Document:

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                                                                    EXHIBIT 10.2

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                  HOUSEHOLD RECEIVABLES ACQUISITION COMPANY II

                                       and

                   HOUSEHOLD AFFINITY FUNDING CORPORATION III

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                     FORM OF RECEIVABLES PURCHASE AGREEMENT

                         Dated as of February [*], 2003

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<S>                                                                                       <C>
ARTICLE I         DEFINITIONS..............................................................1

     Section 1.01.   Definitions...........................................................1

     Section 1.02.   Other Definitional Provisions.........................................3

ARTICLE II        PURCHASE AND CONVEYANCE OF RECEIVABLES...................................4

     Section 2.01.   Purchase..............................................................4

     Section 2.02.   Addition of Aggregate Addition Accounts...............................5

     Section 2.03.   Addition of Automatic Additional Accounts.............................5

     Section 2.04.   Representations and Warranties........................................5

     Section 2.05.   Removal and Deletion of Accounts......................................5

ARTICLE III       CONSIDERATION AND PAYMENT................................................6

     Section 3.01.   Purchase Price........................................................6

     Section 3.02.   Adjustments to Purchase Price.........................................6

     Section 3.03.   Use of Name, Logo and Marks...........................................6

ARTICLE IV        REPRESENTATIONS AND WARRANTIES...........................................7

     Section 4.01.   HRAC II's Representations and Warranties Relating to HRAC II..........7

     Section 4.02.   Representations and Warranties of HRAC II Relating to the
                        Agreement and the Receivables......................................8

     Section 4.03.   Representations and Warranties of Funding.............................9

ARTICLE V         COVENANTS...............................................................11

     Section 5.01.   HRAC II Covenants....................................................11

ARTICLE VI        REPURCHASE OBLIGATION...................................................13

     Section 6.01.   Reassignment of Ineligible Receivables...............................13

     Section 6.02.   Reassignment of Trust Portfolio......................................13

ARTICLE VII       CONDITIONS PRECEDENT....................................................15

     Section 7.01.   Conditions to Funding's Obligations Regarding Additional
                        Receivables.......................................................15

     Section 7.02.   Conditions Precedent to HRAC II's Obligations........................15

ARTICLE VIII      TERM AND PURCHASE TERMINATION...........................................16

     Section 8.01.   Term.................................................................16

     Section 8.02.   Purchase Termination.................................................16

ARTICLE IX        SERVICING...............................................................17

     Section 9.01.   Transfer and Servicing Agreement Controls with respect to the
                        Receivables.......................................................17
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<S>                                                                                       <C>
ARTICLE X         MISCELLANEOUS PROVISIONS................................................18

     Section 10.01.  Amendment............................................................18

     Section 10.02.  GOVERNING LAW........................................................18

     Section 10.03.  Notices..............................................................18

     Section 10.04.  Severability of Provisions...........................................18

     Section 10.05.  Assignment...........................................................18

     Section 10.06.  Acknowledgment and Agreement of HRAC II..............................19

     Section 10.07.  Further Assurances...................................................19

     Section 10.08.  No Waiver; Cumulative Remedies.......................................19

     Section 10.09.  Counterparts.........................................................19

     Section 10.10.  Binding Effect; Third-Party Beneficiaries............................19

     Section 10.11.  Merger and Integration...............................................19

     Section 10.12.  Headings.............................................................19

     Section 10.13.  Schedules and Exhibits...............................................20

     Section 10.14.  Survival of Representations and Warranties...........................20

     Section 10.15.  Nonpetition Covenant.................................................20

Exhibit A     Form of Supplemental Conveyance

Schedule 1    List of Accounts
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        RECEIVABLES PURCHASE AGREEMENT, dated as of February [*], 2003, by and
between HOUSEHOLD RECEIVABLES ACQUISITION COMPANY II, a Delaware corporation
(together with its permitted successors and assigns, "HRAC II"), and HOUSEHOLD
AFFINITY FUNDING CORPORATION III, a Delaware corporation (together with its
permitted successors and assigns, "Funding").

                              W I T N E S S E T H:

        WHEREAS, HRAC II desires to sell and assign from time to time certain
Receivables (hereinafter defined) to Funding, and Funding desires to purchase
such Receivables;

        WHEREAS, it is contemplated that certain Receivables purchased hereunder
will be transferred by Funding to the Note Trust (hereinafter defined) in
connection with the issuance of certain Notes (hereinafter defined) pursuant to
the Indenture (hereinafter defined); and

        WHEREAS, HRAC II agrees that all representations, covenants and
agreements made by HRAC II with respect to the Accounts (hereinafter defined)
shall also be for the benefit of the Owner Trustee (hereinafter defined), the
Indenture Trustee (hereinafter defined) and all holders of the Notes.

        NOW, THEREFORE, it is hereby agreed by and between HRAC II and Funding
as follows:

                                    ARTICLE I

                                   DEFINITIONS

                Section 1.01. Definitions. All capitalized terms used herein
shall have the following meanings:

        "Account" shall mean (a) each Initial Account, (b) each Additional
Account (but only from and after the Addition Date with respect thereto), (c)
each Related Account, (d) any account originated as a replacement of an Account
in connection with the upgrade of such Account to premium status (provided that
such replacement account can be traced or identified by reference to, or by way
of, the applicable computer file or microfiche list previously filed pursuant
hereto), (e) each Transferred Account, and (f) each surviving account resulting
from the combination, in accordance with the Credit Guidelines, of two or more
of the Accounts; provided, however, that the term "Account" shall not include
Deleted Accounts and any Account all of the Receivables in which are reassigned
to HRAC II pursuant to Section 6.01 or Section 6.02.

        "Account Owner" shall mean the Bank, or any other entity which is the
issuer of the revolving credit relating to an Account pursuant to a Credit
Agreement and/or a seller of Receivables to Funding.

        "Addition Date" shall mean, with respect to any Additional Account, the
date from and after which such Additional Account is included as an Additional
Account pursuant to this Agreement and the related Supplemental Conveyance.

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        "Addition Notice Date" shall have the meaning specified in
Section 2.02(a) of this Agreement.

        "Additional Account" shall mean each Automatic Additional Account and
each Aggregate Addition Account.

        "Additional Cut-Off Date" shall have the meaning specified in the
applicable Supplemental Conveyance.

        "Adverse Effect" shall have the meaning specified in the Transfer and
Servicing Agreement.

        "Aggregate Addition Account" shall mean each revolving credit account
established pursuant to a Credit Agreement between the Account Owner and an
Obligor, which account is owned by the Account Owner, is designated pursuant to
Section 2.02, and is identified in the computer file or microfiche list
delivered pursuant to Section 2.01 and Section 2.04 of this Agreement.

        "Agreement" shall mean this Receivables Purchase Agreement and all
amendments and supplements hereto.

        "Amortization Event" shall have the meaning specified in the Indenture.

        "Applicable Transferee" shall mean the Owner Trustee or the Indenture
Trustee, as applicable.

        "Appointment Date" shall have the meaning specified in Section 8.02.

        "Automatic Additional Account" shall mean each revolving credit account
established pursuant to a Credit Agreement between the Account Owner and an
Obligor, which account is owned by the Account Owner, is designated pursuant to
Section 2.03, and is identified in the computer file or microfiche list
delivered pursuant to Section 2.01 and Section 2.04 of this Agreement.

        "Bank" shall mean Household Bank (SB), National Association, a national
bank or any successors or assigns of Household Bank (SB), National Association.

        "Bank Purchase Agreement" shall mean the Second Amended and Restated
Receivables Purchase Agreement, dated as of July 1, 2002, between the Bank and
HRAC II, and all amendments and supplements thereto.

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

        "Collections" shall mean all payments received (including Recoveries and
Insurance/Debt Cancellation Proceeds) in respect of the Receivables, in the form
of cash, checks, wire transfers, electronic transfers, ATM transfers or any
other form of payment.

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        "Conveyance" shall have the meaning specified in Section 2.01(a).

        "Conveyance Papers" shall have the meaning specified in Section 4.01(c).

        "Credit Adjustment" shall have the meaning specified in Section 3.02.

        "Credit Agreement" shall mean, with respect to a revolving credit
account, the agreements between the Account Owner and the Obligor governing the
terms and conditions of such account, as such agreements may be amended,
modified or otherwise changed from time to time.

        "Credit Guidelines" shall mean the Bank's, Servicer's and/or any other
Account Owner's policies and procedures, as amended from time to time, (a)
relating to the operation of its revolving credit business, which are consistent
with prudent practice, including the policies and procedures for determining the
creditworthiness of credit card customers and the extension of credit to credit
card customers, and (b) relating to the maintenance of revolving credit accounts
and the collection of receivables created under revolving credit accounts.

        "Defaulted Receivable" shall mean a Principal Receivable which is
charged off as uncollectible in accordance with the Credit Guidelines or the
Servicer's customary and usual servicing procedures for servicing revolving
credit accounts. A Principal Receivable shall become a Defaulted Receivable no
later than the day on which such Principal Receivable is recorded as charged-off
on the Servicer's computer file of revolving credit accounts.

        "Deleted Account" shall mean any Removed Account as to which there are
no Receivables arising therein owned by Funding.

        "Dissolution Event" shall have the meaning specified in Section 8.02.

        "Distribution Date" shall have the meaning specified in the Indenture.

        "Event of Default" shall have the meaning specified in the Indenture.

        "Finance Charge and Administrative Receivables" shall mean Receivables
created in respect of Periodic Rate Finance Charges, cash advance fees, late
fees, overlimit fees, fees and charges relating to debt cancellation, debt
waiver and other enhancement and insurance programs administered by the Account
Owner, annual membership fees and all other incidental and miscellaneous fees
and charges.

        "Governmental Authority" shall mean the United States of America, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.

        "HRAC II" shall have the meaning specified in the recitals of this
Agreement.

