of Card
         Sales that are subject to Chargeback as they arise, but in some
         instances Bank may process Chargebacks prior to notification as
         specified in these Operating Regulations. If Company and a Cardholder
         resolve a billing inquiry or dispute on a Card Sale for which Bank
         issued a Chargeback, and Bank is permitted by law to rebill the
         Cardholder for all or a portion of the disputed amount, Bank will
         reimburse Company for the portion of the Chargeback which Bank can
         rebill to the Cardholder, provided Company requests the reimbursement
         within ninety (90) days from the date of Chargeback. If, due to federal
         or state laws, or both, Bank is not permitted to rebill a Cardholder
         for all or a portion of a disputed transaction, Bank will not be
         required to reimburse Company for the Chargeback, even if Company has
         complied with the terms of the Merchant Services Agreement and the
         procedures as outlined in the Operating Regulations. Attached as
         Exhibit A is a chart summarizing Chargeback Codes, Definitions,
         Explanations and Required Documentation to support or refute
         Chargebacks. For purposes of Exhibit A the phrase "promptly collected
         from the Cardholder" means that Bank has attempted to collect from the
         Cardholder for at least

                                       35
<PAGE>


         fifty-nine (59) consecutive days. Bank's failure to issue a Chargeback
         to Company immediately after the fifty-nine (59) consecutive days have
         passed does not mean that Bank has forfeited its right to charge back
         the transaction to Company.

1019     REVERSALS OF CHARGEBACKS

         If within ninety (90) days from the date of the Chargeback, Company has
         been unable to resolve the dispute with the Cardholder, Company may
         request a Chargeback reversal from Bank. Bank will review all relevant
         facts and circumstances pertaining to Company and the Cardholder and
         determine if Bank should reverse the Chargeback. If Bank determines
         that it should reverse the Chargeback, Bank will issue a separate
         credit to the Company and debit the Cardholder. Company must not submit
         a new Card Sale transaction in an identical amount in order to recover
         from a Cardholder for a transaction for which Bank has issued a
         Chargeback. Company may request a reversal of a Chargeback by
         submitting to Bank a copy of the original Sales Slip and documentation
         to support the request for reversal of the Chargeback as set forth in
         Exhibit A. Bank will advise Company where it should send Chargeback
         reversal requests. Bank, exercising its reasonable judgment, will
         decide whether it will reverse any Chargeback.

1020     TELEPHONE MONITORING

         Company must notify its associates and obtain each associate's written
         consent that, from time to time, Bank or its processor may monitor and
         tape record telephone calls between Company's associates and Bank's or
         its processor's associates for training purposes.

1021     COMPANY EMPLOYEE FRAUD

         Bank and Company will work together to minimize possible fraud by
         Company employees. Company employees must not issue or accept temporary
         credit cards. The store manager must either mail in or phone in to the
         Operations Center employee applications for a Card. If Company suspects
         that one of its employees is involved with or may be involved with
         fraud relating to the Card Plan, Company must notify Bank within
         forty-eight (48) hours of its discovery of the possible fraud and
         provide Bank with the employee's name and address, the reasons why
         Company suspects the employee and any documentation Company has
         relating to the possible fraud. [Chargeback Codes: 14 and 26]

1022     CLAIM BY CARDHOLDER OF NON-RECEIPT OF PURCHASE

         If a Cardholder advises Bank that he or she did not receive a purchase
         which was billed to his or her Account, Bank will make a reasonable
         investigation. If, after investigation, Bank cannot determine that the
         Cardholder actually received the purchase, Bank shall remove the amount
         of the purchase from the Cardholder's Account and charge that amount
         back to Company. [Chargeback Code 11] Capitalized terms used herein and
         not otherwise defined will have the meanings given to them in the
         Merchant Services Agreement. If there are any conflicts between the
         terms


                                       36
<PAGE>

         of the Merchant Services Agreement and these Operating Regulations, the
         former shall govern.

