<PAGE>

                                                                     EXHIBIT 4.3



                       TRANSFER AND SERVICING AGREEMENT

                                     among

                        SPIEGEL CREDIT CORPORATION III,

                                    Seller,

                        FIRST CONSUMERS NATIONAL BANK,

                                   Servicer,

                                      and

                    SPIEGEL CREDIT CARD MASTER NOTE TRUST,

                                    Issuer,

                         Dated as of December 1, 2000
<PAGE>

                               TABLE OF CONTENTS

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<CAPTION>
                                                                                              Page
<S>                                                                                           <C>
ARTICLE I

DEFINITIONS...................................................................................  1
         Section 1.1.      Definitions........................................................  1
         Section 1.2.      Other Definitional Provisions......................................  1
         Section 1.3.      Daily Allocation of Collections....................................  2

ARTICLE II

CONVEYANCE OF RECEIVABLES.....................................................................  2
         Section 2.1.      Conveyance of Receivables..........................................  2
         Section 2.2.      Acceptance by Issuer...............................................  3
         Section 2.3.      Representations and Warranties of Seller Relating
                           to Seller..........................................................  4
         Section 2.4.      Representations and Warranties of Seller Relating to this
                           Agreement and the Receivables......................................  5
         Section 2.5.      Covenants of Seller................................................  9
         Section 2.6.      Addition of Accounts............................................... 13
         Section 2.7.      Removal of Accounts................................................ 16
         Section 2.8.      Discount Option.................................................... 17

ARTICLE III

ADMINISTRATION AND SERVICING OF RECEIVABLES................................................... 18
         Section 3.1.      Acceptance of Appointment and Other Matters Relating to the
                           Servicer........................................................... 18
         Section 3.2.      Servicing Compensation............................................. 19
         Section 3.3.      Representations; Warranties and Covenants of the Servicer.......... 20
         Section 3.4.      Reports and Records for the Indenture Trustee; Bank Account
                           Statements......................................................... 22
         Section 3.5.      Annual Servicer's Certificate...................................... 22
         Section 3.6.      Annual Independent Public Accountants' Servicing Report............ 22
         Section 3.7.      Tax Treatment...................................................... 23
         Section 3.8.      Merchant Fees...................................................... 23
         Section 3.9.      Reports to the Commission.......................................... 24

ARTICLE IV

OTHER MATTERS RELATING TO SELLER.............................................................. 24
         Section 4.1.      Liability of Seller................................................ 24
         Section 4.2.      Merger or Consolidation of, or Assumption of the Obligations
                           of, Seller etc..................................................... 24
         Section 4.3.      Limitation on Liability of Seller.................................. 25
</TABLE>
<PAGE>

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<S>                                                                                            <C>
ARTICLE V

OTHER MATTERS RELATING TO THE SERVICER........................................................ 25
         Section 5.1.      Liability of the Servicer.......................................... 25
         Section 5.2.      Merger or Consolidation of, or Assumption of the Obligations
                           of, the Servicer................................................... 25
         Section 5.3.      Limitation on Liability of the Servicer and Others................. 26
         Section 5.4.      Indemnification of the Issuer and the Owner Trustee................ 27
         Section 5.5.      The Servicer Not to Resign......................................... 27
         Section 5.6.      Access to Certain Documentation and Information Regarding
                           the Receivables.................................................... 28
         Section 5.7.      Delegation of Duties............................................... 28
         Section 5.8.      Examination of Records............................................. 28

ARTICLE VI

INSOLVENCY EVENTS............................................................................. 28
         Section 6.1.      Rights upon the Occurrence of an Insolvency Event.................. 28

ARTICLE VII

SERVICER DEFAULTS............................................................................. 29
         Section 7.1.      Servicer Defaults.................................................. 29
         Section 7.2.      Indenture Trustee to Act; Appointment of Successor................. 31
         Section 7.3.      Notification to Noteholders........................................ 33

ARTICLE VIII

TERMINATION................................................................................... 33
         Section 8.1.      Termination of Agreement........................................... 33

ARTICLE IX

MISCELLANEOUS PROVISIONS                    .................................................. 33
         Section 9.1.      Amendment; Waiver of Past Defaults................................. 33
         Section 9.2.      Protection of Right, Title and Interest to Issuer.................. 35
         Section 9.3.      Governing Law...................................................... 36
         Section 9.4.      Notices; Payments.................................................. 36
         Section 9.5.      Severability of Provisions......................................... 37
         Section 9.6.      Further Assurances................................................. 37
         Section 9.7.      No Waiver; Cumulative Remedies..................................... 37
         Section 9.8.      Counterparts....................................................... 37
         Section 9.9.      Third-Party Beneficiaries.......................................... 38
         Section 9.10.     Actions by Noteholders............................................. 38
         Section 9.11.     Rule 144A Information.............................................. 38
         Section 9.12.     Merger and Integration............................................. 38
         Section 9.13.     No Bankruptcy Petition............................................. 38
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                                      ii
<PAGE>

<TABLE>
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         Section 9.14.     Rights of Indenture Trustee.....................................    39
         Section 9.15.     Rights of the Owner Trustee.....................................    39

EXHIBITS
--------

EXHIBIT A   Form of Assignment of Receivables in Additional Accounts.......................   A-1
EXHIBIT B   Form of Reassignment of Receivables in Removed Accounts........................   B-1
EXHIBIT C   Form of Monthly Servicer's Certificate.........................................   C-1
EXHIBIT D   Form of Annual Servicer's Certificate..........................................   D-1
EXHIBIT E   Form of Annual Independent Public Accountants' Servicing
            Report ........................................................................   E-1
EXHIBIT F-1 Form of Opinion of Counsel with Respect to Amendments.......................... F-1-1
EXHIBIT F-2 Form of Opinion of Counsel with Respect to Accounts............................ F-2-1
EXHIBIT F-3 Provisions to be Included in Annual Opinion of Counsel......................... F-3-1

SCHEDULES

SCHEDULE 1 List of Accounts................................................................   1-1
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                                      iii
<PAGE>

         TRANSFER AND SERVICING AGREEMENT, dated as of December 1, 2000 (this
"Agreement") among SPIEGEL CREDIT CORPORATION III, a Delaware corporation, as
 ---------
Seller, FIRST CONSUMERS NATIONAL BANK, a national banking association, as
Servicer, and SPIEGEL CREDIT CARD MASTER NOTE TRUST, a trust organized under the
laws of the State of Illinois, as Issuer.

         In consideration of the mutual agreements herein contained, each party
agrees as follows for the benefit of the other parties, the Noteholders and any
Series Enhancer to the extent provided herein, in the Indenture and in any
Indenture Supplement:

                                   ARTICLE I

                                  DEFINITIONS

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

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

         Section 1.3. Daily Allocation of Collections. For purposes of
                      -------------------------------
allocating Collections on a daily basis during any Monthly Period, the Servicer
may estimate the portion of Collections on the entire portfolio of FCNB
Preferred Charge accounts that is allocable to the Accounts and the division of
the Collections on the Accounts between Finance Charge Collections and Principal
Collections.

                                  ARTICLE II

                           CONVEYANCE OF RECEIVABLES

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

         On or prior to the Initial Closing Date, Seller shall deliver to the
Owner Trustee a registered certificate representing the Collateral Certificate.
On or prior to the SMT Termination Date, Seller agrees to record and file, at
its own expense, financing statements (and continuation statements when
applicable) with respect to the Receivables conveyed by Seller existing on the
SMT Termination Date and thereafter created meeting the requirements of
applicable state law in such manner and in such jurisdictions as are necessary
to perfect, and maintain the perfection of, the transfer and assignment of its
interest in such Receivables to the Issuer, and to deliver a file stamped copy
of each such financing statement or other evidence of such filing to the Owner
Trustee as soon as practicable after the SMT Termination Date, and (if any
additional filing is so necessary) as soon as practicable after the applicable
Addition Date, in the case of Receivables arising in Additional Accounts. The
Owner Trustee shall be under no obligation whatsoever to file such financing

                                       2
<PAGE>

or continuation statements or to make any other filing under the UCC in
connection with such transfer and assignment.

         Seller further agrees, at its own expense, on or prior to (x) the SMT
Termination Date, (y) the applicable Addition Date, in the case of Additional
Accounts (other than Additional Accounts added pursuant to Section 2.6(e)), and
                                                           --------------
(z) the applicable Removal Date, in the case of Removed Accounts, (a) to
indicate in the appropriate computer files that Receivables created (or
reassigned, in the case of Removed Accounts) in connection with the Accounts
have been conveyed to the Issuer pursuant to this Agreement (or conveyed to
Seller or its designee in accordance with Section 2.7, in the case of Removed
                                          -----------
Accounts) and (b) to deliver to the Owner Trustee a computer file or microfiche
list containing a true and complete list of all such Accounts specifying for
each such Account, as of the SMT Termination Date, the applicable Addition Date
in the case of Additional Accounts, and the applicable Removal Date in the case
of Removed Accounts, its account number and, the aggregate amount outstanding in
such Account and the aggregate amount of Principal Receivables outstanding in
such Account. Each such file or list, as supplemented, from time to time, to
reflect Additional Accounts and Removed Accounts, shall be marked as Schedule 1
                                                                     ----------
to this Agreement and is hereby incorporated into and made a part of this
Agreement.