        "Indenture" shall mean the Master Indenture between the Note Trust and
the Indenture Trustee, dated as of February [*], 2003, as supplemented by
Indenture Supplements (as defined

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in the Indenture) applicable to any Series (as defined in the Indenture) that
may be issued from time to time, and all other amendments and supplements
thereto.

        "Indenture Trustee" shall mean The Bank of New York, a New York banking
corporation, the institution executing the Indenture as, and acting in the
capacity of, Indenture Trustee thereunder, or its successor in interest, or any
successor trustee appointed as provided in the Indenture.

        "Insurance/Debt Cancellation Proceeds" shall mean all Insurance/Debt
Cancellation Proceeds as defined in the Bank Purchase Agreement (or, with
respect to an Account Owner other than the Bank, in a similar agreement between
such Account Owner and HRAC II) that are paid to HRAC II as provided in the Bank
Purchase Agreement (or such similar agreement).

        "Interchange" shall mean interchange fees paid to HRAC II pursuant to
the Bank Purchase Agreement (or, with respect to an Account Owner other than the
Bank, pursuant to a similar agreement between such Account Owner and HRAC II).

        "Lien" shall mean any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, deposit arrangement, equity interest,
encumbrance, lien (statutory or other), preference, participation interest,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever, including any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing and the filing of any financing statement under the UCC or
comparable law of any jurisdiction to evidence any of the foregoing; provided,
however, that the term "Lien" shall not include any lien or other encumbrance
for municipal or other local taxes if such taxes are not then due and payable or
if the validity of such taxes is then being contested in good faith by
appropriate proceedings and adequate reserves with respect to such taxes have
been set aside on the appropriate books.

        "Monthly Period" shall mean the period from and including the first day
of a calendar month to and including the last day of such calendar month.

        "Note" shall have the meaning specified in the Indenture.

        "Note Trust" shall mean the Household Affinity Credit Card Master Note
Trust I, a Delaware statutory trust, acting by and through the Owner Trustee.

        "Note Trust Collection Account" shall mean the Collection Account as
defined in the Indenture.

        "Note Trust Eligible Account" shall mean a revolving credit account
owned by the Bank or any other Account Owner which, as of the Initial Cut-Off
Date with respect to an Initial Account or as of the Additional Cut-Off Date
with respect to an Additional Account, meets the requirements below: (i) (a) is
a revolving credit account in existence and maintained by the Account Owner; (b)
is payable in United States dollars; (c) has an Obligor who has provided, as his
most recent billing address, an address located in the United States or its
territories, possessions or military bases; provided, however, that such
revolving credit account may have an Obligor who has provided, as his or her
most recent billing address, an address outside of the

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United States if, on the Initial Cut-Off Date or the related Additional Cut-Off
Date, as applicable, no more than 1% of the revolving credit accounts,
calculated by number of accounts, sold to Funding and then outstanding have such
an Obligor; (d) except as provided below, has an Obligor who has not been
identified by either the Account Owner or HRAC II in its computer files as being
currently involved in a voluntary or involuntary bankruptcy proceeding; (e) has
not been identified by the Account Owner or HRAC II as an account with respect
to which (i) the related card, if any, has been lost or stolen or (ii) the
related account number has been stolen; (f) has not been sold or pledged by the
Account Owner to any other Person; (g) does not have any Receivables which have
been sold or pledged by the Account Owner or HRAC II to any other Person other
than any Transferor pursuant to a Receivables Purchase Agreement; (h) except as
provided below, does not have any Receivables that are Defaulted Receivables;
(i) does not have any Receivables that have been identified by the Account Owner
or HRAC II as having been incurred as a result of fraudulent use of any related
credit card, if any, or related account number; and (j)(i) with respect to the
Initial Accounts, is an account in existence and maintained by the Account Owner
or HRAC II as of the Initial Cut-Off Date or (ii) with respect to Aggregate
Addition Accounts, is an account in existence and maintained by the Account
Owner or HRAC II as of the related Additional Cut-Off Date. Note Trust Eligible
Accounts may include revolving credit accounts owned by an Account Owner, the
Receivables in which have been charged off or an Obligor with respect to which
is involved in a bankruptcy proceeding, in each case on the related Additional
Cut-Off Date; provided that (i) such attributes are treated as a factor by HRAC
II and Funding in calculating a Purchase Price determined to be the fair market
value of the related Receivables and the related Purchased Assets, and (ii)
charging privileges with respect to such revolving credit accounts have been
canceled in accordance with the Credit Guidelines.

        "Note Trust Eligible Receivable" shall mean a Receivable:

        (a) which has arisen in a Note Trust Eligible Account;

        (b) which was created in compliance in all material respects with all
Requirements of Law applicable to the Account Owner and pursuant to a Credit
Agreement which complies in all material respects with all Requirements of Law
applicable to the Account Owner;

        (c) with respect to which all material consents, licenses, approvals or
authorizations of, or registrations or declarations with, any Governmental
Authority required to be obtained, effected or given by the Account Owner in
connection with the creation of such Receivable or the execution, delivery and
performance by the Account Owner of its obligations under the Credit Agreement
pursuant to which such Receivable was created, have been duly obtained, effected
or given and are in full force and effect;

        (d) as to which, at the time of the sale of such Receivable to Funding,
HRAC II has good and marketable title thereto and which itself is, and the
related underlying receivable is, free and clear of all Liens;

        (e) which has been the subject of a valid sale and assignment from HRAC
II to Funding of all of HRAC II's right, title and interest therein (including
any proceeds thereof);

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        (f) which is the legal, valid and binding payment obligation of the
Obligor thereon enforceable against such Obligor 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);

        (g) which, at the time of the sale of such Receivable to Funding, has
not been waived or modified except as permitted in accordance with the Credit
Guidelines and which waiver or modification is reflected in the Account Owner's
and HRAC II's computer file of revolving credit accounts at the time of its sale
to Funding;

        (h) which, at the time of the sale of such Receivable to Funding, is not
subject to any right of rescission, setoff, counterclaim or any other defense
(including defenses arising out of violations of usury laws) of the Obligor,
other than defenses arising out of applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
affecting the enforcement of creditors' rights in general;

        (i) as to which, at the time of the sale of such Receivable to Funding,
HRAC II has satisfied all of its obligations required to be satisfied by such
time;

        (j) as to which, at the time of the sale of such Receivable to Funding,
HRAC II has not taken any action which, or omitted to take any action the
omission of which, would impair at the time of such sale the rights of Funding
therein; and

        (k) which constitutes an "account" as defined in Article 9 of the UCC as
then in effect in the State of New York and any state where the filing of a
financing statement is required to perfect Funding's interest in the Receivables
and the proceeds thereof.

        "Noteholder" shall have the meaning specified in the Indenture.

        "Obligor" shall mean, with respect to any Account, any Person obligated
to make payments with respect to such Account, including any guarantor thereof
but excluding any merchant.

        "Officer's Certificate" shall mean a certificate delivered and signed by
the Controller, Treasurer or any Vice President or more senior officer of HRAC
II or Funding, as applicable.

        "Owner Trustee" shall mean Wilmington Trust Company, a Delaware banking
corporation, the institution executing the Trust Agreement as, and acting in the
capacity of, Owner Trustee thereunder, or its successor in interest, or any
successor trustee appointed as provided in the Trust Agreement.

        "Periodic Rate Finance Charges" shall have the meaning specified in the
Credit Agreement applicable to each Account for finance charges (due to periodic
rate) or any similar term.

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

        "Principal Receivables" shall mean all Receivables other than Finance
Charge and Administrative Receivables. In calculating the aggregate amount of
Principal Receivables on any day, the amount of Principal Receivables shall be
reduced by the aggregate amount of credit balances in the Accounts on such day.

        "Purchase Price" shall have the meaning specified in Section 3.01(a).

        "Purchase Price Payment Date" shall have the meaning specified in
Section 3.01(a).

        "Purchased Assets" shall have the meaning specified in Section 2.01(a).

        "Rating Agency" shall mean the nationally-recognized statistical rating
agency or agencies, if any, selected by Funding to rate any Notes.

        "Rating Agency Condition" shall have the meaning specified in the
Indenture.

        "Receivables" shall mean all amounts payable by Obligors on any Account
from time to time, including amounts payable for Principal Receivables and
Finance Charge and Administrative Receivables, but only to the extent that such
amounts payable have been conveyed by the Bank to HRAC II pursuant to the Bank
Purchase Agreement (or, with respect to an Account Owner other than the Bank,
pursuant to a similar agreement between such Account Owner and HRAC II). If HRAC
II sells only a fractional undivided interest in a receivable to Funding
pursuant to the express terms of a Supplemental Conveyance, and unless the
context otherwise requires (whether or not there is a specific reference to the
underlying receivable), any reference in this Agreement or any Supplemental
Conveyance to such Receivable and any Collections thereon shall refer to only
the fractional undivided interest that is sold by HRAC II to Funding, which
fractional interest may be less than a 100% undivided interest therein. Any
reference in this Agreement to the "underlying receivable" with respect to a
Receivable shall refer to the receivable in which such Receivable represents an
undivided interest.

        "Recoveries" shall mean all Recoveries as defined in the Bank Purchase
Agreement (or, with respect to an Account Owner other than the Bank, in a
similar agreement between such Account Owner and HRAC II) that are paid to
HRAC II as provided in the Bank Purchase Agreement (or such similar agreement).

        "Reinvestment Event" shall have the meaning specified in the Indenture.

        "Related Account" shall mean an Account with respect to which a new
account number has been issued by the Account Owner under circumstances
resulting from a lost or stolen credit card or account number and not requiring
standard application and credit evaluation procedures under the Credit
Guidelines.

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        "Removed Account" shall mean any Account as to which HRAC II has
received notice from the Servicer that such Account is a "Removed Account" as
defined in the Transfer and Servicing Agreement.