                                       37

<PAGE>

                                    EXHIBIT A

<TABLE>
<CAPTION>

CODE          DEFINITION                   EXPLANATION
----          ----------                   -----------
<S>     <C>                         <C>

01      Transaction without         A valid Authorization was not obtained. This
        Required Authorization      Chargeback will only be exercised when such
                                    transaction cannot be promptly collected from the
                                    Cardholder.


02      Declined Authorization      The transaction was completed after the
                                    Company received a decline. This Chargeback
                                    will be exercised only when such transaction
                                    cannot be promptly collected from the
                                    Cardholder.

03      Invalid Cardholder Account  The transaction was submitted using an
        Number                      Account number for which no valid Account
                                    exists or can be located.



04      Late Presentation of        The time from transaction date to date of
        Transaction                 processing exceeds the 60-day limit allowed
                                    by Bank, and the transaction cannot be
                                    promptly collected from the Cardholder. In
                                    the event the Company's employees or
                                    representatives accept payments at Company's
                                    retail locations and such payment is
                                    returned to Company for insufficient funds,
                                    Company must present Bank with the
                                    insufficient funds item within fourteen (14)
                                    days of Company's receipt of the item from
                                    its bank.

05      Cardholder Disputes         The Cardholder disputes the quality of
        Merchandise/Services        merchandise purchased or service rendered or
                                    any portion thereof, and Company has not
                                    responded to such dispute in accordance with
                                    Section 2.9 of the Merchant Services
                                    Agreement.


06      Alteration of Amount        The Cardholder claims that the purchase
                                    amount for which the Cardholder signed was
                                    altered after the Cardholder signed the
                                    Sales Slip and without the Cardholder's
                                    consent or direction. Only the difference
                                    will be charged back to the Company.

<CAPTION>

                                          DOCUMENTATION TO           DOCUMENTATION TO
CODE          DEFINITION                  SUPPORT CHARGEBACK         REVERSE CHARGEBACK
----          ----------                  ------------------         ------------------
<S>                                     <C>                          <C>

01      Transaction without             D02 Authorization Report     None
        Required Authorization          for Sales Data;
                                        Cardholder Statement.



02      Declined Authorization          D02 Authorization Report     Sales Ticket
                                        showing Decline;
                                        Cardholder Statement.



03      Invalid Cardholder Account      R15 Reject-Re-entry Report;  None
        Number                          Purged Account Report.




04      Late Presentation of            Sales Ticket; Cardholder     None
        Transaction                     Statement.

05      Cardholder Disputes             Written Cardholder Claim.    Resolution of dispute by Company within time
        Merchandise/Services                                         frame set forth in section 2.9 of the
                                                                     Merchant Services Agreement evidenced by a
                                                                     signed agreement. Partial/Full Credit posted
                                                                     to Account.

06      Alteration of Amount            Cardholder's Receipt does    POS Transaction Log proving Cardholder
                                        not match copy of Sales      altered the amount.
                                        Ticket received from
                                        Company or the  Bank's
                                        Transaction Report.
</TABLE>

                                       38

<PAGE>

<TABLE>
<CAPTION>

CODE          DEFINITION                   EXPLANATION
----          ----------                   -----------
<S>     <C>                         <C>


07      Duplicate Processing        Cardholder claims they have been charged
                                    twice for a transaction.




08      Non-Receipt of Credit       Cardholder claims that a Credit issued by
                                    the Company has never been posted to the
                                    Cardholder's Account or Cardholder received
                                    a cash refund in connection with a Card Sale
                                    and the Cardholder did not pay the Bank for
                                    such Card Sale. The Chargeback is limited to
                                    the amount of the Credit.

09      Unauthorized Purchase       The Cardholder, in writing, claims that
                                    neither the Cardholder nor any party
                                    authorized by the Cardholder participated in
                                    the transaction and that the Cardholder has
                                    no knowledge of the transaction.





10      Missing Signature           The Application or the Sales Slip is missing
                                    the Cardholder signature and the Cardholder
                                    does not recognize the Card Sale.


11      Non-Receipt of Goods or     Company submitted a Card Sale in which the
        Services                    goods or services were not yet shipped or
                                    otherwise provided to the Cardholder or the
                                    Cardholder claims they have not received the
                                    goods or services for which they have been
                                    charged.