         If the arrangements with respect to the Receivables hereunder shall
constitute a loan and not a purchase and sale of such Receivables, it is the
intention of the parties hereto that this Agreement shall constitute a security
agreement under applicable law, and that Seller shall be deemed to have granted
to the Issuer a first priority perfected security interest in all of Seller's
right, title and interest, whether owned on the SMT Termination Date or
thereafter acquired, in, to and under the Receivables and the other Trust Assets
conveyed by Seller, and all money, accounts, general intangibles, chattel paper,
instruments, documents, goods, investment property, deposit accounts,
certificates of deposit, letters of credit, and advices of credit consisting of,
arising from or related to the Trust Assets, to secure its obligations
hereunder.

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

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

         (b)   The Owner Trustee hereby agrees not to disclose to any Person any
of the account numbers or other information contained in the computer files or
microfiche lists marked as Schedule 1 and delivered to the Owner Trustee or the
Issuer, from time to time, except (i) to a Successor Servicer or as required by
a Requirement of Law applicable to the Owner Trustee, (ii) in connection with
the performance of the Owner Trustee's or the Issuer's duties hereunder, (iii)
to the Indenture Trustee in connection with its duties in enforcing the rights
of Noteholders

                                       3
<PAGE>

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

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

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

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

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

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

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

         (f)   No Proceedings. There are no proceedings or investigations
               --------------
pending or, to the best knowledge of Seller, threatened against Seller, before
any court, regulatory body, administrative agency, or other tribunal or
governmental

                                       4
<PAGE>

instrumentality (i) asserting the invalidity of this Agreement or the
Receivables Purchase Agreement, (ii) seeking to prevent the consummation of any
of the transactions contemplated by this Agreement or the Receivables Purchase
Agreement, (iii) seeking any determination or ruling that, in the reasonable
judgment of Seller, would materially and adversely affect the performance by
Seller of its obligations under this Agreement or the Receivables Purchase
Agreement, (iv) seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of this Agreement or the
Receivables Purchase Agreement or (v) seeking to impose income taxes on the
Issuer (other than as a wholly-owned subsidiary of Seller).

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

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

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

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

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

The representations and warranties set forth in this Section 2.3 shall survive
                                                     -----------
the transfer of the Trust Assets to the Issuer. Upon discovery by Seller, the
Servicer or the Owner Trustee of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the others and any Enhancement Provider. Seller hereby
represents and warrants, with respect to any Series, as of the Closing Date with
respect to such Series, unless otherwise stated in the related Indenture
Supplement, that the representations and warranties of Seller set forth in this
Section 2.3 will be true and correct as of such date.
-----------

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

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

                                       5
<PAGE>

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

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

     (b)  Eligibility of Receivables. As of the SMT Termination Date, Seller
          --------------------------
agrees that all representations and warranties made by it with respect to any
Account or Receivable pursuant to Section 2.4 of the Pooling and Servicing
                                  -----------
Agreement shall be deemed for all purposes (including the reassignment
obligations under Section 2.4(e)) to have been made pursuant to this Agreement
                  --------------
as of the day when each was made or deemed made, as if this Agreement had been
in effect on that day.

                                       6
<PAGE>

Thereafter, each day on which any new Receivable is transferred by Seller to the
Issuer, Seller shall be deemed to represent and warrant to the Issuer that (i)
each Receivable transferred on such day is an Eligible Receivable, (ii) each
Receivable transferred on such day has been transferred to the Issuer free and
clear of any Lien of any Person (other than Liens permitted under Section
                                                                  -------
2.5(b), the Seller Interest and Seller's right to receive interest accruing on,
------
and investment earnings in respect of, the Collection Account or any Series
Account, as provided in the Transaction Documents) and in compliance, in all
material respects, with all Requirements of Law applicable to Seller, (iii) with
respect to each such Receivable, all consents, licenses, approvals or
authorizations of or registrations or declarations with any Governmental
Authority required to be obtained, effected or given by Seller in connection
with the transfer of such Receivable to the Issuer have been duly obtained,
effected or given and are in full force and effect and (iv) the representations
and warranties set forth in Section 2.4(a) are true and correct with respect to
                            --------------
each Receivable transferred on such day as if made on such day.

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

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

         (i)   Reassignment of Receivables. In the event any representation or
               ---------------------------
warranty contained in Section 2.4(b) or Section 2.6(c)(v) is not true and
                      --------------    -----------------
correct in any material respect as of the date specified therein with respect to
any Receivable or the related Account unless cured within sixty (60) days (or
such longer period, not in excess of 120 days, as may be agreed to by the
Indenture Trustee and the Servicer) after the earlier to occur of the discovery
thereof by Seller or receipt by Seller of written notice thereof given by the
Owner Trustee, the Indenture Trustee or the Servicer, then Seller shall accept
reassignment of all Receivables in the related Account ("Ineligible
                                                         ----------
Receivables") on the terms and conditions set forth in paragraph (ii) below.
-----------
Notwithstanding anything contained in this Section 2.4(d) to the contrary, in
                                           --------------
the event of breach of any representation and warranty set forth in Section
                                                                    -------
2.4(b) with respect to any Receivable having been conveyed to the Issuer free
------
and clear of any Lien of any Person claiming through or under Seller and its
Affiliates and in compliance in all material respects with all Requirements of
Law applicable to Seller, immediately upon the earlier to occur of the discovery
of such breach by Seller or receipt by Seller of written notice of such breach
given by the Owner Trustee, the Indenture Trustee or the Servicer, Seller shall
repurchase and the Owner Trustee shall convey, without recourse, representation
or warranty, all of the Owner Trustee's right, title and interest in each
Ineligible Receivable.

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

                                       7
<PAGE>

     Amount and the various Allocation Percentages. If the exclusion of an
     Ineligible Receivable from the calculation of the Seller Amount would cause
     the Seller Amount to be less than the Minimum Seller Amount, then Seller
     shall, on the date of retransfer of such Ineligible Receivable, make a
     deposit in the Excess Funding Account (for allocation pursuant to the
     Indenture) in immediately available funds in an amount equal to the
     Shortfall Amount. The amounts so deposited are to be treated for all
     purposes hereof as Collections on such Ineligible Receivables.

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

          (e)  Reassignment of Issuer Portfolio. If any representation or
               --------------------------------
     warranty of a Seller set forth in Section 2.4(a) is not true and correct in
                                       --------------
     any material respect and such breach has a material adverse effect on the
     Receivables or the availability of the proceeds thereof to the Issuer
     (which determination shall be made without regard to whether funds are then
     available pursuant to any Series Enhancement), then either the Owner
     Trustee, the Indenture Trustee or the Holders of Notes holding not less
     than 50% of the aggregate principal amount of all Outstanding Notes, by
     notice then given to Seller and the Servicer (and to the Owner Trustee and
     Indenture Trustee if given by the Noteholders), may direct Seller to accept
     a reassignment of the Receivables conveyed to the Issuer by Seller if such
     breach and any material adverse effect caused by such breach is not cured
     within sixty (60) days of such notice (or within such longer period, not in
     excess of 120 days, as may be specified in such notice), and upon those
     conditions Seller shall be obligated to accept such reassignment on the
     terms set forth below; provided, however, that the Receivables will not be
                            --------  -------
     reassigned to Seller if, on any day prior to the end of such 60-day or
     longer period (i) the relevant representation and warranty shall be true
     and correct in all material respects as if made on such day and (ii) Seller
     shall have delivered to the Owner Trustee a certificate of an authorized
     officer describing the nature of such breach and the manner in which the
     relevant representation and warranty has become true and correct.

                                       8
<PAGE>

          Seller shall deposit in the Collection Account in immediately
     available funds not later than 1:00 p.m., New York City time, on the first
     Distribution Date following the Monthly Period in which such reassignment
     obligation arises, in payment for such reassignment, an amount equal to the
     sum of the amounts specified therefor with respect to each outstanding
     Series in the related Indenture Supplement. Notwithstanding anything to the
     contrary in this Agreement, such amounts shall be distributed to the
     Noteholders on such Distribution Date in accordance with the terms of each
     Indenture Supplement. If the Owner Trustee, the Indenture Trustee or the
     Noteholders give notice directing the Seller to accept a reassignment of
     the Receivables as provided above, the obligation of Seller to accept such
     reassignment pursuant to this Section 2.4(e) and to make the deposit
                                   --------------
     required to be made to the Collection Account as provided in this paragraph
     shall constitute the sole remedy respecting an event of the type specified
     in the first sentence of this Section 2.4(e) available to the Noteholders
                                   --------------
     (or the Owner Trustee or Indenture Trustee on behalf of the Noteholders)
     or, unless expressly stated in the related Series Enhancement, any Series
     Enhancer. Upon reassignment of the Receivables on such Distribution Date,
     the Issuer shall automatically and without further action be deemed to
     sell, transfer, assign, set-over and otherwise convey to the Seller,
     without recourse, representation or warranty, all the right, title and
     interest of the Issuer in and to the Receivables and Recoveries allocable
     to the Issuer, and all monies and amounts due or to become due with respect
     thereto and all proceeds thereof. The Issuer shall execute such documents
     and instruments of transfer or assignment and take such other actions as
     shall reasonably be requested by the Seller to effect the conveyance of
     such property pursuant to this Section.