        "Repurchase Price" shall have the meaning specified in Section 6.01(b).

        "Requirements of Law" shall mean any law, treaty, rule or regulation, or
determination of an arbitrator or Governmental Authority, whether federal, state
or local (including usury laws, the Federal Truth in Lending Act and Regulation
B and Regulation Z of the Board of Governors of the Federal Reserve System),
and, when used with respect to any Person, the certificate of incorporation and
by-laws or other organizational or governing documents of such Person.

        "Servicer" shall mean the entity acting as Servicer under the Transfer
and Servicing Agreement.

        "Stop Date" shall have the meaning specified in Section 2.05(a).

        "Supplemental Conveyance" shall have the meaning specified in
Section 2.01(a).

        "Transfer and Servicing Agreement" shall mean the Transfer and Servicing
Agreement, dated as of February [*], 2003, among Household Finance Corporation,
as Servicer, Funding, as Transferor, and the Note Trust, and all amendments and
supplements thereto.

        "Transfer Date" shall have the meaning specified in the Indenture.

        "Transferred Account" shall mean an Account into which an Account shall
be transferred pursuant to the Credit Guidelines; provided, however, that such
Transferred Account can be traced or identified as an account into which an
Account has been transferred.

        "Trust Agreement" shall mean the Trust Agreement, dated as of [*], 2003,
between Funding, as Transferor, and Wilmington Trust Company, as Owner Trustee,
and all amendments and supplements thereto.

        "UCC" shall mean the Uniform Commercial Code as in effect in the
applicable jurisdiction.

        Section 1.02. Other Definitional Provisions. (a)All terms defined in
this Agreement shall have the defined meanings when used in any certificate,
other document or Conveyance Paper made or delivered pursuant hereto unless
otherwise defined therein.

        (b)     The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement or any Conveyance Paper shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and Section, Subsection, Schedule and Exhibit references contained in
this Agreement are references to Sections, Subsections, Schedules and Exhibits
in or to this Agreement unless otherwise specified.

                               [END OF ARTICLE I]

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                                   ARTICLE II

                     PURCHASE AND CONVEYANCE OF RECEIVABLES

                Section 2.01. Purchase. (a) Subject to the terms of this
Agreement, and by execution from time to time of certain assignments
substantially in the form of Exhibit A hereto (each, a "Supplemental
Conveyance") supplementing this Agreement, HRAC II hereby sells, transfers,
assigns, sets over and otherwise conveys to Funding (collectively, the
"Conveyance"), without recourse, all of its right, title and interest in, to and
under the Receivables of the Accounts existing on the related Additional Cut-Off
Date and thereafter created from time to time until the termination of this
Agreement pursuant to Article VIII hereof, all Interchange, Insurance/Debt
Cancellation Proceeds and Recoveries allocable to such Receivables, all monies
due or to become due and all amounts received or receivable with respect
thereto, all Collections with respect thereto and all proceeds (including
"proceeds" as defined in the UCC) thereof (the "Purchased Assets"). The
Receivables existing in Accounts on the related Additional Cut-Off Date and
thereafter arising in such Accounts on or prior to the related Addition Date,
and the related Purchased Assets, shall be sold by HRAC II and purchased by
Funding on the related Addition Date. Receivables arising after such Addition
Date in such Accounts and the related Purchased Assets shall be sold by HRAC II
and purchased by Funding on the date such Receivables arise.

                (b)     In connection with each Conveyance of Receivables
arising under Accounts, HRAC II agrees (i) to record and file, at its own
expense, any financing statements (and amendments with respect to such financing
statements when applicable) with respect to such Receivables and the related
Purchased Assets, meeting the requirements of applicable state law in such
manner and in such jurisdictions as are necessary to perfect, and maintain
perfection of, the Conveyance of such Receivables and other Purchased Assets
from HRAC II to Funding on and after the applicable Addition Date, (ii) to cause
such financing statements and amendments to name HRAC II, as seller, and
Funding, as purchaser, of such Receivables and other Purchased Assets and (iii)
to deliver a file-stamped copy of such financing statements or amendments or
other evidence of such filings to Funding (and to one or more Applicable
Transferees, if Funding so directs) as soon as is practicable after filing.

                (c)     In connection with each Conveyance of Receivables
arising under Accounts, HRAC II further agrees that it will, at its own expense,
(i) on or prior to the respective Addition Date, indicate in its computer files
and microfiche lists that Receivables created in connection with such Accounts
and the related Purchased Assets have been sold to Funding in accordance with
this Agreement and the Supplemental Conveyance by including in such computer
files and microfiche lists the appropriate code, and (ii) on or prior to the
date that is five Business Days after the respective Addition Date, deliver to
Funding (and to one or more Applicable Transferees, if Funding so directs) a
computer file or microfiche list containing a true and complete list of all such
Accounts specifying for each such Account, as of the Additional Cut-Off Date,
(A) its account number, (B) the aggregate amount outstanding in such Account and
(C) the aggregate amount of Principal Receivables in such Account. Such computer
files and microfiche lists, as supplemented from time to time to reflect
Accounts and Deleted Accounts, shall be marked as Schedule 1 to this Agreement,
shall be delivered to Funding (and to one or more Applicable Transferees, if so
directed by Funding), shall be marked as proprietary and

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confidential, and are hereby incorporated into and made a part of this
Agreement. HRAC II further agrees not to alter the code referenced in clause (i)
of this paragraph with respect to any Account during the term of this Agreement
unless and until such Account is no longer an Account.

                (d)     The parties hereto intend that the conveyance of
HRAC II's right, title and interest in and to the Purchased Assets pursuant to
this Agreement and any Supplemental Conveyance shall constitute an absolute
sale, conveying good title free and clear of any Liens from HRAC II to Funding
and that the Purchased Assets shall not be part of HRAC II's estate in the event
of the insolvency of HRAC II or a bankruptcy or similar event with respect to
HRAC II. It is the intention of the parties hereto that the arrangements with
respect to the Purchased Assets pursuant to this Agreement and any Supplemental
Conveyance shall constitute a purchase and sale of such Purchased Assets and not
a loan or borrowing secured by such Purchased Assets, including for accounting
purposes. In the event, however, that notwithstanding such intent it were
determined that the transactions evidenced hereby constitute a loan or borrowing
and not a purchase and sale, it is the intention of the parties hereto that this
Agreement shall constitute a security agreement under applicable law, and that
HRAC II shall be deemed to have granted, and HRAC II does hereby grant, to
Funding a first priority perfected security interest in all of HRAC II's right,
title and interest, whether now owned or hereafter acquired, in, to and under
the Receivables and other Purchased Assets.

                Section 2.02. Addition of Aggregate Addition Accounts. (a) If,
from time to time, Funding becomes obligated to designate Aggregate Addition
Accounts (as defined in the Transfer and Servicing Agreement) pursuant to
Section 2.09(a) of the Transfer and Servicing Agreement, then Funding may, at
its option, give HRAC II written notice thereof on or before the fifth Business
Day (the "Addition Notice Date") prior to the Addition Date therefor, and HRAC
II shall on or before the related Addition Date designate sufficient Note Trust
Eligible Accounts to be included as Aggregate Addition Accounts so that, after
the inclusion thereof, Funding will be in compliance with the requirements of
said Section 2.09(a). In addition, from time to time and subject to Funding's
covenant in the Transfer and Servicing Agreement to comply with Sections 2.09(b)
and (c) of the Transfer and Servicing Agreement, Note Trust Eligible Accounts
may be designated to be included as Aggregate Addition Accounts upon the mutual
agreement of HRAC II and Funding.

        (b)     On the Addition Date with respect to any designation of
        Aggregate Addition Accounts, Funding shall purchase HRAC II's right,
        title and interest in, to and under the Receivables in such Aggregate
        Addition Accounts and the related Purchased Assets (and such Aggregate
        Addition Accounts shall become Accounts for purposes of this Agreement),
        subject to the satisfaction of the following conditions on such Addition
        Date:

        (i)     all Aggregate Addition Accounts shall be Note Trust Eligible
        Accounts;

        (ii)    HRAC II shall have delivered to Funding copies of UCC financing
        statements covering such Aggregate Addition Accounts, if necessary to
        perfect Funding's interest in the Receivables arising therein;

                                       10

<PAGE>

        (iii)   HRAC II shall have delivered to Funding (or deposited in the
        Note Trust Collection Account, if required under Section 2.09(c) of the
        Transfer and Servicing Agreement and so directed by Funding) all
        Collections with respect to such Aggregate Addition Accounts since the
        Additional Cut-Off Date;

        (iv)    as of each of the Additional Cut-Off Date and the Addition Date,
        no Dissolution Event with respect to HRAC II shall have occurred nor
        shall the sale of the Receivables arising in the Aggregate Addition
        Accounts to Funding have been made in contemplation of the occurrence
        thereof;

        (v)     HRAC II shall have delivered to Funding an Officer's Certificate
        of HRAC II, dated the Addition Date, confirming, to the extent
        applicable, the items set forth in clauses (i) through (iv) above; and

        (vi)    HRAC II and Funding shall have entered into a duly executed,
        written Supplemental Conveyance.

                Section 2.03. Addition of Automatic Additional Accounts. (a)
Upon the mutual agreement of HRAC II and Funding, and subject to Funding's
covenant in the Transfer and Servicing Agreement to comply with Sections 2.09(d)
and (e) of the Transfer and Servicing Agreement, HRAC II may designate Note
Trust Eligible Accounts to be included as Automatic Additional Accounts. HRAC II
shall cooperate with Funding to enable Funding to comply with the requirements
of Section 2.09 of the Transfer and Servicing Agreement and to enable Funding to
perform with respect to the Receivables in the Automatic Additional Accounts all
actions specified in Section 2.09(d) or (e) of the Transfer and Servicing
Agreement.