12      Split Sale (where           A purchase for a single item cannot be split
        applicable)                 between the Card and another credit card or
                                    financing vehicle. However, the purchase can
                                    be split between the Card and cash or check
                                    or the Card and an unsecured general purpose
                                    bank card such as Visa, MasterCard or a
                                    NOVUS brand card.


13      No Card Application         Any transaction made by a Cardholder for
                                    whom a written Card application has not been
                                    submitted in accordance with Section 1006,
                                    paragraph 5, above, and the Cardholder
                                    claims they did not open an Account.

<CAPTION>

CODE          DEFINITION             DOCUMENTATION TO           DOCUMENTATION TO
----          ----------             SUPPORT CHARGEBACK         REVERSE CHARGEBACK
<S>     <C>                          ------------------         ------------------
                                     <C>                        <C>
07      Duplicate Processing         Cardholder statement(s).     Production of two Sales
                                                                  Slips with different
                                                                  authorization codes.
                                                                  POS Transaction Log

08      Non-Receipt of Credit        Cardholder's Credit Slip     None
                                     and Credit was not
                                     posted to Cardholder's
                                     Account.

09      Unauthorized Purchase        Written claim from           None
                                     Cardholder and copy of
                                     Sales Slip from Company.
                                     Bank compares signature
                                     on the Cardholder letter
                                     with signature on Sales
                                     Slip. Additional
                                     investigation may also be
                                      necessary.

10      Missing Signature            Unsigned Sales Slip/         None


11      Non-Receipt of Goods or      Written Cardholder           Shipping Invoice
        Services                     Complaint.                   Signed Delivery Ticket

12      Split Sale (where            Sales Slip; Written          None
        applicable)                  Cardholder Claim.

13      No Card Application          Written Cardholder Claim.    Copy of the Application

</TABLE>

                                       39

<PAGE>

<TABLE>
<CAPTION>



CODE          DEFINITION                   EXPLANATION
----          ----------                   -----------
<S>     <C>                         <C>


14      Sale made with a            Any transaction made with a temporary credit
        Temporary Credit Card       card.

15      Mismatched or Incomplete    One or more of the following items on the
        Application                 Application provided by the Company employee
                                    or representative at the point-of-sale for
                                    telephone approvals or REAP approvals does
                                    not match the written application
                                    information provided by the applicant.

                                    1.  Type of Residence
                                    2.  Length of time at Residence
                                    3.  Employment information
                                    4.  Banking relationship
                                    5.  Applicant's and Joint Applicant's identification
                                    6.  Absence of Primary and/or Joint Applicant's
                                        signature
                                    7.  Income

16      Non-Receipt of Requested    Sales Slip or Credit Slip has not been
        Document                    provided within 15 business days in response
                                    to ticket retrieval request or within any
                                    other date as otherwise specified in the
                                    Merchant Services Agreement.



17      Non-Receipt of Special      Cardholder claims they have not received a
        Credit Plan Disclosure      point-of-sale disclosure describing the
                                    terms of the Special Credit Plan. This
                                    Chargeback will be exercised only when such
                                    transaction cannot be promptly collected
                                    from the Cardholder.

18      Invalid Credit Plan         Company charged a sale to an invalid credit
                                    plan or misrepresented the type of the
                                    credit plan to the Cardholder and the
                                    Cardholder claims they were told the plan
                                    was either valid or for a longer period of
                                    time.


19      Altered or Counterfeit      Card Sale made with invalid Cards and/or
        Cards                       Card Account number. This Chargeback will
                                    only be exercised when such transaction
                                    cannot be promptly collected from the
                                    Cardholder.

20      Improper Card Use           Card use for purposes other than personal,
                                    family, household and charitable purposes.