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

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

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

                                       9
<PAGE>

          (c)  Account Allocations. (i) If Seller is unable for any reason to
               -------------------
     transfer Receivables to the Issuer in accordance with the provisions of
     this Agreement (including by reason of the occurrence of an Insolvency
     Event) then Seller agrees that, solely for purposes of payments under this
     Agreement, it shall in any such event allocate, after the occurrence of
     such event, payments on each Account with respect to the principal balance
     of such Account first to the oldest principal balance of such Account (it
     being understood that the foregoing allocation does not affect, with
     respect to any obligor, the priority of application of cardholder payments
     provided for in the related Charge Account Agreement(s)) and to have such
     payments applied as Collections in accordance with the Indenture. The
     parties hereto agree that Finance Charge Receivables, whenever created,
     accrued in respect of Principal Receivables which have been conveyed to the
     Issuer, or which would have been conveyed to the Issuer but for the above
     described inability to transfer such Receivables, shall continue to be a
     part of the Issuer notwithstanding any cessation of the transfer of
     additional Principal Receivables to the Issuer and Collections with respect
     thereto shall continue to be allocated and paid in accordance with the
     Indenture.

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

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

          (f)  Charge Account Agreements and Charge Account Guidelines. Seller
               -------------------------------------------------------
     agrees to comply with and perform its obligations under the Charge Account
     Agreements relating to the Accounts and the Charge Account Guidelines,
     except insofar as any failure so to comply or conform would not materially
     and adversely affect the rights of the Issuer or the Noteholders or under
     the Transaction Documents. Subject to the foregoing and subject to the
     restrictions set forth in Section 2.5(e), and so long as such changes are
                               --------------
     made applicable to comparable segments of those charge account accounts
     serviced by the Servicer which have characteristics the same as, or
     substantially similar to, the Accounts which are subject hereto, FCNB shall
     be free to change the terms and provisions of such Charge Account
     Agreements or the Charge Account Guidelines in any respect.

                                      10
<PAGE>

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

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

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

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

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

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

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

                                      11
<PAGE>

          (n)  Receivables Purchase Agreement. Seller shall not give any consent
               ------------------------------
     to FCNB under the Receivables Purchase Agreement unless the Rating Agency
     Condition is satisfied with respect thereto.

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

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

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

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

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

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

                                      12
<PAGE>

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

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

          (a)  If, on any day after the SMT Termination Date, the Aggregate
     Principal Balance is less than the Minimum Aggregate Principal Balance,
     either Seller or the Servicer (whichever shall first become aware of same)
     promptly shall give the Owner Trustee written notice thereof, and as soon
     as practicable (but in no event later than 10 days thereafter) Seller shall
     designate additional Eligible Accounts ("Additional Accounts") to be
                                              -------------------
     included as Accounts and shall transfer the Receivables in such Additional
     Accounts to the Issuer, in a sufficient amount so that the Aggregate
     Principal Balance on such day would have, if the Receivables from such
     Additional Accounts had been transferred to the Issuer on or prior to such
     day, at least equaled the Minimum Aggregate Principal Balance.

          (b)  In addition to its obligation under Section 2.6(a), Seller may,
                                                   --------------
     but shall not be obligated to, from time to time, designate Additional
     Accounts to be included as Accounts, so long as after giving effect to such
     addition not more than 20% of the Receivables, by outstanding balance, will
     be 30 or more days delinquent (and for this purpose, Receivables in an
     Account shall be considered delinquent if less than 100% of a required
     payment was received).

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

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

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

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

                                      13
<PAGE>

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

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


          in either case, deliver a letter from each Rating Agency to the
          Indenture Trustee by the Addition Date confirming that the Rating
          Agency Condition has been satisfied with respect to the addition of
          such Additional Accounts;

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

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

               (v)    Seller shall be deemed to represent and warrant that, as
          of the Addition Date, the Assignment Agreement constitutes either (x)
          a valid

                                      14
<PAGE>

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

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

               (vii)  Seller shall, on the Addition Date for Additional Accounts
          added pursuant to Section 2.6(a) or (b), deliver an Opinion of Counsel
                            --------------    ---
          with respect to the Receivables in the Additional Accounts to the
          Owner Trustee substantially in the form of Exhibit F-2, and which
                                                     -----------
          shall be reasonably acceptable to the Rating Agencies.

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

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

                                      15
<PAGE>

     pursuant to the Receivables Purchase Agreement, shall automatically be
     included as an Account (and the Receivables arising thereunder
     automatically transferred to the Issuer) effective on the date on which
     such account is created; provided, however, that such automatic inclusion
                              --------  -------
     and transfer shall not occur with respect to any such account if: (i) such
     account does not qualify as an Eligible Account, (ii) the transfer to the
     Issuer of the Receivables in such Account, if such Accounts had been
     designated by Seller pursuant to Section 2.6(b), would have caused the
                                      --------------
     limitations set forth in Section 2.6(c)(ii) to be exceeded (unless Seller
                              ------------------
     shall have satisfied the Rating Agency Condition as to such addition), or
     (iii) Seller otherwise designates such account as an account which is not
     to be included as an Account pursuant to this Section 2.6(e). On or before
                                                   --------------
     the fifth Business Day of each month next succeeding a calendar month in
     which Accounts were included pursuant to the preceding sentence, Seller
     shall indicate in its computer files of the receivables that the
     Receivables created in connection with such included Accounts have been
     transferred to the Issuer. Seller, at its option, may, by providing written
     notice to the Owner Trustee and the Servicer, terminate or suspend the
     inclusion of Additional Accounts added pursuant to Section 2.6(e) at any
                                                        --------------
     time.

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

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

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

               (i)    If the Accounts to be removed have outstanding
          Receivables, Seller shall satisfy the Rating Agency Condition with
          respect thereto by such Removal Date;

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

                                      16
<PAGE>

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

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

               (v)    After giving effect to such removal, the Aggregate
          Principal Balance shall not be less than the Minimum Aggregate
          Principal Balance;

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

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

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

          (c)  On and after the SMT Termination Date, on the date on which an
     Account becomes a Defaulted Account, the Trust shall automatically and
     without further action or consideration be deemed to transfer, set over,
     and otherwise convey to the Seller, without recourse, representation or
     warranty, all the right, title and interest of the Trust in and to the
     Receivables in such Defaulted Account, all monies due or to become due with
     respect thereto, all proceeds of such Receivables allocable to the Trust
     with respect to such Receivable, excluding Recoveries relating thereto,
     which shall remain a part of the Trust Assets.

                                      17
<PAGE>

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

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

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

                                  ARTICLE III

                  ADMINISTRATION AND SERVICING OF RECEIVABLES

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

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

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

          (b)  Subject to the provisions of this Agreement, the Servicer shall
     service and administer the Receivables and shall collect payments due under
     the Collateral Certificate and the Receivables in accordance with its
     customary and

                                      18
<PAGE>

usual servicing procedures for servicing charge account receivables comparable
to the Receivables and in accordance with the Charge Account Guidelines and
shall have full power and authority, acting alone or through any party properly
designated by it hereunder, to do any and all things in connection with such
servicing and administration which it may deem necessary or desirable. Without
limiting the generality of the foregoing and subject to Section 7.1, the
                                                        -----------
Servicer is hereby authorized and empowered (i) unless such power and authority
is revoked by the Owner Trustee on account of the occurrence of a Servicer
Default pursuant to Section 7.1, to make withdrawals from the Collection Account
                    -----------
as set forth in this Agreement, (ii) unless such power and authority is revoked
by the Indenture Trustee on account of the occurrence of a Servicer Default
pursuant to Section 7.1, to instruct the Indenture Trustee to make withdrawals
            -----------
and payments from the Series Accounts in accordance with such instructions as
set forth in this Agreement, (iii) unless such power and authority is revoked by
the Indenture Trustee on account of the occurrence of a Servicer Default
pursuant to Section 7.1, to instruct the Indenture Trustee in writing as
            -----------
provided herein, and (iv) unless such power and authority is revoked by the
Indenture Trustee on account of the occurrence of a Servicer Default pursuant to
Section 7.1, to execute and deliver, on behalf of the Issuer for the benefit of
-----------
the Noteholders, any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge, and all other comparable instruments, with
respect to the Receivables and, after the delinquency of any Receivable and to
the extent permitted under and in compliance with applicable law and
regulations, to commence enforcement proceedings with respect to such
Receivables. The Owner Trustee shall furnish the Servicer with any powers of
attorney and other documents necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties hereunder.

     (c)  If Seller is unable for any reason to transfer Receivables to the
Issuer in accordance with the provisions of this Agreement (including by reason
of the occurrence of an Insolvency Event), the Servicer agrees to allocate and
pay to the Issuer, after such date, all Collections as contemplated by Section
                                                                       -------
2.5(c).
------

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

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

     Section 3.2.   Servicing Compensation. As compensation for its servicing
                    ----------------------
activities hereunder and reimbursement for its expenses as set forth in the
immediately following paragraph, the Servicer shall be entitled to receive a
monthly servicing fee in respect of any Monthly Period (or portion thereof)
prior to the termination of the Issuer pursuant to the Indenture (the "Monthly
                                                                       -------
Servicing Fee"). The share of the Monthly Servicing Fee allocable to each Series
-------------
of Notes with

                                      19
<PAGE>

respect to any Monthly Period (or portion thereof) shall be payable on the
related Distribution Date and, with respect to each Series, shall be equal to
the amount specified in the related Indenture Supplement (the "Investor Monthly
                                                               ----------------
Servicing Fee"). The share of the Monthly Servicing Fee allocable to the Holder
-------------
of the Seller Interest with respect to any Monthly Period (or portion thereof)
shall be equal to one-twelfth of the product of (A) Seller Amount minus the sum
of the Excess Funding Amount and the balance on deposit in the Principal
Collections Subaccount, and (B) the weighted average of the Servicing Fee Rates
with respect to each Series of Notes then outstanding (the "Monthly Seller
                                                            --------------
Servicing Fee"). The Monthly Servicing Fee shall equal the sum of (x) the
-------------
aggregate amount of Investor Monthly Servicing Fees with respect to each Series
then outstanding and (y) the Monthly Seller Servicing Fee. The Investor Monthly
Servicing Fee with respect to any Series is payable in arrears on the related
Distribution Date (unless otherwise provided in the related Indenture
Supplement) and the Monthly Seller Servicing Fee is payable in arrears no later
than the last Distribution Date with respect to any Series occurring in a
Monthly Period. The Monthly Seller Servicing Fee and, unless otherwise provided
in an Indenture Supplement, each Investor Monthly Servicing Fee, shall be
calculated on the basis of a 360-day year consisting of twelve 30-day months.