        (b)     On the Addition Date with respect to any designation of
Automatic Additional Accounts, Funding shall purchase HRAC II's right, title and
interest in, to and under the Receivables in such Automatic Additional Accounts
and the related Purchased Assets (and such Automatic Additional Accounts shall
become Accounts for purposes of this Agreement), subject to the satisfaction of
the following conditions on such Addition Date:

        (i)     all Automatic Additional Accounts shall be Note Trust Eligible
Accounts;

        (ii)    HRAC II shall have delivered to Funding copies of UCC financing
statements covering such Automatic Additional Accounts, if necessary to perfect
Funding's interest in the Receivables arising therein;

        (iii)   HRAC II shall have delivered to Funding (or deposited in the
Note Trust Collection Account, if required under Section 2.09(e) of the Transfer
and Servicing Agreement and so directed by Funding) all Collections with respect
to such Automatic Additional Accounts since the Additional Cut-Off Date;

        (iv)    as of each of the Additional Cut-Off Date and the Addition Date,
no Dissolution Event with respect to HRAC II shall have occurred nor shall the
sale of the Receivables arising in the Automatic Additional Accounts to Funding
have been made in contemplation of the occurrence thereof;

                                       11

<PAGE>

        (v)     HRAC II shall have delivered to Funding an Officer's Certificate
of HRAC II, dated the Addition Date, confirming, to the extent applicable, the
items set forth in clauses (i) through (iv) above; and

        (vi)    HRAC II and Funding shall have entered into a duly executed,
written Supplemental Conveyance.

                Section 2.04. Representations and Warranties. HRAC II hereby
represents and warrants to Funding on the related Addition Date as to the
matters set forth in Sections 2.02(b)(ii) and 2.03(b)(ii) above and that, in the
case of Additional Accounts, the computer file or microfiche list delivered
pursuant to Section 2.01(c) is, as of the applicable Additional Cut-Off Date,
true and complete in all material respects

                Section 2.05. Removal and Deletion of Accounts. (a) If an
Account becomes a Removed Account, then HRAC II shall stop selling to Funding
Principal Receivables arising in such Removed Account effective on the Business
Day (the "Stop Date") after the date such Account becomes a Removed Account.
Notwithstanding the cessation of the sale to Funding of additional Principal
Receivables arising in such Removed Account, Principal Receivables sold to
Funding prior to the Stop Date, Collections in respect of such Principal
Receivables, Finance Charge and Administrative Receivables whenever created that
accrue in respect of such Principal Receivables, and Collections in respect of
such Finance Charge and Administrative Receivables, shall continue to be
property of Funding available for transfer by Funding to the Note Trust. To the
extent that it is not clear to HRAC II whether collections relate to a Principal
Receivable that was sold to Funding or to a principal receivable that HRAC II
did not sell to Funding, HRAC II shall allocate payments on each such Removed
Account with respect to the principal balance of such Removed Account first to
the oldest principal balance of such Removed Account.

        (b)     On and after the Stop Date for a Removed Account, HRAC II may
mark its books and records to indicate that such Account is a Removed Account,
but HRAC II shall not (i) alter the code referenced in clause (i) of Section
2.01(c) with respect to such Removed Account unless and until such Account
becomes a Deleted Account, or (ii) delete such Removed Account from Schedule 1
hereto.

        (c)     Once a Removed Account becomes a Deleted Account, HRAC II shall
promptly delete such Deleted Account from Schedule 1 hereto and shall indicate
in its computer files that such Deleted Account is no longer an Account.

                               [END OF ARTICLE II]

                                       12

<PAGE>

                                   ARTICLE III

                            CONSIDERATION AND PAYMENT

                Section 3.01. Purchase Price. (a) The "Purchase Price" for the
Receivables in Accounts existing on the related Additional Cut-Off Date, and the
related Purchased Assets, that are conveyed to Funding under this Agreement and
the related Supplemental Conveyance shall be payable in cash on the Addition
Date in an amount equal to the sum of (i) 100% of the aggregate balance of the
Principal Receivables, and such of the Finance Charge and Administrative
Receivables as constitute fees and charges relating to debt cancellation, debt
waiver and other enhancement and insurance programs administered by the Account
Owner, so conveyed, plus (ii) the present value of anticipated excess spread,
including Interchange, computed by taking into account factors such as
historical losses (and discounted to take into account any uncertainty as to
future performance matching historical performance), servicing fees,
delinquencies, payment rates and yield, such sum adjusted to reflect any other
factors as HRAC II and Funding mutually may agree will result in a Purchase
Price determined to be the fair market value of such Receivables and the related
Purchased Assets. This computation of initial Purchase Price shall assume no
reinvestment in new Receivables. The Purchase Price for the Receivables in
Accounts which come into existence after the related Additional Cut-Off Date,
and the related Purchased Assets, shall be payable on a date (the "Purchase
Price Payment Date") mutually agreed to by HRAC II and Funding (but no later
than the Distribution Date following the Monthly Period in which such
Receivables and the related Purchased Assets are conveyed by HRAC II to Funding)
in cash in an amount equal to the sum of (i) 100% of the aggregate balance of
the Principal Receivables, and such of the Finance Charge and Administrative
Receivables as constitute fees and charges relating to debt cancellation, debt
waiver and other enhancement and insurance programs administered by the Account
Owner, so conveyed, plus (ii) the present value of anticipated excess spread,
including Interchange, computed by taking into account factors such as
historical losses (and discounted to take into account any uncertainty as to
future performance matching historical performance), servicing fees,
delinquencies, payment rates and yield, such sum adjusted to reflect any other
factors as HRAC II and Funding mutually may agree will result in a Purchase
Price determined to be the fair market value of such Receivables and the related
Purchased Assets.

                (b)     Notwithstanding any other provision of this Agreement,
HRAC II shall not be obligated to continue to sell Receivables or other
Purchased Assets to Funding to the extent that HRAC II is not paid the Purchase
Price therefor as provided herein.

                Section 3.02. Adjustments to Purchase Price. The Purchase Price
shall be adjusted on each Purchase Price Payment Date (a "Credit Adjustment")
with respect to any Receivable previously conveyed to Funding by HRAC II which
has since been reversed by HRAC II or the Servicer because of a rebate, refund,
unauthorized charge or billing error to an Obligor or because such Receivable
was created in respect of merchandise which was refused or returned by an
Obligor, but in each case other than by reason of Servicer error. The amount of
such adjustment shall equal (x) the reduction in the principal balance of such
Receivable resulting from the occurrence of such event multiplied by (y) the
quotient (expressed as a percentage) of (i) the Purchase Price payable on such
Purchase Price Payment Date computed in accordance with Section 3.01(a) divided
by (ii) the amount of Principal Receivables, and such of

                                       13

<PAGE>

the Finance Charge and Administrative Receivables as constitute fees and charges
relating to debt cancellation, debt waiver and other insurance and enhancement
programs administered by the Account Owner, paid for on such date pursuant to
such Section. In the event that an adjustment pursuant to this Section 3.02
causes the Purchase Price to be a negative number, HRAC II agrees that, not
later than 1:00 p.m. New York City time on such Purchase Price Payment Date,
HRAC II shall pay or cause to be paid to Funding an amount equal to the amount
by which the Credit Adjustment exceeds the unadjusted Purchase Price.

                Section 3.03. Use of Name, Logo and Marks. HRAC II does hereby
grant to Funding a non-exclusive license to use the name "Household Receivables
Acquisition Company II" and all related identifying trade or service marks,
signs, symbols, logos, designs, servicing software, customer lists and other
intangibles (including those of any Account Owner in which HRAC II has rights)
in connection with the servicing of the Receivables purchased hereunder. The
license granted shall be co-extensive with the term of the Agreement.

                              [END OF ARTICLE III]

                                       14

<PAGE>

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

          Section 4.01. HRAC II's Representations and Warranties Relating to
HRAC II. HRAC II hereby represents and warrants to, and agrees with, Funding on
the date of this Agreement and each Addition Date, that:

          (a)    Organization and Good Standing. HRAC II is a corporation duly
organized and validly existing in good standing under the laws of the State of
Delaware and has, in all material respects, full power and authority 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. HRAC II is duly qualified to do business and
is in good standing as a foreign corporation (or is exempt from such
requirements) and has obtained all necessary licenses and approvals in each
jurisdiction in which failure to so qualify or to obtain such licenses and
approvals would (i) render any Credit Agreement relating to an Account
unenforceable or (ii) have a material adverse effect on this Agreement or the
transactions contemplated hereby or on the ability of HRAC II to perform its
obligations under this Agreement.

          (c)    Due Authorization. The execution, delivery and performance by
HRAC II of this Agreement and any other document or instrument delivered
pursuant hereto to which HRAC II is a party (such other documents or
instruments, collectively, the "Conveyance Papers"), and the consummation by
HRAC II of the transactions provided for in this Agreement or any other
Conveyance Papers, have been duly authorized by all necessary corporate action
on the part of HRAC II, and this Agreement will remain from the time of its
execution, an official record of HRAC II.

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

          (e)    No Violation. The execution, delivery and performance of this
Agreement and the Conveyance Papers by HRAC II and the fulfillment by HRAC II of
the terms contemplated herein and therein applicable to HRAC II will not
conflict with or violate any Requirements of Law applicable to HRAC II.

          (f)    No Proceedings. There are no proceedings or investigations
pending or, to the best knowledge of HRAC II, threatened against HRAC II, before
any Governmental Authority (i) asserting the invalidity of this Agreement or the
Conveyance Papers, (ii) seeking to

                                       15

<PAGE>

prevent the consummation of any of the transactions contemplated by this
Agreement or the Conveyance Papers, (iii) seeking any determination or ruling
that, in the reasonable judgment of HRAC II, would materially and adversely
affect the performance by HRAC II of its obligations under this Agreement or the
Conveyance Papers, (iv) seeking any determination or ruling that would
materially and adversely affect the validity or enforceability of this Agreement
or the Conveyance Papers or (v) seeking to affect adversely the income tax
attributes of the Note Trust under United States, New York, California, Nevada
or Illinois income tax systems.