<CAPTION>
                                       DOCUMENTATION TO           DOCUMENTATION TO
CODE          DEFINITION               SUPPORT CHARGEBACK         REVERSE CHARGEBACK
----          ----------               ------------------         ------------------
<S>     <C>                            <C>                        <C>
14      Sale made with a               Card type listed on Sales    Slip with
        Temporary Credit Card          Sales Slip.                  Card Swipe

15      Mismatched or Incomplete       Application copy; NAPS       None
        Application                    record.

16      Non-Receipt of Requested       Request made to              None
        Document                       Company and Sales Slip or
                                       Credit Slip is not received
                                       within specified  time.

17      Non-Receipt of Special         Written Cardholder Claim.    Set procedure in place and written
        Credit Plan Disclosure                                      documentation regarding point-of-sale
                                                                    disclosures.

18      Invalid Credit Plan            Monetary File/Authorization  None
                                       Report reveals an invalid
                                       credit plan number;
                                       Written Customer complaint.


19      Altered or Counterfeit         Invalid Card.                None
        Cards

20      Improper Card Use              Name on Application is       None
                                       a business name.

</TABLE>


                                       40
<PAGE>

<TABLE>
<CAPTION>

CODE          DEFINITION                   EXPLANATION
----          ----------                   -----------
<S>     <C>                         <C>

21      Failure to Give Cardholder  The Cardholder claims that they did not
        Agreement to Cardholder     receive the Cardholder Agreement at the
                                    point-of-sale for a new Account or that the
                                    Cardholder did not receive a catalog
                                    containing the Cardholder Agreement prior to
                                    opening an Account over the telephone in
                                    conjunction with a catalog order. This
                                    Chargeback will only be exercised when such
                                    transaction cannot be promptly collected
                                    from the Cardholder.

22      No Proper Identification    Company submitted an application that did
        For New Account             not contain evidence that Company's
        Application                 employees or representatives obtained and
                                    verified the appropriate identification for
                                    a New Account application. This Chargeback
                                    will only be exercised when such transaction
                                    cannot be promptly collected from the
                                    Cardholder.



23      No Proper Identification    Company's employee or representative failed
        For an Add-On-Sale          to note on the sales slip the two (2) types
        without a Card              of identification used and that no card was
                                    present at the time of the sale. This
                                    Chargeback will only be exercised when such
                                    transaction cannot be promptly collected
                                    from the Cardholder.

24      No Proper Identification    Company's employee or representative failed
        For Catalog, Phone or       to note on the sales slip the Cardholder's
        Fax Purchase                full address and telephone number for a
                                    catalog, phone or fax purchase. This
                                    Chargeback will only be exercised when such
                                    transaction cannot be promptly collected
                                    from the Cardholder.

25      Expired Cardholder Forms    Company's employees or representatives used
                                    Card forms that have expired or have been
                                    otherwise replaced by new forms by Bank.
                                    Only the portion of the transaction affected
                                    by the expired forms will be charged back to
                                    Company. This Chargeback will only be
                                    exercised when such transaction cannot be
                                    promptly collected from the Cardholder.


26      Employee Fraud              Company's employee or representative
                                    involved in fraud relating to the Card Plan.
<CAPTION>
                                     DOCUMENTATION TO           DOCUMENTATION TO
CODE          DEFINITION             SUPPORT CHARGEBACK         REVERSE CHARGEBACK
----          ----------             ------------------         ------------------
<S>     <C>                          <C>                        <C>
21      Failure to Give Cardholder   Written Cardholder Claim.    Well-documented  procedure
        Agreement to Cardholder                                   in place and training regarding
                                                                  handing out cardholder agreements
                                                                  and forms.

22      No Proper Identification     Application Copy;            None
        For New Account              NAPS record of
        Application                  verification of
                                     identification.

23      No Proper Identification     Sales Slip.                  Sales Slip with
        For an Add-On-Sale                                        identification notation.
        without a Card

24      No Proper Identification     Sales Slip.                  None
        For Catalog, Phone or
        Fax Purchase

25      Expired Cardholder Forms     Copy of Application-Form     None
                                     number indicates date on
                                     Form; Written Cardholder
                                     Claim.

26      Employee Fraud               Copy of Cardholder forms     None
                                     indicating Employee or
                                     Former-employee involvement.
</TABLE>

                                       41