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

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

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

     (b)  Due Qualification. The Servicer is qualified as a foreign banking
          -----------------
association or other entity in any state where it is required to be so qualified
to service the Receivables as required by this Agreement and has obtained all
necessary licenses and approvals as required under federal and state law, in
each

                                      20
<PAGE>

case, where the failure to be so qualified, licensed or approved, could
reasonably be expected materially and adversely to affect the ability of the
Servicer to comply with the terms of this Agreement.

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

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

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

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

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

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

     (i)  Compliance with Requirements of Law. The Servicer shall duly
          -----------------------------------
satisfy all obligations on its part to be fulfilled under or in connection with
the Receivables or Accounts, will maintain in effect all qualifications required
under

                                      21
<PAGE>

Requirements of Law in order to properly service the Receivables and the
Accounts and will comply in all material respects with all Requirements of Law
in connection with servicing the Receivables and the Accounts the failure to
comply with which would have a material adverse effect on the Noteholders.

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

     (a)  Daily Reports. On each Business Day, the Servicer shall prepare and
          -------------
make available at the office of the Servicer for inspection by the Indenture
Trustee a record (the "Daily Report") setting forth (i) the aggregate amount of
                       ------------
Collections processed by the Servicer on the preceding Business Day, (ii) the
Aggregate Principal Receivables as of the close of business on the preceding
Business Day, (iii) the amount of Finance Charge Collections for the preceding
Business Day, (iv) the Excess Funding Amount on the preceding Business Day and
(v) a calculation of the Seller Amount and the Minimum Seller Amount and the
Minimum Aggregate Principal Balance on the preceding Business Day and a
determination of whether the Seller Amount on the preceding Business Day was
greater than the Minimum Seller Amount on such Business Day and whether the
Aggregate Principal Balance on the preceding Business Day was greater than the
Minimum Aggregate Principal Balance on the preceding Business Day and such other
information as may be specified in an Indenture Supplement.

     (b)  Monthly Servicer's Certificate. Unless otherwise stated in the related
          ------------------------------
Indenture Supplement with respect to any Series, on each Determination Date, the
Servicer shall forward to the Indenture Trustee, the Paying Agent, any Rating
Agency and any Enhancement Provider a certificate of a Servicing Officer
substantially in the form of Exhibit C.
                             ---------

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

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

                                      22
<PAGE>

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

     (b)  On or before April 30 of each calendar year, beginning with April 30,
2002, the Servicer shall cause KPMG Peat Marwick or another firm of nationally
recognized independent public accountants (who may also render other services to
the Servicer or Seller) to furnish a report to the Indenture Trustee to the
effect that they have compared the mathematical calculations of each amount set
forth in the monthly certificates forwarded by the Servicer pursuant to Section
                                                                        -------
3.4(b) during the period covered by such report (which shall be the period from
------
January 1, to and including December 31 of such calendar year) with the
Servicer's computer reports which were the source of such amounts and that on
the basis of such comparison, such accountants are of the opinion that such
amounts are in agreement, except for such exceptions as they believe to be
immaterial and such other exceptions as shall be set forth in such statement. A
copy of such report may be obtained by any Noteholder by a request in writing to
the Owner Trustee addressed to the Corporate Trust Office. In addition, the
Servicer shall cause such accountants to furnish a copy of such report to each
Rating Agency and to each Enhancement Provider.

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

                                      23
<PAGE>

or measured by income, and to report all receipts and payments relating thereto
in a manner that is consistent with such characterization.

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

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

                                  ARTICLE IV

                       OTHER MATTERS RELATING TO SELLER

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

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

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

          (i)     the Person formed by such consolidation or into which Seller
     is merged or the Person which acquires by conveyance or transfer the
     properties and assets of Seller substantially as an entirety shall be, if
     Seller is not the surviving entity, organized and existing under the laws
     of the United States of America or any State or the District of Columbia
     and shall expressly assume, by an agreement supplemental hereto, executed
     and delivered to the Owner Trustee, in form satisfactory to the Owner
     Trustee, the performance of every covenant and obligation of Seller, as
     applicable hereunder, and shall benefit from all the rights granted to
     Seller, as applicable hereunder. To the extent that any right, covenant or
     obligation of Seller, as applicable hereunder, is inapplicable to the
     successor entity, such successor entity shall be subject to such covenant
     or obligation, or benefit from such right, as would apply, to the extent
     practicable, to such successor entity. In furtherance hereof, in applying
     this Section 4.2 to a successor
          -----------

                                      24
<PAGE>

     entity, Section 6.1 hereof shall be applied by reference to events of
             -----------
     involuntary liquidation, receivership or conservatorship applicable to such
     successor entity as such be set forth in the officer's certificate
     described in Section 4.2(a)(ii);
                  ------------------

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

          (iii)   Seller shall have delivered notice of such consolidation,
     merger, conveyance or transfer to each Rating Agency, and the Rating Agency
     Condition shall have been satisfied; it being understood that a sale,
     transfer, assignment, participation, pledge or other disposition of the
     Seller Interest or the issuance of a Supplemental Certificate permitted by
     Section 3.4 of the Trust Agreement shall not be deemed to be a conveyance
     -----------
     or transfer of the Seller's property substantially as an entirety for
     purposes of this Section 4.2.
                      -----------
     (b)  The obligations of Seller hereunder shall not be assignable nor shall
any Person succeed to the obligations of Seller hereunder except for mergers,
consolidations, assumptions or transfers in accordance with the provisions of
the foregoing paragraph.

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

                                   ARTICLE V

                    OTHER MATTERS RELATING TO THE SERVICER

                                      25
<PAGE>

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

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

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

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

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

     Section 5.3.   Limitation on Liability of the Servicer and Others. Except
                    --------------------------------------------------
as provided in Section 5.4 with respect to the Issuer and the Owner Trustee,
               -----------
neither the Servicer nor any of the directors or officers or employees or agents
of the Servicer shall be under any liability to the Issuer, the Owner Trustee,
the Indenture Trustee, the Noteholders or any other Person for any action taken
or for refraining from the taking of any action pursuant to this Agreement
whether arising from express or implied duties under this Agreement; provided,
                                                                     --------
however, that this provision shall not protect the Servicer or any such person
-------
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of its willful misconduct

                                      26
<PAGE>

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

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

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

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

     The Servicer shall indemnify the Indenture Trustee as provided in Section
                                                                       -------
6.7 of the Master Indenture.
---

                                      27
<PAGE>

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

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

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

     Section 5.8.   Examination of Records. The Servicer shall clearly and
                    ----------------------
unambiguously identify each Account (including any Additional Account designated
pursuant to Section 2.6) in its computer or other records to reflect that the
            -----------
Receivables arising in such Account have been transferred by Seller to the
Issuer pursuant to this Agreement. The Servicer shall, prior to the sale or
transfer to a third party of any receivable held in its custody, examine its
computer and other records to determine that such receivable is not a
Receivable.

                                      28
<PAGE>

                                  ARTICLE VI

                               INSOLVENCY EVENTS

     Section 6.1.   Rights upon the Occurrence of an Insolvency Event. If Seller
                    -------------------------------------------------
shall consent or fail to object to the appointment of a bankruptcy trustee or
conservator, receiver or liquidator in any bankruptcy proceeding or other
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to Seller of or relating to all or
substantially all of Seller's property, or the commencement of an action seeking
a decree or order of a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a bankruptcy trustee or
conservator, receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings, or for the winding-
up, insolvency, bankruptcy, reorganization, conservatorship, receivership or
liquidation of such entity's affairs, or notwithstanding an objection by Seller
any such action shall have remained undischarged or unstayed for a period of
sixty (60) days or upon entry of any order or decree providing for such relief;
or Seller shall admit in writing its inability to pay its debts generally as
they become due, file, or consent or fail to object (or object without dismissal
of any such filing within sixty (60) days of such filing) to the filing of, a
petition to take advantage of any Debtor Relief Law, make an assignment for the
benefit of its creditors (any such act or occurrence with respect to any Person
being an "Insolvency Event"), Seller shall on the day any such Insolvency Event
          ----------------
occurs immediately cease to transfer Principal Receivables to the Issuer and
shall promptly give notice to the Indenture Trustee, the Owner Trustee and the
Rating Agencies thereof.