          (g)    All Consents. All authorizations, consents, orders or approvals
of or registrations or declarations with any Governmental Authority required to
be obtained, effected or given by HRAC II in connection with the execution and
delivery by HRAC II of this Agreement or the Conveyance Papers and the
performance of the transactions contemplated by this Agreement or the Conveyance
Papers by HRAC II have been duly obtained, effected or given and are in full
force and effect.

     The representations and warranties set forth in this Section 4.01 shall
survive the sale and assignment of the Purchased Assets to Funding. Upon
discovery by HRAC II or Funding of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
written notice to the other party, the Owner Trustee and the Indenture Trustee
within five Business Days following such discovery.

          Section 4.02. Representations and Warranties of HRAC II Relating to
the Agreement and the Receivables.

          (a)    Representations and Warranties. HRAC II hereby represents and
warrants to Funding, with respect to Additional Accounts, on the related
Addition Date that:

          (i)    this Agreement and, in the case of Additional Accounts, the
related Supplemental Conveyance, each constitutes a legal, valid and binding
obligation of HRAC II enforceable against HRAC II in accordance with its terms,
except as such enforceability may be limited by (A) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws, now or hereafter
in effect, relating to creditors' rights generally, (B) the possible
unavailability of remedies of specific performance and injunctive and other
forms of equitable relief, and (C) equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought;

          (ii)   as of the related Additional Cut-Off Date with respect to
Additional Accounts, Schedule 1 to this Agreement, as supplemented to such date,
is an accurate and complete listing in all material respects of all the
Accounts, and the information contained therein supplied by HRAC II with respect
to the identity of such Accounts and the Receivables existing thereunder is true
and correct in all material respects;

          (iii)  each Receivable sold to Funding has been sold free and clear of
any Lien, and each related underlying receivable is then free and clear of all
Liens;

          (iv)   with respect to each Receivable, all consents, orders,
approvals or authorizations of or registrations or declarations with any
Governmental Authority required to be

                                       16

<PAGE>

obtained, effected or given by HRAC II in connection with the conveyance of such
Receivable to Funding have been duly obtained, effected or given and are in full
force and effect;

          (v)    each related Supplemental Conveyance constitutes a valid sale,
transfer and assignment to Funding of all right, title and interest of HRAC II
in the Receivables of the related Accounts and the proceeds thereof, and the
Interchange, Insurance/Debt Cancellation Proceeds and Recoveries allocable to
such Receivables;

          (vi)   on the Additional Cut-Off Date, in the case of each related
Additional Account, each such Account is a Note Trust Eligible Account;

          (vii)  on the Additional Cut-Off Date, in the case of each related
Additional Account, each Receivable contained in such Account on such date and
sold to Funding by HRAC II is a Note Trust Eligible Receivable;

          (viii) on the date of the creation of any new Receivable sold to
Funding by HRAC II, such Receivable is a Note Trust Eligible Receivable; and

          (ix)   no selection procedures believed by HRAC II to be materially
adverse to the interests of Funding, the Owner Trustee, the Indenture Trustee or
the Note Trust have been used by HRAC II in selecting the Accounts from among
any pool of accounts of a similar type available to HRAC II.

          (b)    Notice of Breach. The representations and warranties set forth
in this Section 4.02 shall survive the sale and assignment of the Purchased
Assets to Funding. Upon discovery by either HRAC II or Funding of a breach of
any of the representations and warranties set forth in this Section 4.02, the
party discovering such breach shall give written notice to the other party, the
Owner Trustee and the Indenture Trustee within five Business Days following such
discovery; provided that the failure to give notice within five Business Days
does not preclude subsequent notice. HRAC II hereby acknowledges that Funding
intends to rely on the representations hereunder in connection with
representations made by Funding to secured parties, assignees or subsequent
transferees, including but not limited to transfers made by Funding to the Note
Trust pursuant to the Transfer and Servicing Agreement and by the Note Trust to
the Indenture Trustee pursuant to the Indenture, and that the Owner Trustee and
the Indenture Trustee may enforce such representations directly against HRAC II.

          Section 4.03. Representations and Warranties of Funding. On the date
of this Agreement and each Addition Date, Funding hereby represents and warrants
to, and agrees with, HRAC II that:

          (a)    Organization and Good Standing. Funding is a corporation duly
organized and validly existing under the laws of the State of Delaware and has,
in all material respects, full power and authority 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 Conveyance Papers to which Funding is a party.

          (b)    Due Authorization. The execution and delivery by Funding of
this Agreement and the Conveyance Papers to which Funding is a party, and the
consummation by

                                       17

<PAGE>

Funding of the transactions provided for in this Agreement and the Conveyance
Papers to which Funding is a party, have been duly authorized by Funding by all
necessary corporate action on the part of Funding.

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

          (d)    No Violation. The execution, delivery and performance by
Funding of this Agreement and the Conveyance Papers to which Funding is a party
and the fulfillment by Funding of the terms contemplated herein and therein
applicable to Funding will not conflict with or violate any Requirements of Law
applicable to Funding.

          (e)    No Proceedings. There are no proceedings or investigations
pending or, to the best knowledge of Funding, threatened against Funding, before
any Governmental Authority (i) asserting the invalidity of this Agreement or the
Conveyance Papers to which Funding is a party, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or the
Conveyance Papers to which Funding is a party, (iii) seeking any determination
or ruling that, in the reasonable judgment of Funding, would materially and
adversely affect the performance by Funding of its obligations under this
Agreement or the Conveyance Papers to which Funding is a party or (iv) seeking
any determination or ruling that would materially and adversely affect the
validity or enforceability of this Agreement or the Conveyance Papers to which
Funding is a party.

          (f)    All Consents. All authorizations, consents, orders or approvals
of or registrations or declarations with any Governmental Authority required to
be obtained, effected or given by Funding in connection with the execution and
delivery by Funding of this Agreement and the Conveyance Papers to which Funding
is a party and the performance by Funding of the transactions contemplated by
this Agreement and the Conveyance Papers to which Funding is a party or the
fulfillment by Funding of the terms of this Agreement and the Conveyance Papers
to which Funding is a party have been duly obtained, effected or given and are
in full force and effect.

     The representations and warranties set forth in this Section 4.03 shall
survive the sale and assignment of the Purchased Assets to Funding. Upon
discovery by HRAC II or Funding of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
written notice to the other party, the Owner Trustee and the Indenture Trustee
within five Business Days following such discovery.

                               [END OF ARTICLE IV]

                                       18

<PAGE>

                                    ARTICLE V

                                    COVENANTS

          Section 5.01. Covenants of HRAC II. HRAC II hereby covenants and
agrees with Funding as follows:

          (a)    Receivables Not To Be Evidenced by Instruments. HRAC II will
take no action to cause any Receivable (or any underlying receivable) to be
evidenced by any instrument (as defined in the UCC), except in connection with
the enforcement or collection undertaken with regard to the related Account. In
the event of a breach of this Section 5.01(a), such Receivable shall be
reassigned to HRAC II in accordance with Section 6.01(b).

          (b)    Security Interests. Except for the conveyances hereunder or as
otherwise provided herein, HRAC II will not sell, pledge, assign or transfer to
any other Person, or take any other action inconsistent with Funding's ownership
of, the Purchased Assets or grant, create, incur, assume or suffer to exist any
Lien (arising through or under HRAC II) on any Purchased Asset or any underlying
receivable, whether now existing or hereafter created, or any interest therein,
and HRAC II shall not claim any ownership interest in any Purchased Asset and
shall defend the right, title and interest of Funding in, to and under the
Purchased Assets, whether now existing or hereafter created, against all claims
of third parties claiming through or under HRAC II.

          (c)    Account Allocations. In the event that HRAC II is unable for
any reason to sell Receivables to Funding in accordance with the provisions of
this Agreement (including, without limitation, by reason of the application of
the provisions of Section 8.02 or any Governmental Authority having regulatory
authority over HRAC II or any court of competent jurisdiction ordering that HRAC
II not sell any additional Principal Receivables to Funding), then, in any such
event, HRAC II agrees (except as prohibited by any such order) to allocate and
pay to Funding, after the date of such inability, all Collections with respect
to Principal Receivables previously sold to Funding. To the extent that it is
not clear to HRAC II whether collections relate to a Principal Receivable that
was sold to Funding or to a principal receivable that HRAC II is unable to sell
to Funding, HRAC II agrees that it shall allocate payments on each Account with
respect to the principal balance of such Account first to the oldest principal
balance of such Account. Notwithstanding any cessation of the sale to Funding of
additional Principal Receivables, Principal Receivables sold to Funding prior to
the occurrence of the event giving rise to such inability, Collections in
respect of such Principal Receivables, Finance Charge and Administrative
Receivables whenever created that accrue in respect of such Principal
Receivables, and Collections in respect of such Finance Charge and
Administrative Receivables, shall continue to be property of Funding available
for transfer by Funding to the Note Trust.

          (d)    Delivery of Collections. In the event that HRAC II receives
Collections in respect of the Purchased Assets sold to Funding hereunder, HRAC
II agrees to pay to Funding (or to the Servicer if Funding so directs) all such
Collections as soon as practicable after receipt thereof.

                                       19

<PAGE>

          (e)    Notice of Liens. HRAC II shall notify Funding promptly after
becoming aware of any Lien on any Purchased Asset other than the conveyances
hereunder

          (f)    Enforcement of Agreements. HRAC II hereby covenants that HRAC
II will at all times enforce the covenants and agreements of the Bank under the
Bank Purchase Agreement (or, with respect to an Account Owner other than the
Bank, in a similar agreement between such Account Owner and HRAC II), including
those relating to periodic rate finance charges, credit agreements, and credit
guidelines related to the Accounts.

