INTERIM SERVICING AGREEMENT

This Interim Servicing Agreement (this "Agreement") is made and entered into as of January 30, 2003, by and among Household Bank (SB), N.A., a national banking association ("Buyer"), and Gottschalks Inc. ("Servicer").

RECITALS

A. Servicer has entered into a Purchase and Sale Agreement with Buyer dated as of the date hereof (the "Purchase Agreement"), pursuant to which Servicer has agreed to sell the Account Portfolio Assets to Buyer.

B. Buyer desires to have Servicer administer and service the Accounts, and Servicer desires to so administer and service the Accounts, all pursuant to the terms and conditions of this Agreement.

1. DEFINITIONS
   1. Certain Definitions. Capitalized terms contained in this Agreement that are not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Purchase Agreement or Related Documents (as defined in the Purchase Agreement).
   2. Construction. Unless the context otherwise clearly indicates, words used in the singular include the plural and words used in the plural include the singular. The Schedules and Exhibits referred to herein shall be construed with and as an integral part of this Agreement to the same extent as if they were set forth verbatim herein. All references to Articles, Sections, subsections and Exhibits herein are references to Articles, Sections, subsections and Exhibits, respectively, of this Agreement unless otherwise specified. The Recitals and the headings of Articles and Sections of this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not affect the meaning or interpretation of this Agreement.

2. SERVICES AND PROCEDURES
   1. Term: Services until Conversion Date.
      1. Term. Subject to the terms of this Agreement, the term of this Agreement shall commence on the Initial Closing Date and terminate on May 1, 2003; provided, however, that the term of this Agreement may be (i) extended by one (1) additional thirty (30) day period upon prior written notice by Buyer to Servicer on or prior to April 1, 2003, or (ii) pursuant to the terms of Section 2.06, terminated if Buyer completes its conversion of the Accounts by an earlier date (the last day of the term, the "Conversion Date").
      2. Services. During the term of this Agreement, Servicer shall provide, except as otherwise noted herein, directly, or indirectly through its Affiliates or third-party service providers, all of the services that were rendered prior to the Closing by Servicer in connection with the servicing, processing, collection and administration of the Account Portfolio Assets (the "Services"), including, without limitation, the services specified in Exhibits 2.01(a) and 2.02. Except as provided in the Related Documents, Servicer shall, however, have no obligation to continue marketing activities, initiate litigation, undertake management review, initiate repossessions, contest bankruptcies or purchase Accounts.
      3. Servicing Obligations after Conversion Date. From and after the Conversion Date, Servicer shall have no servicing obligations or other obligations under this Agreement whatsoever except as set forth in Section 6.01, Article VII and Exhibit 2.01(c).
   2. Servicing Standards. Servicer shall perform (i) the Services set forth in Exhibit 2.01(a) in all material respects in accordance with the written policies and procedures previously reviewed and approved by Buyer relating to the Account Portfolio Assets ("Policies and Procedures") and in substantially the same manner as Servicer performed such services prior to the date hereof, and (ii) the Services set forth in Exhibit 2.02, which Servicer shall perform in a commercially reasonable manner; provided, however, that notwithstanding anything to the contrary in this Agreement, Servicer shall have no liability for performing the Services set forth in Exhibit 2.02 in conformity with or pursuant to any request or direction of Buyer, as long as such performance is done in a commercially reasonable manner, and Servicer may rely and shall be protected in acting or refraining from acting upon any instruction, statement, instrument, report, notice, request or document believed by it to be genuine and to have been signed or presented by the proper parties.
   3. Reports by Servicer. Until the Conversion Date, Servicer shall prepare or cause to be prepared and transmit to Buyer the following reports:
      1. a Daily Settlement Sheet, which Servicer shall deliver to Buyer by 12:00 p.m., Eastern time., on the first Business Day following the day covered by the report (in the form of Exhibit 2.03(i)); and
      2. the reports listed on Exhibit 2.03(ii), which Servicer shall deliver to Buyer within the time frames specified in Exhibit 2.03(ii). Servicer shall provide copies of the masterfile in tape form to Buyer for each calendar month-end from the Initial Closing Date to the Conversion Date on or before the fifth Business Day of the following calendar month. Servicer shall prepare or cause to be prepared and transmit to Buyer such additional reports as Buyer shall reasonably request and as are currently available from Servicer's accounts receivable system.
   4. Policies and Procedures; Manuals. Until the Conversion Date, Servicer shall make available for Buyer's inspection, Servicer's existing manuals in which the Policies and Procedures are reflected ("Manuals").
   5. Access to System and Premises.
      1. Until the Conversion Date, subject to reasonable security and confidentiality procedures and the approval of the appropriate service provider, and upon reasonable prior notice, Servicer will provide to Buyer (at Buyer's sole cost, if any): (i) reasonable access during normal business hours to the appropriate operating location of Servicer; (ii) reasonable access to employees of Servicer providing Services; and (iii) reasonable access to all of Servicer's facilities, data, applicable software, records, files and Books and Records relating to the Account Portfolio Assets; provided, however, that such access shall not unreasonably interfere with Servicer's normal operations.
      2. Until the Conversion Date and subject to reasonable security and confidentiality procedures and, where applicable, the approval of the appropriate service provider, and upon reasonable prior notice, Servicer shall (at Buyer's sole cost, if any):
         1. cause its personnel to provide Buyer assistance and reasonable access during normal business hours to Servicer's premises in its investigation of such matters as Buyer may reasonably request, provided, however, that such investigation shall be conducted in a manner which does not unreasonably interfere with Servicer's normal operations;
         2. subject to the provisions of any licensing agreements, provide Buyer with reasonable access during normal business hours to, or screen prints of, the parameters of various operating systems currently in use to manage the Accounts;
         3. provide Buyer with on-line read only access to the Account processing systems for the purpose of viewing Account data and systems (including settlement systems) parameters to aid in conversion planning and auditing; provided that such reasonable access shall be provided to not more than five (5) of Buyer's employees; and
         4. consult with Buyer regarding material decisions in the transfer of Accounts, including, but not limited to, decisions regarding Account mapping strategies and usage of subsystems.
      
       

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