                                  ARTICLE VII

                               SERVICER DEFAULTS

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

          (a)  any failure by the Servicer to make any payment, transfer or
     deposit or to give instructions or notice to the Indenture Trustee pursuant
     to the Indenture or to make any required drawing, withdrawal, or payment
     under any Enhancement required to be made by the Servicer on or before the
     date occurring five Business Days after the date such payment, transfer,
     deposit, withdrawal or drawing, or such instruction or notice is required
     to be made or given by the Servicer, as the case may be, under the terms of
     this Agreement or the Indenture; or

          (b)  failure on the part of the Servicer duly to observe or perform in
     any material respect any other covenants or agreements of the Servicer set
     forth in this Agreement which has a material adverse effect on the

                                      29
<PAGE>

     Noteholders, which continues unremedied for a period of 60 days after the
     date on which written notice of such failure requiring the same to be
     remedied shall have been given to the Servicer by the Indenture Trustee, or
     to the Servicer and the Indenture Trustee by the Noteholders holding not
     less than 10% of the outstanding principal amount of any Series adversely
     affected thereby and continues to materially adversely affect such
     Noteholders for such period; or the Servicer's delegation of its duties
     under this Agreement except as permitted by Section 5.7; or
                                                 -----------

          (c)  any representation, warranty or certification made by the
     Servicer in this Agreement or in any certificate delivered pursuant to this
     Agreement shall prove to have been incorrect when made, which has a
     material adverse effect on the Noteholders and which continues to be
     incorrect in any material respect for a period of 60 days after the date on
     which written notice of such failure requiring the same to be remedied
     shall have been given to the Servicer by the Indenture Trustee, or to the
     Servicer and the Indenture Trustee by the Noteholders holding not less than
     10% of the outstanding principal amount of any Series adversely affected
     thereby and continues to materially adversely affect such Noteholders for
     such period, or if such failure cannot be cured within such 60-day period
     owing to causes beyond the control of the Servicer, if the Servicer shall
     fail to proceed promptly to cure the same and prosecute the curing of such
     failure with diligence and continuity; or

          (d)  the Servicer shall (i) become insolvent, (ii) fail to pay its
     debts generally as they become due, (iii) voluntarily seek, consent to, or
     acquiesce in the benefit or benefits of any Debtor Relief Law, or (iv)
     become a party to (or be made the subject of) any proceeding provided for
     by any Debtor Relief Law, other than as a creditor or claimant, and, in the
     event such proceeding is involuntary, the petition instituting same is not
     dismissed within 60 days after its filing;

     then, so long as such Servicer Default shall not have been remedied, either
     the Indenture Trustee, or the Noteholders holding more than 50% of the
     aggregate outstanding principal amount of the Notes, by notice then given
     in writing to the Servicer (and to the Indenture Trustee if given by the
     Noteholders) (a "Termination Notice"), may terminate all of the rights and
                      ------------------
     obligations of the Servicer as Servicer under this Agreement and in and to
     the Receivables and the proceeds thereof. After receipt by the Servicer of
     such Termination Notice, and on the date that a Successor Servicer shall
     have been appointed by the Indenture Trustee pursuant to Section 7.2, all
                                                              -----------
     authority and power of the Servicer under this Agreement shall pass to and
     be vested in a Successor Servicer; and the Indenture Trustee is hereby
     authorized and empowered (upon the failure of the Servicer to cooperate) to
     execute and deliver, on behalf of the Servicer, as attorney-in-fact or
     otherwise, all documents and other instruments upon the failure of the
     Servicer to execute or deliver such documents or instruments, and to do and
     accomplish all other

                                      30
<PAGE>

     acts or things necessary or appropriate to effect the purposes of such
     transfer of servicing rights. The Servicer agrees to cooperate with the
     Indenture Trustee and such Successor Servicer in effecting the termination
     of the responsibilities and rights of the Servicer to conduct servicing
     hereunder, including the transfer to such Successor Servicer of all
     authority of the Servicer to service the Receivables provided for under
     this Agreement, including all authority over all Collections which shall on
     the date of transfer be held by the Servicer for deposit, or which have
     been deposited by the Servicer, in any Collection Account or Series
     Account, or which shall thereafter be received with respect to the
     Receivables, and in assisting the Successor Servicer and in enforcing all
     rights to Insurance Proceeds. The Servicer shall promptly transfer its
     electronic records relating to the Receivables to the Successor Servicer in
     such electronic form as the Successor Servicer may reasonably request and
     shall promptly transfer to the Successor Servicer all other records,
     correspondence and documents necessary for the continued servicing of the
     Receivables in the manner and at such times as the Successor Servicer shall
     reasonably request. To the extent that compliance with this Section 7.1
                                                                 -----------
     shall require the Servicer to disclose to the Successor Servicer
     information of any kind which the Servicer reasonably deems to be
     confidential, the Successor Servicer shall be required to enter into such
     customary licensing and confidentiality agreements as the Servicer shall
     deem necessary to protect its interest. The Servicer shall, on the date of
     any servicing transfer, transfer all of its rights and obligations, if any,
     in respect of any Enhancement to the Successor Servicer.

     Section 7.2. Indenture Trustee to Act; Appointment of Successor. (a) On and
                  --------------------------------------------------
after the receipt by the Servicer of a Termination Notice pursuant to Section
                                                                      -------
7.1, the Servicer shall continue to perform all servicing functions under this
---
Agreement until the date specified in the Termination Notice or otherwise
specified by the Indenture Trustee in writing or, if no such date is specified
in such Termination Notice or otherwise specified by the Indenture Trustee,
until a date mutually agreed upon by the Servicer and the Indenture Trustee. The
Indenture Trustee shall as promptly as possible after the giving of a
Termination Notice appoint (with the consent of the Noteholders holding greater
than 50% of the outstanding principal amount of each Series, and with prior
written notice to the Rating Agencies) a successor servicer (the "Successor
                                                                  ---------
Servicer"), and such Successor Servicer shall accept its appointment by a
--------
written assumption in a form acceptable to the Indenture Trustee. The Indenture
Trustee may obtain bids from any potential successor servicer. If the Indenture
Trustee is unable to obtain any bids from any potential successor servicer and
the Servicer delivers an Officer's Certificate to the effect that it cannot in
good faith cure the Servicer Default which gave rise to a transfer of servicing,
then the Owner Trustee shall offer Seller the right to accept retransfer of all
the Receivables and Seller may accept retransfer of all the Receivables,
provided, however, that if the long-term unsecured debt obligations of Seller
--------  -------
are not rated at the time of such purchase at least Baa3 by Moody's and BBB- by
Standard & Poor's, no such retransfer shall occur unless Seller shall deliver an
Opinion of Counsel reasonably acceptable to the Indenture

                                      31
<PAGE>

Trustee that such retransfer would not constitute a fraudulent conveyance of
Seller. The retransfer deposit amount for such a retransfer shall be equal to
the higher of the sum of (i) the outstanding principal balance of the Notes,
plus accrued interest thereon, at the Note Rate, through the date of retransfer
and (ii) the average bid price quoted by two recognized dealers for a similar
security rated in the highest rating category by Moody's and Standard & Poor's
and having a remaining maturity substantially similar to the remaining maturity
of the Notes. In the event that a Successor Servicer has not been appointed and
has not accepted its appointment at the time when the Servicer ceases to act as
Servicer, the Indenture Trustee without further action shall automatically be
appointed the Successor Servicer. Notwithstanding the above, the Indenture
Trustee shall, if it is legally unable so to act, petition a court of competent
jurisdiction to appoint any established financial institution having a net worth
of not less than $50,000,000 and whose regular business includes the servicing
of installment sales charge, credit and/or credit card account receivables as
the Successor Servicer hereunder. Notwithstanding anything else herein to the
contrary, in no event shall the Indenture Trustee be liable for any servicing
fee.

          (b)  Upon its appointment, the Successor Servicer shall be the
successor in all respects to the Servicer with respect to servicing functions
under this Agreement and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall be
deemed to refer to the Successor Servicer. Any Successor Servicer, by its
acceptance of its appointment, will automatically agree to be bound by the terms
and provisions of any Enhancement to the extent that such terms apply to the
Servicer. Any sub-servicing agreement shall be assigned to the Successor
Servicer.

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

         (d) All authority and power granted to the Servicer under this
Agreement shall automatically cease and terminate upon termination of the Issuer
pursuant to the Trust Agreement and shall pass to and be vested in Seller and,
Seller is hereby authorized and empowered to execute and deliver, on behalf of
the Servicer, as attorney-in-fact or otherwise, all documents and other
instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of such transfer of servicing rights. The
Servicer agrees to cooperate with Seller in

                                      32
<PAGE>

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

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

                                 ARTICLE VIII

                                  TERMINATION

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

                                  ARTICLE IX

                           MISCELLANEOUS PROVISIONS

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

         (a)   This Agreement may be amended from time to time by the Servicer,
Seller and the Issuer, without the consent of any of the Indenture Trustee or
any Noteholder to cure any ambiguity, to correct or supplement any provisions
herein which may be inconsistent with any other provisions herein or to add any
other provisions with respect to matters or questions raised under this
Agreement which shall not be inconsistent with the provisions of this Agreement;
provided, however, that such action shall not adversely affect in any material
--------  -------
respect the interests of any of the Noteholders. Additionally, this Agreement
may be amended from time to time by the Servicer, the Seller and the Issuer by a
written instrument signed by each of them, without the consent of the Indenture
Trustee or any of the

                                      33
<PAGE>

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

          (b)  This Agreement may also be amended from time to time by the
Servicer, Seller and the Issuer, with the consent of the Noteholders holding
more than 66 2/3% of the Outstanding principal amount of the Notes of each
Series affected thereby for which Seller has not delivered an Officer's
Certificate stating that there is no Adverse Effect, for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of modifying in any manner the rights of the Noteholders;
provided, however, that no such amendment shall (i) reduce in any manner the
--------  -------
amount of or delay the timing of any distributions (changes in Pay Out Events or
Events of Default that decrease the likelihood of the occurrence thereof shall
not be considered delays in the timing of distributions for purposes of this
clause) to be made to Noteholders or deposits of amounts to be so distributed or
the amount available under any Series Enhancement without the consent of each
affected Noteholder, (ii) change the definition of or the manner of calculating
the interest of any Noteholder without the consent of each affected Noteholder,
(iii) reduce the aforesaid percentage required to consent to any such amendment
without the consent of each Noteholder or (iv) adversely affect the rating of
any Series or Class by each Rating Agency without the consent of the Noteholders
of such Series or Class holding more than 66 2/3% of the Outstanding principal
amount of the Notes of such Series or Class affected thereby.