          (g)    Interchange. Not later than 1:00 p.m., New York City time, on
each Distribution Date, HRAC II shall pay to or at the direction of Funding, in
immediately available funds, the amount of Interchange allocable to the
Receivables and received by HRAC II.

          (h)    Documentation of Transfer. HRAC II shall undertake to file the
documents which would be necessary to perfect and maintain the perfection of the
sale of the Purchased Assets to Funding.

          (i)    Approval of Office Records. HRAC II shall cause this Agreement
and all Conveyance Papers to be duly approved by HRAC II's Board of Directors,
and HRAC II shall maintain this Agreement and all Conveyance Papers as a part of
the official records of HRAC II for the term of the Agreement.

          (j)    Name and Type and Jurisdiction of Organization. HRAC II shall
not change its name or its type or jurisdiction of organization without
previously having delivered to Funding an opinion of counsel to the effect that
all actions have been taken, and all filings have been made, as are necessary to
continue and maintain the first-priority perfected ownership interest of Funding
in the Purchased Assets.

                               [END OF ARTICLE V]

                                       20

<PAGE>

                                   ARTICLE VI

                              REPURCHASE OBLIGATION

          Section 6.01. Reassignment of Ineligible Receivables.

          (a)    In the event any representation or warranty under Section
4.02(a) (ii), (iii), (iv), (vi), (vii) or (viii) is not true and correct in any
material respect as of the date specified therein with respect to any Receivable
or the related Account and as a result of such breach Funding is required to
accept a reassignment of the Receivables previously sold by HRAC II to Funding
pursuant to Section 2.05 of the Transfer and Servicing Agreement, HRAC II shall
accept reassignment of such Receivables on the terms and conditions set forth in
Section 6.01(b).

          (b)    (b) HRAC II shall accept reassignment of any Receivables
described in Section 6.01(a), and any related Purchased Assets, from Funding on
the date on which such Receivables and related Purchased Assets are reassigned
to Funding, and shall pay for such reassigned Receivables and related Purchased
Assets by paying to Funding in immediately available funds on the next Purchase
Price Payment Date an amount equal to 100% of the aggregate balance of such
reassigned Receivables as constitute Principal Receivables and Finance Charge
and Administrative Receivables representing fees and charges relating to debt
cancellation, debt waiver and other enhancement and insurance programs
administered by the Account Owner, plus accrued and unpaid finance charges at
the annual percentage rate applicable to such Receivables from the last date
billed through the end of the prior Monthly Period (the "Repurchase Price").
Upon reassignment of such Receivables and related Purchased Assets, Funding
shall automatically and without further action sell, transfer, assign, set over
and otherwise convey to HRAC II, without recourse, representation or warranty,
all the right, title and interest of Funding in and to such Receivables and
related Purchased Assets, and such reassigned Receivables and related Purchased
Assets shall be treated by Funding as collected in full as of the date on which
they are transferred. Funding shall execute such documents and instruments of
transfer or assignment and take such other actions as shall reasonably be
requested by HRAC II to effect the conveyance of such Receivables and related
Purchased Assets pursuant to this Section 6.01(b).

          Section 6.02. Reassignment of Other Receivables. (a) In the event any
representation or warranty set forth in Section 4.01(a) or (c) or Section
4.02(a)(i) or (a)(v) is not true and correct in any material respect and as a
result of such breach Funding is required to accept a reassignment of the
Receivables previously sold by HRAC II to Funding pursuant to Section 2.06 of
the Transfer and Servicing Agreement, HRAC II shall accept reassignment of such
Receivables on the terms and conditions set forth in Section 6.02 (b).

          (b)    HRAC II shall accept reassignment of any Receivables described
in Section 6.02(a), and any related Purchased Assets, from Funding on the date
on which such Receivables and related Purchased Assets are reassigned to
Funding, and shall pay for such reassigned Receivables and related Purchased
Assets by paying to Funding in immediately available funds, not later than 1:00
p.m. New York City time, on the Transfer Date following the Monthly Period in
which such reassignment obligation arises, an amount equal to the Repurchase
Price. If

                                       21

<PAGE>

Funding so directs, HRAC II shall deposit such payment directly into the Note
Trust Collection Account in accordance with the terms of the Transfer and
Servicing Agreement and the Indenture. Upon reassignment of such Receivables and
related Purchased Assets, Funding shall automatically and without further action
sell, transfer, assign, set over and otherwise convey to HRAC II, without
recourse, representation or warranty, all the right, title and interest of
Funding in and to such Receivables and related Purchased Assets, and such
reassigned Receivables and related Purchased Assets shall be treated by Funding
as collected in full as of the date on which they are transferred. Funding shall
execute such documents and instruments of transfer or assignment and take such
other actions as shall reasonably be requested by HRAC II to effect the
conveyance of such Receivables and related Purchased Assets pursuant to this
Section 6.02(b).

                               [END OF ARTICLE VI]

                                       22

<PAGE>

                                   ARTICLE VII

                              CONDITIONS PRECEDENT

          Section 7.01. Conditions to Funding's Obligations Regarding
Receivables. The obligations of Funding to purchase any Receivables created on
or after any Addition Date shall be subject to the satisfaction of the following
conditions:

          (a)    All representations and warranties of HRAC II contained in this
Agreement shall be true and correct with the same effect as though such
representations and warranties had been made on such date (except that, to the
extent any such representation or warranty expressly relates to an earlier date,
such representation or warranty was true and correct on such earlier date);

          (b)    All information (concerning any Account to which such
Receivables relate) provided or to be provided to Funding shall be true and
correct in all material respects;

          (c)    HRAC II shall have indicated in its computer files and
microfiche lists that such Receivables have been sold to Funding in accordance
with this Agreement; and

          (d)    HRAC II shall have recorded and filed, at its own expense, any
financing statements with respect to such Receivables meeting the requirements
of applicable state law in such jurisdictions as would be necessary to perfect
the sale of such Receivables from HRAC II to Funding, and shall deliver a
file-stamped copy of such financing statements or other evidence of such filings
to Funding.

          Section 7.02. Conditions Precedent to HRAC II's Obligations. The
obligations of HRAC II to sell, on any date, Receivables shall be subject to the
satisfaction of the following conditions:

          (a)    All representations and warranties of Funding contained in this
Agreement shall be true and correct with the same effect as though such
representations and warranties had been made on such date (except that, to the
extent any such representation or warranty expressly relates to an earlier date,
such representation or warranty was true and correct on such earlier date);

          (b)    Payment or provision for payment of the Purchase Price in
accordance with Sections 3.01 and 3.02 hereof shall have been made; and

          (c)    All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to HRAC II, and HRAC II shall have received
from Funding copies of all documents (including, without limitation, records of
corporate proceedings) relevant to the transactions herein contemplated as HRAC
II may reasonably have requested.

                              [END OF ARTICLE VII]

                                       23

<PAGE>

                                  ARTICLE VIII

                          TERM AND PURCHASE TERMINATION

          Section 8.01. Term. This Agreement shall commence as of the date of
execution and delivery hereof and shall continue at least until the termination
of the Note Trust as provided in Article VIII of the Trust Agreement. Thereafter
this Agreement may be terminated by the mutual agreement of the parties hereto.

          Section 8.02. Purchase Termination. If (a) HRAC II shall file a
petition or commence a proceeding (i) to take advantage of any bankruptcy,
conservatorship, receivership, insolvency or similar laws or (ii) for the
appointment of a trustee, conservator, receiver, liquidator or similar official
for or relating to HRAC II or all or substantially all of its property, (b) HRAC
II shall consent or fail to object to any such petition filed or proceeding
commenced against or with respect to it or all or substantially all of its
property, or any such petition or proceeding shall not have been dismissed or
stayed within sixty (60) days of its filing or commencement, or a court, agency,
or other supervisory authority with jurisdiction shall have decreed or ordered
relief with respect to any such petition or proceeding, (c) HRAC II shall admit
in writing its inability to pay its debts generally as they become due, (d) HRAC
II shall make an assignment for the benefit of its creditors, (e) HRAC II shall
voluntarily suspend payment of its obligations, or (f) HRAC II shall take any
action in furtherance of any of the foregoing (any of the foregoing, a
"Dissolution Event"), HRAC II shall, on the day of such Dissolution Event (the
"Appointment Date"), immediately cease to sell additional Principal Receivables
to Funding and shall promptly give notice to Funding and the Applicable
Transferees of such Dissolution Event. Notwithstanding any cessation of the sale
to Funding of additional Principal Receivables, Principal Receivables sold to
Funding prior to such Appointment Date, Collections in respect of such Principal
Receivables, Finance Charge and Administrative Receivables whenever created
accrued in respect of such Principal Receivables, and Collections in respect of
such Finance Charge and Administrative Receivables, shall continue to be
property of Funding available for transfer by Funding to the Note Trust.

                              [END OF ARTICLE VIII]

                                       24

<PAGE>

                                   ARTICLE IX

                                    SERVICING

          Section 9.01. Transfer and Servicing Agreement Controls with respect
to the Receivables. HRAC II acknowledges that the Receivables are to be
deposited in the Note Trust pursuant to the Transfer and Servicing Agreement and
are to be serviced by the Servicer. HRAC II agrees to cooperate fully with the
Servicer and to permit the Servicer to take any and all actions necessary in
connection with the Receivables.

                               [END OF ARTICLE IX]

                                       25

<PAGE>

                                    ARTICLE X

                            MISCELLANEOUS PROVISIONS

          Section 10.01. Amendment. This Agreement and any Conveyance Papers and
the rights and obligations of the parties hereunder and thereunder may not be
changed orally, but only by an instrument in writing signed by Funding and HRAC
II in accordance with this Section 10.01. This Agreement and any Conveyance
Papers may be amended from time to time by Funding and HRAC II, provided that
Funding provides to HRAC II (a) an Officer's Certificate of Funding to the
effect that Funding reasonably believes that such amendment will not have an
Adverse Effect, and (b) an opinion of counsel addressed and delivered to HRAC
II, dated the date of such amendment, to the effect that the conditions
precedent to any such amendment have been satisfied.

          Section 10.02. GOVERNING LAW. THIS AGREEMENT AND THE CONVEYANCE PAPERS
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.

          Section 10.03. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by certified mail, return receipt requested,
to (a) in the case of HRAC II, Household Receivables Acquisition Company II,
1111 Town Center Drive, Las Vegas, Nevada 89144, Attention: Manager-Compliance
(facsimile no. (702) 243-1214); (b) in the case of Funding, Household Affinity
Funding Corporation II, 1111 Town Center Drive, Las Vegas, Nevada 89144,
Attention: Manager-Compliance (facsimile no. (702) 243-[*]); (c) in the case of
the Owner Trustee, Wilmington Trust Company, as Owner Trustee, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001; (d) in the
case of the Indenture Trustee, The Bank of New York, as Indenture Trustee, 101
Barclay Street, Floor 8 West, New York, New York 10286; or (e) as to each party,
at such other address as shall be designated by such party in a written notice
to each other party.

          Section 10.04. Severability of Provisions. If any one or more of the
covenants, agreements, provisions, or terms of this Agreement or any Conveyance
Paper shall for any reason whatsoever be held invalid, then such covenants,
agreements, provisions, or terms shall be deemed severable from the remaining
covenants, agreements, provisions, and terms of this Agreement or any Conveyance
Paper and shall in no way affect the validity or enforceability of the other
provisions of this Agreement or of any Conveyance Paper.

          Section 10.05. Assignment. Notwithstanding anything to the contrary
contained herein, other than Funding's assignment of its right, title and
interest in, to and under this Agreement to the Note Trust (and the subsequent
assignment pursuant to the Indenture), this Agreement may not be assigned by the
parties hereto, except for an assignment by a party hereto of its right, title
and interest in, to and under this Agreement to (i) a successor by merger
assuming this Agreement, (ii) any affiliate owned directly or indirectly by
Household International, Inc. (or any successor to Household International,
Inc.) which assumes the

                                       26

<PAGE>

obligations of this Agreement or (iii) any entity provided that the Rating
Agency Condition has been satisfied.

          Section 10.06. Acknowledgment and Agreement of HRAC II. By execution
below, HRAC II expressly acknowledges and agrees that all of Funding's right,
title and interest in, to and under this Agreement, including, without
limitation, all of Funding's right, title and interest in and to the
Receivables, shall be assigned by Funding to the Note Trust pursuant to the
Transfer and Servicing Agreement and by the Note Trust to the Indenture Trustee
pursuant to the Indenture. HRAC II hereby expressly consents to such
assignments. Additionally, HRAC II agrees to pay, or cause to be paid, directly
to the Indenture Trustee any amounts payable by HRAC II to Funding hereunder
which are identified to HRAC II as required to be paid by Funding to the Note
Trust and by the Note Trust to the Indenture Trustee. Any payment required to be
made on or before a specified date in same-day funds may be made on the prior
Business Day in next- day funds.

          Section 10.07. Further Assurances. HRAC II and Funding 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 other party, the Owner
Trustee or the Indenture Trustee more fully to effect the purposes of this
Agreement and the Conveyance Papers, including, without limitation, the
execution of any financing statements or amendments thereto or equivalent
documents relating to the Purchased Assets for filing under the provisions of
the UCC or other law of any applicable jurisdiction.

          Section 10.08. No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of HRAC II or Funding, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. Subject to Section 10.06, the rights,
remedies, powers and privileges herein provided are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided by law.

          Section 10.09. Counterparts. This Agreement and the Conveyance Papers
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 10.10. Binding Effect; Third-Party Beneficiaries. This
Agreement and the Conveyance Papers will inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
The Applicable Transferees shall be considered third-party beneficiaries of this
Agreement.

          Section 10.11. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement and the Conveyance Papers set 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 and the
Conveyance Papers. This Agreement and the Conveyance Papers may not be modified,
amended, waived or supplemented except as provided herein.

                                       27

<PAGE>

          Section 10.12. Headings. The headings are for purposes of reference
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.

          Section 10.13. Schedules and Exhibits. The schedules and exhibits
attached hereto and referred to herein shall constitute a part of this Agreement
and are incorporated into this Agreement for all purposes.

          Section 10.14. Survival of Representations and Warranties. All
representations, warranties and agreements contained in this Agreement or
contained in any Supplemental Conveyance, shall remain operative and in full
force and effect and shall survive the conveyance of any Purchased Assets by
Funding to the Note Trust pursuant to the Transfer and Servicing Agreement and
by the Note Trust to the Indenture Trustee pursuant to the Indenture.

          Section 10.15. Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement, HRAC II shall not, prior to the date which is one
year and one day after the termination of this Agreement, acquiesce, petition or
otherwise invoke or cause Funding or the Note Trust to petition or invoke the
process of any Governmental Authority for the purpose of commencing or
sustaining a case against Funding or the Note Trust under any bankruptcy,
insolvency or similar law or appointing a trustee, receiver, conservator,
liquidator, assignee, custodian, sequestrator or other similar official of
Funding or the Note Trust or any substantial part of its property or ordering
the winding-up or liquidation of the affairs of Funding or the Note Trust.

                               [END OF ARTICLE X]

                                       28

<PAGE>

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

                                          HOUSEHOLD RECEIVABLES
                                           ACQUISITION COMPANY II

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

                                          HOUSEHOLD AFFINITY FUNDING
                                           CORPORATION III

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

                                       29

<PAGE>

                                                                       EXHIBIT A

                         FORM OF SUPPLEMENTAL CONVEYANCE

                (As required by Section 2.02 and Section 2.03 of
                       the Receivables Purchase Agreement)

     SUPPLEMENTAL CONVEYANCE No.    , dated as of              , by and between
HOUSEHOLD RECEIVABLES ACQUISITION COMPANY II, as Seller (together with its
permitted successors and assigns, "HRAC II"), and HOUSEHOLD AFFINITY FUNDING
CORPORATION III (together with its permitted successors and assigns, "Funding"),
pursuant to the Receivables Purchase Agreement referred to below.

                              W I T N E S S E T H :

     WHEREAS, HRAC II and Funding are parties to the Receivables Purchase
Agreement, dated as of February [*], 2003 (hereinafter as such agreement may
have been, or may from time to time be, amended, supplemented or otherwise
modified, the "Receivables Purchase Agreement");

     WHEREAS, pursuant to the Receivables Purchase Agreement, HRAC II wishes to
designate Additional Accounts and to sell the Receivables of such Additional
Accounts, whether existing on the Additional Cut-Off Date or thereafter created,
to Funding pursuant to the Receivables Purchase Agreement; and

     WHEREAS, Funding is willing to accept such designation and conveyance
subject to the terms and conditions hereof.

     NOW THEREFORE, HRAC II and Funding hereby agree as follows:

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

     "Addition Date" shall mean, with respect to the Additional Accounts, ______
____________,.

     "Additional Accounts" shall have the meaning specified in Section 2.

     "Additional Cut-Off Date" shall mean, with respect to the Additional
Accounts [the close of business on], ____________________.

     "Additional Purchased Assets" shall have the meaning specified in Section
3(a)

     2.   Designation of Additional Accounts. Within five Business Days of the
Addition Date, HRAC II shall deliver a computer file or microfiche list
containing a true and complete schedule identifying all Additional Accounts
designated hereby (the "Additional Accounts") and specifying for each such
Additional Account, as of the Additional Cut-Off Date, (a) its

                                       A-1

<PAGE>

account number, (b) the aggregate amount outstanding in such Additional Account
and (c) the aggregate amount of Principal Receivables in such Additional
Account. On the date of this Supplemental Conveyance, such computer file or
microfiche list shall be incorporated into and made part of this Supplemental
Conveyance and the Receivables Purchase Agreement and is marked as Schedule 1 to
this Supplemental Conveyance and shall supplement Schedule 1 of the Receivables
Purchase Agreement..

     3.   Conveyance of Receivables.

          (a)    HRAC II does hereby sell, transfer, assign, set over and
     otherwise convey to Funding, without recourse, all of its right, title and
     interest in, to and under the Receivables of the Additional Accounts
     existing on the Additional Cut-Off Date and thereafter created from time to
     time until the termination of the Receivables Purchase Agreement pursuant
     to Article VIII thereof, all Interchange, Insurance/Debt Cancellation
     Proceeds and Recoveries allocable to such Receivables, all monies due or to
     become due and all amounts received or receivable with respect thereto, all
     Collections with respect thereto and all proceeds (including "proceeds" as
     defined in the UCC) thereof (the "Additional Purchased Assets").

          (b)    In connection with such sale and if necessary, HRAC II agrees
     to record and file, at its own expense, one or more financing statements
     (and amendments with respect to such financing statements when applicable)
     with respect to the Additional Purchased Assets meeting the requirements of
     applicable state law in such manner and in such jurisdictions as are
     necessary to perfect the sale of the Additional Purchased Assets to
     Funding, and to deliver a file-stamped copy of such financing statements or
     amendments or other evidence of such filing to Funding.

          (c)    In connection with such sale, HRAC II further agrees, at its
     own expense, on or prior to the date of this Supplemental Conveyance, to
     indicate in the appropriate computer files and microfiche lists that all
     Receivables created in connection with the Additional Accounts and the
     related Additional Purchased Assets have been sold to Funding pursuant to
     this Supplemental Conveyance.