          (c)  Promptly after the execution of any such amendment or consent
(other than an amendment pursuant to paragraph (a)), the Issuer shall furnish
notification of the substance of such amendment to the Indenture Trustee and
each Noteholder, and the Servicer shall furnish notification of the substance of
such amendment to each Rating Agency and each Series Enhancer.

                                      34
<PAGE>

          (d)  It shall not be necessary for the consent of Noteholders under
this Section 9.1 to approve the particular form of any proposed amendment, but
     -----------
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Noteholders shall be subject to such reasonable
requirements as the Indenture Trustee may prescribe.

          (e)  Notwithstanding anything in this Section 9.1 to the contrary, no
                                                -----------
amendment may be made to this Agreement which would adversely affect the
interests of any Series Enhancer without the consent of such Series Enhancer.

          (f)  Any Indenture Supplement executed in accordance with the
provisions of Article X of the Indenture shall not be considered an amendment of
              ---------
this Agreement for the purposes of this Section 9.1.
                                        -----------

          (g)  The Noteholders holding 66 2/3% or more of the Outstanding
principal amount of the Notes of each Series or, with respect to any Series with
two (2) or more Classes, of each Class (or, with respect to any default that
does not relate to all Series, 66 2/3% or more of the principal amount of the
Outstanding Notes of each Series to which such default relates or, with respect
to any such Series with two or more Classes, of each Class) may, on behalf of
all Noteholders, waive any default by Seller or the Servicer in the performance
of their obligations hereunder and its consequences, except the failure to make
any distributions required to be made to Noteholders or to make any required
deposits of any amounts to be so distributed. Upon any such waiver of a past
default, such default shall cease to exist, and any default arising therefrom
shall be deemed to have been remedied for every purpose of this Agreement. No
such waiver shall extend to any subsequent or other default or impair any right
consequent thereon except to the extent expressly so waived.

          (h)  The Owner Trustee may, but shall not be obligated to, enter into
any such amendment which affects the Owner Trustee's rights, duties or
immunities under this Agreement or otherwise. In connection with the execution
of any amendment hereunder, the Owner Trustee shall be entitled to receive the
Opinion of Counsel described in Section 9.2(d).
                                -------------

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

          (a)  Seller shall cause this Agreement, all amendments and supplements
hereto and all financing statements and continuation statements and any other
necessary documents covering the Indenture Trustee's and the Issuer's right,
title and interest to the Issuer to be promptly recorded, registered and filed,
and at all times to be kept recorded, registered and filed, all in such manner
and in such places as may be required by law fully to preserve and protect the
right, title and interest of the Indenture Trustee, Noteholders and the Issuer
hereunder to all property comprising the Issuer. Seller shall deliver to the
Indenture Trustee file-stamped copies of, or filing receipts for, any document
recorded, registered or filed as

                                      35
<PAGE>

provided above, as soon as available following such recording, registration or
filing. Seller shall cooperate fully with the Servicer in connection with the
obligations set forth above and will execute any and all documents reasonably
required to fulfill the intent of this paragraph.

         (b) Within thirty (30) days after the Seller makes any change in its
name, identity or corporate structure which would make any financing statement
or continuation statement filed in accordance with paragraph (a) seriously
misleading within the meaning of Section 9-402(7) (or any comparable provision)
of the UCC, the Seller shall give the Indenture Trustee notice of any such
change and shall file such financing statements or amendments as may be
necessary to continue the perfection of the Issuer's security interest or
ownership interest in the Receivables and the proceeds thereof.

         (c) Seller shall give the Indenture Trustee prompt notice of any
relocation of its chief principal executive office or any change in the
jurisdiction under whose laws it is organized and whether, as a result of such
relocation or change, the applicable provisions of the UCC would require the
filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement and shall file such financing
statements or amendments as may be necessary to perfect or to continue the
perfection of the Issuer's security interest in the Receivables and the proceeds
thereof. Seller shall at all times maintain its chief principal executive
offices within the United States and shall at all times be organized under the
laws of a jurisdiction located within the United States.

         (d) Seller shall deliver to the Indenture Trustee (i) upon the
execution and delivery of each amendment of this Agreement, an Opinion of
Counsel to the effect specified in Exhibit F-1; (ii) on each date specified in
                                   -----------
Section 2.6(c)(vii) with respect to Aggregate Additions to be designated as
------------------
Accounts, an Opinion of Counsel substantially in the form of Exhibit F-2; and
                                                             -----------
(iii) on or before April 30 of each year, beginning with April 30, 2001, an
Opinion of Counsel substantially in the form of Exhibit F-3.
                                                -----------

         Section 9.3. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
                      -------------
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, PROVIDED, HOWEVER,
                                                            --------  -------
THAT THE DUTIES AND OBLIGATIONS OF THE INDENTURE TRUSTEE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS.

         Section 9.4. Notices; Payments.
                      -----------------

                                      36
<PAGE>

         (a) All demands, notices, instructions, directions and communications
(collectively, "Notices") under this Agreement shall be in writing and shall be
                -------
deemed to have been duly given if personally delivered at, mailed by registered
mail, return receipt requested, or sent by facsimile transmission (i) in the
case of Seller, to Spiegel Credit Corporation III, 400 West 9th Street, Suite
101B, Wilmington, Delaware 19801, Attn: Treasurer, with a copy to Spiegel, Inc.,
3500 Lacey Road, Downers Grove, Illinois 60515-5452, Attn: Treasurer, (ii) in
the case of the Servicer, to First Consumers National Bank, P.O. Box 5280,
Portland, Oregon 97208, Attn: President, (iii) in the case of the Issuer or the
Owner Trustee, to the Corporate Trust Office, Attn: Structured Finance Group,
(iv) in the case of the Rating Agency for a particular Series, the address, if
any, specified in the Indenture Supplement relating to such Series, and (v) to
any other Person as specified in the Indenture or any Indenture Supplement; or,
as to each party, at such other address or facsimile number as shall be
designated by such party in a written notice to each other party.

         (b) Any Notice required or permitted to be given to a Holder of
Registered Notes shall be given by first-class mail, postage prepaid, at the
address of such Holder as shown in the Note Register. Any Notice so mailed
within the time prescribed in this Agreement shall be conclusively presumed to
have been duly given, whether or not the Noteholder receives such Notice. In
addition, in the case of any Series or Class with respect to which any Notes are
outstanding, any Notice required or permitted to be given to Noteholders of such
Series or Class shall be published in an Authorized Newspaper within the time
period prescribed in this Agreement.

         Section 9.5. Severability of Provisions. If any one or more of the
                      --------------------------
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such provisions shall be deemed
severable from the remaining provisions of this Agreement and shall in no way
affect the validity or enforceability of the remaining provisions or of the
Notes or the rights of the Noteholders.

         Section 9.6. Further Assurances. Seller and the Servicer agree to do
                      ------------------
and perform, from time to time, any and all acts and to execute any and all
further instruments required or reasonably requested by the Owner Trustee and
the Indenture Trustee more fully to effect the purposes of this Agreement,
including the execution of any financing statements or continuation statements
relating to the Receivables for filing under the provisions of the UCC of any
applicable jurisdiction.

         Section 9.7. No Waiver; Cumulative Remedies. No failure to exercise and
                      ------------------------------
no delay in exercising, on the part of the Owner Trustee, the Indenture Trustee
or the Noteholders, any right, remedy, power or privilege under this Agreement
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege under this Agreement preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or
privilege. The

                                      37
<PAGE>

rights, remedies, powers and privileges provided under this Agreement are
cumulative and not exhaustive of any rights, remedies, powers and privileges
provided by law.

         Section 9.8.  Counterparts. This Agreement may be executed in two or
                       ------------
more counterparts (and by different parties on separate counterparts), each of
which shall be an original, but all of which together shall constitute one and
the same instrument.

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

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

         (a) Wherever in this Agreement a provision is made that an action may
be taken or a Notice given by Noteholders, such action or Notice may be taken or
given by any Noteholder, unless such provision requires a specific percentage of
Noteholders.

         (b) Any Notice, request, authorization, direction, consent, waiver or
other act by the Noteholder shall bind such Holder and every subsequent Holder
of such Note and of any Note issued upon the registration of transfer thereof or
in exchange therefor or in lieu thereof in respect of anything done or omitted
to be done by the Owner Trustee, Seller or the Servicer in reliance thereon,
whether or not notation of such action is made upon such Note.

         Section 9.11. Rule 144A Information. For so long as any of the Notes of
                       ---------------------
any Series or Class are "restricted securities" within the meaning of Rule
144(a)(3) under the Securities Act, each of Seller, the Owner Trustee, the
Indenture Trustee, the Servicer and any Series Enhancer agree to cooperate with
each other to provide to any Noteholders of such Series or Class and to any
prospective purchaser of Notes designated by such Noteholder, upon the request
of such Noteholder or prospective purchaser, any information required to be
provided to such holder or prospective purchaser to satisfy the condition set
forth in Rule 144A(d)(4) under the Securities Act.

         Section 9.12. Merger and Integration. Except as specifically stated
                       ----------------------
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.

         Section 9.13. No Bankruptcy Petition. (a) Each of Seller and Servicer,
                       ----------------------
severally and not jointly, hereby covenants and agrees that, prior to the date
which is one (1) year and one (1) day after the payment in full of all Notes, it
will not

                                      38
<PAGE>

institute against, or join any other Person in instituting against, the Issuer
or Spiegel Master Trust any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings or other similar proceeding under the laws of the
United States or any state of the United States. Nothing in this Section 9.13
                                                                 ------------
shall preclude, or be deemed to estop, any Seller and Servicer from taking (to
the extent such action is otherwise permitted to be taken by such Person
hereunder) or omitting to take any action prior to such date in (i) any case or
proceeding voluntarily filed or commenced by or on behalf of the Issuer under or
pursuant to any such law or (ii) any involuntary case or proceeding pertaining
to the Issuer under or pursuant to any such law.

         (b) Each of Servicer and Issuer, severally and not jointly, hereby
covenants and agrees that, prior to the date which is one (1) year and one (1)
day after the payment in full of all Notes, it will not institute against, or
join any other Person in instituting against, the Seller any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or any state of the
United States. Nothing in this Section 9.13 shall preclude, or be deemed to
                               ------------
estop, any Servicer and Issuer from taking (to the extent such action is
otherwise permitted to be taken by such Person hereunder) or omitting to take
any action prior to such date in (i) any case or proceeding voluntarily filed or
commenced by or on behalf of the Seller under or pursuant to any such law or
(ii) any involuntary case or proceeding pertaining to the Seller under or
pursuant to any such law.

         Section 9.14. Rights of Indenture Trustee.  The Indenture Trustee
                       ---------------------------
shall have herein the same rights, protections, indemnities and immunities as
specified in the Indenture.

         Section 9.15. Rights of the Owner Trustee. Each of the parties hereto
                       ---------------------------
acknowledges and agrees that this Agreement is being executed and delivered by
Bankers Trust Company not individually but solely and exclusively in its
capacity as Owner Trustee on behalf of Spiegel Credit Card Master Note Trust for
the purpose and with the intention of binding Spiegel Credit Card Master Note
Trust. No obligations or liabilities hereunder shall run against Bankers Trust
Company in its individual capacity or against its properties or assets.

                                      39
<PAGE>

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

                          SPIEGEL CREDIT CORPORATION III, Seller

                          Name: /s/ John R. Steele
                          Title: Treasurer

                          FIRST CONSUMERS NATIONAL BANK

                          Name: /s/ John R. Steele
                          Title: Treasurer

                          SPIEGEL CREDIT CARD MASTER NOTE
                          TRUST, Issuer

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

                          Name: /s/ Eileen M. Hughes
                          Title: Vice President

Acknowledged and Accepted:

THE BANK OF NEW YORK,
not in its individual capacity but
solely as Indenture Trustee

Name: /s/ Cassandra Shedd
Title: Assistant Treasurer

Signature page to
Transfer and Servicing Agreement
<PAGE>

                                   EXHIBIT A
                                      to
                       TRANSFER AND SERVICING AGREEMENT

                       FORM OF ASSIGNMENT OF RECEIVABLES
                            IN ADDITIONAL ACCOUNTS

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

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

                                   WITNESSETH

      WHEREAS, the Seller, the Servicer and the Issuer are parties to the
Transfer and Servicing Agreement, dated as of December 1, 2000 (the
"Agreement");
 ---------

      WHEREAS, pursuant to the Agreement, the Seller wishes to designate
Additional Accounts to be included as Accounts and to convey the Receivables of
such Additional Accounts (as each such term is defined in the Agreement),
whether now existing or hereafter created, to the Issuer; and

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

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

      1.   Defined Terms. All capitalized terms used herein shall have the
           -------------
meanings ascribed to them in the Agreement unless otherwise defined herein.

      "Addition Date" means, with respect to the Additional Accounts designated
       -------------
hereby, ____________, 200__.

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

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

                                  Exhibit A-1
<PAGE>

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

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

           (b)   The Seller agrees to record and file, at its own expense,
financing statements (and continuation statements when applicable) with respect
to the Receivables in Additional Accounts existing on the Notice Date and
thereafter created meeting the requirements of applicable state law in such
manner and in such jurisdictions as are necessary to perfect, and maintain
perfection of, the sale and assignment of its interest in such Receivables to
the Issuer, and to deliver a file- stamped copy of each such financing statement
or other evidence of such filing to the Owner Trustee on or prior to the
Addition Date. The Owner Trustee shall be under no obligation whatsoever to file
such financing or continuation statements or to make any other filing under the
UCC in connection with such sale and assignment.

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

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

                                  Exhibit A-2
<PAGE>

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

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

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

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

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

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

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

           (f)   Security Interest. This Assignment constitutes (i) a valid
                 -----------------
     transfer and assignment to the Issuer of all right, title and interest of
     the Seller in and to Receivables now existing and hereafter created in the
     Additional Accounts designated hereby, and all proceeds (as defined in the
     UCC as in effect in the State of Illinois) of such Receivables and
     Insurance Proceeds relating thereto, and such Receivables and any
     Collections, Recoveries and other proceeds thereof and Insurance Proceeds
     relating thereto will be held by the Issuer free and clear of any Lien of
     any Person except for (x) Liens permitted under

                                  Exhibit A-3
<PAGE>

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

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

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

           (a)   Officer's Certificate. The Seller shall have delivered to the
                 ---------------------
      Owner Trustee a certificate of a Vice President or more senior officer,
      certifying that (i) all requirements set forth in Section 2.6 of the
                                                        -----------
      Transfer and Servicing Agreement for designating Additional Accounts and
      conveying the Principal Receivables of such Accounts, whether now existing
      or hereafter created, have been satisfied and (ii) each of the
      representations and warranties made by the Seller in Section 5 is true and
                                                           ---------
      correct as of the Addition Date. The Owner Trustee may conclusively rely
      on such Officer's Certificate, shall

                                  Exhibit A-4

<PAGE>

      have no duty to make inquiries with regard to the matters set forth
      therein, and shall incur no liability in so relying.

           (b)   Opinion of Counsel. The Seller shall have delivered to the
                 ------------------
      Owner Trustee an Opinion of Counsel with respect to the Additional
      Accounts designated hereby substantially in the form of Exhibit F-2 to the
                                                              -----------
      Agreement.

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

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

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

      9.   Rights of the Owner Trustee. Each of the parties hereto acknowledges
           ---------------------------
and agrees that this Agreement is being executed and delivered by Bankers Trust
Company not individually but solely and exclusively in its capacity as Owner
Trustee on behalf of Spiegel Credit Card Master Note Trust for the purpose and
with the intention of binding Spiegel Credit Card Master Note Trust. No
obligations or liabilities hereunder shall run against Bankers Trust Company in
its individual capacity or against its properties or assets.

                                  Exhibit A-5
<PAGE>

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

                               SPIEGEL CREDIT CORPORATION III,
                               Seller

                               By:____________________________
                               Name:
                               Title:

                               SPIEGEL CREDIT CARD MASTER
                               NOTE TRUST,
                               Issuer

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

                               By:____________________________
                               Name:
                               Title:

                                  Exhibit A-6
<PAGE>

                                   Schedule 1
                          to Assignment of Receivables
                             in Additional Accounts

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

                                  Exhibit A-7
<PAGE>

                                  EXHIBIT B
                                      to
                       TRANSFER AND SERVICING AGREEMENT

                     FORM OF REASSIGNMENT OF RECEIVABLES
                             IN REMOVED ACCOUNTS

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

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

                                   WITNESSETH:

      WHEREAS the Seller, the Servicer and the Issuer are parties to the
Transfer and Servicing Agreement, dated as of December 1, 2000 (the
"Agreement");
 ---------

      WHEREAS pursuant to the Agreement, the Seller wishes to remove from the
Issuer all Receivables owned by the Issuer in certain designated Accounts (the
"Removed Accounts") and to cause the Issuer to reconvey the Receivables of such
 ----------------
Removed Accounts, whether now existing or hereafter created, from the Issuer to
the Seller; and

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

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

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

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


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

      2.   Designation of Removed Accounts. On or before the date that is ten
           -------------------------------
(10) Business Days after the Removal Date, the Seller will deliver to the Owner
Trustee a computer file or microfiche list containing a true and complete
schedule

                                  Exhibit B-1
<PAGE>

identifying all Accounts the Receivables of which are being removed from the
Issuer, specifying for each such Account, as of the Removal Notice Date, its
account number, the aggregate amount outstanding in such Account and the
aggregate amount of Principal Receivables in such Account, which computer file
or microfiche list shall supplement Schedule 1 to the Agreement.
                                    ----------

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

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

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

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

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

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

      6.   Officers' Certificate. The Seller shall have delivered to the Owner
           ---------------------
Trustee an Officers' Certificate certifying that (i) as of the Removal Date, all
requirements set forth in Section 2.5 of the Transfer and Servicing Agreement
                          -----------
for designating Removed Accounts and reconveying the Receivables of such Removed

                                  Exhibit B-2
<PAGE>

Accounts, whether now existing or hereafter created, have been satisfied, and
(ii) each of the representations and warranties made by the Seller in Section 5
                                                                      ---------
hereof is true and correct as of the Removal Date. The Owner Trustee may
conclusively rely on such Officer's Certificate, shall have no duty to make
inquiries with regard to the matters set forth therein and shall incur no
liability in so relying.