          (d)    The parties hereto intend that the conveyance of the Additional
     Purchased Assets described in Section 3(a) constitute an absolute sale
     consistent with the intent expressed in Section 2.01(d) of the Receivables
     Purchase Agreement. It is the intention of the parties hereto that the
     arrangements with respect to the Additional Purchased Assets shall
     constitute a purchase and sale of such Additional Purchased Assets and not
     a loan, including for accounting purposes. In the event, however, that
     notwithstanding such intent it were determined that the transactions
     evidenced hereby constitute a loan and not a purchase and sale, it is the
     intention of the parties hereto that this Supplemental Conveyance shall
     constitute a security agreement under applicable law, and that HRAC II
     shall be deemed to have granted, and HRAC II does hereby grant, to Funding
     a first priority perfected security interest in all of HRAC II's right,
     title and interest, whether now owned or hereafter acquired, in, to and
     under the Additional Purchased Assets to secure the obligations of HRAC II
     hereunder and under the Receivables Purchase Agreement.

                                       A-2

<PAGE>

     4.   Acceptance by Funding. Subject to the satisfaction of the conditions
set forth in Section 6 of this Supplemental Conveyance, Funding hereby
acknowledges its acceptance of the Additional Purchased Assets, now existing and
hereafter created, conveyed to Funding pursuant to Section 3 of this
Supplemental Conveyance. Funding further agrees to enforce HRAC II's covenant to
deliver to Funding (and to the Applicable Transferees if Funding has so
directed) the computer file or microfiche list described in Section 2 of this
Supplemental Conveyance within five Business Days of the Addition Date.

     5.   Representations and Warranties of HRAC II. HRAC II hereby represents
and warrants to Funding on the date of this Supplemental Conveyance and on the
Addition Date that:

          (a)    Legal, Valid and Binding Obligation. This Supplemental
     Conveyance constitutes a legal, valid and binding obligation of HRAC II
     enforceable against HRAC II in accordance with its terms, except as such
     enforceability may be limited by (i) applicable bankruptcy, insolvency,
     reorganization, moratorium or other similar laws, now or hereafter in
     effect, relating to creditors' rights generally, (ii) the possible
     unavailability of remedies of specific performance and injunctive and other
     forms of equitable relief and (iii) equitable defenses and the discretion
     of the court before which any proceeding therefor may be brought;

          (b)    Selection Procedures. No selection procedures believed by HRAC
     II to be materially adverse to the interests of Funding, the Owner Trustee,
     the Indenture Trustee or the Note Trust have been used by HRAC II in
     selecting the Additional Accounts from among any pool of accounts of a
     similar type available to HRAC II;

          (c)    Insolvency. HRAC II is not insolvent and, after giving effect
     to the conveyance set forth in Section 3 of this Supplemental Conveyance,
     will not be insolvent;

          (d)    Sale of Receivables. This Supplemental Conveyance constitutes a
     valid sale, transfer and assignment to Funding of all right, title and
     interest of HRAC II in the Receivables of the Additional Accounts and the
     proceeds thereof, and the Interchange, Insurance/Debt Cancellation Proceeds
     and Recoveries allocable to such Receivables;

          (e)    No Conflict. The execution and delivery of this Supplemental
     Conveyance by HRAC II, the performance by HRAC II of the transactions
     contemplated by this Supplemental Conveyance, and the fulfillment by HRAC
     II of the terms of this Supplemental Conveyance applicable to HRAC II will
     not conflict with, violate or result in any breach of any of the material
     terms and provisions of, or constitute (with or without notice or lapse of
     time or both) a material default under, any indenture, contract, agreement,
     mortgage, deed of trust or other instrument to which HRAC II is a party or
     by which it or any of its properties are bound;

          (f)    No Violation. The execution, delivery and performance of this
     Supplemental Conveyance by HRAC II and the fulfillment by HRAC II of the
     terms contemplated herein applicable to HRAC II will not conflict with or
     violate any Requirements of Law applicable to HRAC II;

                                       A-3

<PAGE>

          (g)    No Proceedings. There are no proceedings or investigations,
     pending or, to the best knowledge of HRAC II, threatened against HRAC II
     before any Governmental Authority (i) asserting the invalidity of this
     Supplemental Conveyance, (ii) seeking to prevent the consummation of any of
     the transactions contemplated by this Supplemental Conveyance, (iii)
     seeking any determination or ruling that, in the reasonable judgment of
     HRAC II, would materially and adversely affect the performance by HRAC II
     of its obligations under this Supplemental Conveyance, (iv) seeking any
     determination or ruling that would materially and adversely affect the
     validity or enforceability of this Supplemental Conveyance or (v) seeking
     to affect adversely the income tax attributes of the Note Trust under
     United States, New York, California, Nevada or Illinois income tax systems;

          (h)    All Consents. All authorizations, consents, orders or approvals
     of or registrations or declarations with any Governmental Authority
     required to be obtained, effected or given by HRAC II in connection with
     the execution and delivery by HRAC II of this Supplemental Conveyance and
     the performance of the transactions contemplated by this Supplemental
     Conveyance by HRAC II have been duly obtained, effected or given and are in
     full force and effect;

          (i)    No Liens. Each Receivable sold to Funding has been sold free
     and clear of any Lien, and each related underlying receivable is then free
     and clear of all Liens;

          (j)    Eligibility of Additional Accounts. On the Additional Cut-Off
     Date, each Additional Account is a Note Trust Eligible Account; and

          (k)    Eligibility of Receivables. On the Additional Cut-Off Date,
     each Receivable contained in an Additional Account on such date and sold to
     Funding by HRAC II is a Note Trust Eligible Receivable.

     6.   Conditions Precedent. The acceptance of Funding set forth in Section 4
of this Supplemental Conveyance is subject to the satisfaction, on or prior to
the Addition Date, of the following conditions precedent:

          (a)    Representations and Warranties. Each of the representations and
     warranties made by HRAC II in Section 5 of this Supplemental Conveyance
     shall be true and correct on the date of this Supplemental Conveyance and
     on the Addition Date.

          (b)    Officer's Certificate. HRAC II shall have delivered to Funding
     an Officer's Certificate of HRAC II confirming that (i) no selection
     procedures believed by HRAC II to be materially adverse to the interests of
     Funding, the Owner Trustee, the Indenture Trustee or the Note Trust have
     been used by HRAC II in selecting the Additional Accounts from among any
     pool of accounts of a similar type available to HRAC II; and (ii) the list
     of Additional Accounts, as of the Additional Cut-Off Date, is a true and
     complete schedule identifying all such Additional Accounts and specifies
     for each such Additional Account, as of the Additional Cut-Off Date, (x)
     its account number, (y) the aggregate amount outstanding in such Additional
     Account and (z) the aggregate amount of Principal Receivables in such
     Additional Account.

                                       A-4

<PAGE>

          (c)    Additional Information. HRAC II shall have delivered to Funding
     such information as was reasonably requested by Funding to satisfy itself
     as to the accuracy of the representation and warranty set forth in Section
     5(d) of this Supplemental Conveyance.

     7.   Ratification of the Receivables Purchase Agreement. The Receivables
Purchase Agreement is hereby ratified, and all references to the "Receivables
Purchase Agreement," to "this Agreement" and "herein" shall be deemed from and
after the Addition Date to be as supplemented by this Supplemental Conveyance.
Except as expressly amended hereby, all the representations, warranties, terms,
covenants and conditions of the Receivables Purchase 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 consent to
non-compliance with any term or provision of the Receivables Purchase Agreement.

     8.   Counterparts. This Supplemental Conveyance may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument.

     9.   Governing Law. THIS SUPPLEMENTAL CONVEYANCE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

                                       A-5

<PAGE>

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

                                          HOUSEHOLD RECEIVABLES
                                           ACQUISITION COMPANY II

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

                                          HOUSEHOLD AFFINITY FUNDING
                                           CORPORATION III

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

                                      A-6

<PAGE>

                                                                   Schedule 1 to
                                                                    Supplemental
                                                                      Conveyance

                               Additional Accounts

     Computer Files Containing Account Information Delivered to Funding are
Incorporated by Reference

<PAGE>

                                                                      Schedule 1

                                LIST OF ACCOUNTS

     COMPUTER FILES CONTAINING ACCOUNT INFORMATION DELIVERED TO FUNDING ARE
INCORPORATED BY REFERENCE2nd Amend / Marie St. John Gray

 Exhibit 10.45 
  
 SECOND AMENDMENT 
 TO 
 AMENDED AND
RESTATED EMPLOYMENT AGREEMENT 
  
 This Second Amendment to Amended and Restated Employment Agreement (this
“Second Amendment”), dated September 24, 2002, is entered into by and between St. John Knits, Inc., a California corporation (“Company”), and Marie St. John Gray, an individual (“Executive”), and amends terms of that
certain Amended and Restated Employment Agreement, dated as of July 14, 1998, as amended, between the Company and Executive (the “1998 Agreement”). In consideration of the mutual covenants and agreement set forth herein, the parties hereto
agree as follows (all capitalized terms not defined herein shall have the meanings set forth in the 1998 Agreement). 
  
 1. Section II.1 of the 1998 Agreement shall be amended to reflect an increase in the Base Salary from $500,000 to $750,000, effective as of September 1, 2001. 
  
 2. Section IV.5(e) of the 1998 Agreement shall be amended to reflect that twice Executive’s Base Salary shall be equal to $1,500,000. 
  
     IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. 
  
 
	 “Company”
  
  
 St. John Knits, Inc.,
 a California corporation
 
	 
	 By:
 	 	 /s/    Bob Gray        
 

	  	 	 Bob Gray
 Chief Executive Officer
 

 
  
 
	 “Executive”
 
	 
	 /s/    Marie St. John Gray        

	 Marie St. John Gray

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