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

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

      9.   Rights of the Owner Trustee. Each of the parties hereto acknowledges
           ---------------------------
and agrees that this Agreement is being executed and delivered by Bankers Trust
Company not individually but solely and exclusively in its capacity as Owner
Trustee on behalf of Spiegel Credit Card Master Note Trust for the purpose and
with the intention of binding Spiegel Credit Card Master Note Trust. No
obligations or liabilities hereunder shall run against Bankers Trust Company in
its individual capacity or against its properties or assets.

                                  Exhibit B-3
<PAGE>

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

                                    SPIEGEL CREDIT CORPORATION III,
                                    Seller

                                    By:___________________________
                                    Name:
                                    Title:

                                    SPIEGEL CREDIT CARD MASTER
                                    NOTE TRUST, Issuer

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

                                    By:___________________________
                                    Name:
                                    Title:

                                    FIRST CONSUMERS NATIONAL
                                    BANK, Servicer

                                    By:___________________________
                                    Name:
                                    Title:

                                  Exhibit B-4
<PAGE>

                                  Schedule 1
                           to Reassignment Agreement

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

                                   EXHIBIT C
                                      to
                       TRANSFER AND SERVICING AGREEMENT

                    FORM OF MONTHLY SERVICER'S CERTIFICATE

     The undersigned, a duly authorized representative of First Consumers
National Bank ("FCNB"), as Servicer pursuant to the Transfer and Servicing
                ----
Agreement dated as of December 1, 2000 (the "Transfer and Servicing Agreement")
                                             --------------------------------
among FCNB, Spiegel Credit Corporation III and Spiegel Credit Card Master Note
Trust, as Issuer, does hereby certify as follows:

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

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

3.   The undersigned is a Servicing Officer.

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

5.   The aggregate amount of Collections processed during the preceding Monthly
     Period was equal to $ _______________________

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

7.   The aggregate amount of Finance Charge Collections during the preceding
     Monthly Period was equal to $ _______________________

8.   The Default Amount for the preceding Monthly Period was equal to $
     _________________

                                  Exhibit C-1
<PAGE>

9.   Net Recoveries for the preceding Monthly Period was equal to $
     ______________

10.  The Portfolio Yield for the preceding Monthly Period for each of the
     following Series was equal to:

     Series ____________  $  ____________
     Series ____________  $  ____________

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

     Series ____________  $  ____________
     Series ____________  $  ____________

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

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

14.  The aggregate amount payable to the Investor Noteholders on the succeeding
     Distribution Date in respect of Note interest is equal to $______________

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

                                  Exhibit C-2
<PAGE>

                                   EXHIBIT D
                                      to
                       TRANSFER AND SERVICING AGREEMENT

                     FORM OF ANNUAL SERVICER'S CERTIFICATE

         The undersigned, a duly authorized representative of First Consumers
National Bank ("FCNB") as Servicer pursuant to the Transfer and Servicing
                ----
Agreement dated as of December 1, 2000 (the "Transfer and Servicing Agreement")
                                             --------------------------------
among Spiegel Credit Corporation III, FCNB and Spiegel Credit Card Master Note
Trust, as Issuer, does hereby certify that:

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

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

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

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

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

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

                                  Exhibit D-1
<PAGE>

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


                                            _______________________________
                                            Name:
                                            Title:

                                  Exhibit D-2
<PAGE>

                                   EXHIBIT E
                                      to
                       TRANSFER AND SERVICING AGREEMENT

                FORM OF ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS'
                               SERVICING REPORT


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

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

The Bank of New York
2 North LaSalle Street
Suite 1020
Chicago, Illinois 60602

Gentlemen:

         We have applied certain agreed-upon procedures, as discussed below, to
the accounting records of First Consumers National Bank (the "Servicer") and
                                                              --------
Spiegel Credit Corporation III ("SCCIII") as of December 31, ____, solely to
                                 ------
assist the Servicer in its responsibilities as Servicer under the Transfer and
Servicing Agreement dated as of December 1, 2000, among SCCIII, the Servicer and
Spiegel Credit Card Master Note Trust (the "Transfer and Servicing Agreement").
                                            --------------------------------
It is understood that this report is solely for your information and is not to
be referred to or distributed for any other purpose to anyone who is not a
member of management of the Servicer, SCCIII or the Owner Trustee, or who is not
otherwise specifically defined as a recipient in the Servicing Agreement. Our
procedures and findings are as follows:

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

                                  Exhibit E-1
<PAGE>

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

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

         (d)  We read the Annual Servicer's Certificate delivered pursuant to
              Section 3.5 of the Servicing Agreement for the year ended December
              -----------
              31, _____ [for the period of ____months ended, _______, _____] and
              made inquiries of the Servicer's management regarding the
              Servicer's compliance with the guidelines of the Transfer and
              Servicing Agreement.

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

Date:

                                  Exhibit E-2
<PAGE>

                                  EXHIBIT F-1

                          FORM OF OPINION OF COUNSEL
                          WITH RESPECT TO AMENDMENTS

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

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

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

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

                                 Exhibit F-1-1
<PAGE>

                                  EXHIBIT F-2

                          FORM OF OPINION OF COUNSEL
                           WITH RESPECT TO ACCOUNTS

       (Provisions to be included in Opinion of Counsel to be delivered
            pursuant to Section 2.6(c)(vii) and Section 9.2(d)(ii))
                        -------------------     ------------------

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

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

         2.   If the Assignment, together with the Agreement, constitutes a
valid assignment of all Seller's right, title and interest in, to and under the
Receivables in Schedule 1 to the Assignment and all of the Seller's rights,
               ----------
remedies, powers, and privileges with respect to such Receivables, then the
Issuer has or will acquire all of Seller's right, title and interest in, to and
under the such Receivables free and clear of any Lien or interest of any person
at the time of transfer (and anytime thereafter with respect to any Lien or
interest arising through or under the Seller except as provided in the
Agreement), except for Liens for municipal or other local taxes permitted under
Section 2.5(b) of the Agreement.

         3.   If the Assignment, together with the Agreement, does not
constitute a valid assignment of all of the Seller's right, title and interest
in, to and under the Receivables in Schedule 1 to the Assignment, then the
                                    ----------
Assignment creates a valid security interest in all the Seller's right, title
and interest in, to and under such Receivable and the proceeds thereof in favor
of the Issuer.

         4.   If the Receivables Purchase Agreement constitutes a valid
assignment of all of the applicable RPA Seller's right, title and interest in,
to and under the Receivables in Schedule 1 to the Assignment and all of its
                                ----------
rights, remedies, powers, and privileges with respect to such Receivables, then
the Seller has or will acquire all the applicable RPA Seller's right, title and
interest in, to and under such Receivables free and clear of any Lien or
interest of any person at the time of transfer (and anytime thereafter with
respect to any Lien or interest arising through or under the applicable RPA
Seller, except as provided in the Agreement), except for Liens for municipal or
other local taxes.

         5.   If the Receivables Purchase Agreement does not constitute a valid
assignment of all the applicable RPA Seller's right, title, and interest in, to
and under the Receivables in Schedule 1 to the Assignment and all of the
                             ----------
applicable RPA Seller's rights, remedies, powers, and privileges with respect to
such Receivables, then the Receivables Purchase Agreement creates a valid
security

                                 Exhibit F-2-1
<PAGE>

interest in all of the applicable RPA Seller's right, title and interest in, to
and under the Receivables and proceeds thereof in favor of the Seller.

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

                                 Exhibit F-2-2
<PAGE>

                                  EXHIBIT F-3

                         PROVISIONS TO BE INCLUDED IN
                           ANNUAL OPINION OF COUNSEL

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

         1. No filing or other action, other than such filing or other action
described in this opinion letter, is necessary from the date of this opinion
letter through June 30 of the following year to continue the perfected status of
the security interest of the Trust in the Receivables described in the financing
statements referenced in this opinion letter.

         2. No filing or other action, other than such filing or other action
described in this opinion letter, is necessary from the date of this opinion
letter through June 30 of the following year to continue the perfected status of
the security interest of the Indenture Trustee in the Receivables described in
the financing statements referenced in this opinion letter.

         3. No filing or other action, other than such filing or other action
described in this opinion letter, is necessary from the date of this opinion
letter through June 30 of the following year to continue the perfected status of
the security interest of the Seller in the Receivables described in the
financing statements referenced in this opinion letter.

                                 Exhibit F-3-1
<PAGE>

                                  SCHEDULE 1

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

                  [Original list delivered to Owner Trustee]

                                      1-1